Still a hidden bargain Savings draw long-distance callers to the Internet

A new study indicates that many computer users in the U.S. would use voice-over-Internet software for their long-distance calls if it would significantly lower their telephone bills.

The study, conducted by St. Louis-based Aragon Consulting Group, showed that more than 60% of the 400 computer users surveyed would consider switching from a long-distance provider to the Internet if they could save more than 50%. The responses vary by region.

The study is good news for makers of such software, which transmits voice calls over the Internet to anywhere in the world for the cost of a local call. But the survey also revealed that, despite the software makers' attempts to publicize the technology, few consumers actually know about it.

Almost one-third of those surveyed did not know or declined to say what percentage of savings would persuade them to look into Internet telephony. "That's a large portion of computer-literate people who apparently don't understand what savings can be achieved from the use of these products, or understand but are unwilling to accept a lower quality of service," said Gary Miller, president of Aragon.

Although the software's makers have touted the software as the answer to high phone bills, audio quality problems and compatibility issues have hampered its widespread acceptance.

The Federal Communications Commission has begun the thorny task of lowering access charges, setting the stage for another regulatory dispute between local and long-distance carriers.

No final rules are expected until May, but the FCC got the ball rolling late last month with a proposed rule that suggests two paths-one market-driven and the other regulatory-driven-toward access charge reform.

The goal is to drive down consumer prices by creating a framework for competition in which AT&T, MCI and others will join the Bell regional holding companies in offering local telephone service.

It's too early to pick winners and losers, but one apparent victor is the Internet service industry. The FCC said that Internet service providers should remain exempt from access charges. However, the Internet's effect on local networks raises "critical questions" and should be studied further, the agency said.

The FCC's stance is sure to disappoint local telcos, which have requested that ISPs start paying access charges because of their heavy use of local networks. Their argument: Long-distance and cellular companies pay these per-minute fees to local telcos to originate and terminate calls on local networks, so the ISPs should, too.

Paul Misener, a spokesman for the DATA Coalition, a group representing ISP, on-line and software companies, said he was pleased with the FCC's proposal. "It's really a matter of addressing what are appropriate technologies for Internet access," he said.

Begun a decade ago, the artificially high access charges subsidize low-cost residential service in hard-to-reach geographic areas. There's a consensus the charges should be lowered, and the FCC is suggesting two approaches.

The market-based approach would rely on "potential and actual competition" from new local service providers to drive down access fees in three phases. For rates to fall, local exchange carriers would have to show that increasing levels of competition exist.

In the second approach, the FCC would set access charges according to an as-yet unspecified schedule. "The commission questions whether marketplace forces alone are sufficient to drive access rates to forward-looking economic costs," said an agency statement.

The FCC could choose one approach or a combination of the two.