Internet becomes focus of face-off Study refutes RHCs' claims that the Internet is hopelessly clogged >BY CAROLYN HIRSCHMAN, Special to Telephony

The Internet industry has fired the latest salvo in an increasingly heated battle with local exchange carriers: a study claiming that Bell regional holding companies greatly exaggerate the severity of Internet-related congestion on local telephone networks.

The report, released by the Internet Access Coalition in Washington, directly rebuts several RHC studies that blamed growing Internet use for clogged networks and resulting problems, such as busy signals and delayed dial tones. The few problems that do exist can be fixed with available technologies at little cost, says the study by Boston-based Economics and Technology Inc.

Behind the technical disagreement is a high-stakes financial fight over access charges-the per-minute fees for call origination and completion paid by long-distance companies to fund universal service. Internet service providers were exempted from the charges in 1986 to let their then-fledgling businesses prosper. Now the fast-growing industry has matured, and the question of exemption is arising again.

The RHCs want the ISPs to pay access charges because as heavy network users, they should help fund network improvements. The ISPs disagree, saying that they would have to pass on higher costs to customers, threatening their industry's growth.

So far, regulators have sided with the ISPs. The Federal Communications Commission, in a proposal for access-charge reform issued in late December, said that ISPs 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. A separate notice of inquiry invited comments on the issue.

A torrent of studies is being unleashed to try to sway the commission. The coalition study was submitted to the FCC last week, and previous studies have been conducted by Pacific Telesis, U S West, Nynex, Bell Atlantic and Bellcore.

The two sides agree on one point: At some unspecified future time, Internet use will overload the RHCs' voice networks if nothing is done. Alternatives that divert data traffic away from analog circuit-switched voice networks, such as digital packet switching and cable modems, must be developed and expanded to meet Internet users' needs.

Even on this point, the RHCs and ISPs get testy. "If the Bell [companies] don't want to install this new technology, let someone else do it," said Harris Miller, president of the Information Technology Association of America. "As long as the Bell [companies] have the key to the locker room, it's a little hard to get in there and do it.

"The real obstacle [to deployment of data technologies] is pricing," said Lee Bauman, Pacific Bell's vice president of local competition. "Internet service providers are acting rationally. They will use the voice network in preference to the data network as long as the [enhanced service provider] exemption makes doing so nearly cost-free.

Future solutions aside, the true battles lines are being drawn around the voice network because that's the main route for Internet access now.

"The[RHCs] have misrepresented the impact of increased Internet use on the nation's phone system," according to the coalition study. "Data communications traffic currently poses no significant threat to network integrity. In addition, the Bell companies exaggerate the financial burden that the new technology imposes.

The RHCs responded by standing their ground. "The bottom line is that all companies-whether they provide long-distance, Internet access or local telephone service-must pay for use of the world's most advanced telecommunications network," said Roy Neel, president and chief executive officer of the U.S. Telephone Association. "Local telephone companies continue to invest more than $20 billion annually in maintaining and upgrading this network. All other users must pay their fair share.

The coalition study faults the RHCs for assessing the Internet by studying traffic around central office switches close to ISPs. These switches constitute a tiny part of the overall phone network, and the problems cited by the RHCs don't represent most callers' experience, the study says. Any difficulties are caused not by ISPs but by inadequate planning and inefficient engineering, according to the study.

Internet congestion is real, as are the costs it incurs, responded Pacific Bell. Among residential users, average daily usage is 20 minutes for voice calls but 45 minutes for Internet calls, said Bauman. Approximately 10% of Internet users in California remain on-line for four to six hours a day. As a result, the company will spend almost $100 million this year beyond normal upgrades to accommodate Internet use.

The RHCs make more money than they spend on the Internet by selling second phone lines and their own Internet services, the coalition points out. In all, they grossed nearly $3 billion in revenues from additional residential lines between 1990 and 1995, the study estimates.

The study's suggested correlation between growing Internet use and additional lines is misleading, said a Bell Atlantic spokesman. Its own research shows that less than half of additional lines are ordered for Internet access; the rest are for voice and fax services.

"We can't be 100% certain [of the correlation]," admitted ITAA President Miller. "The most dramatic effect has been in the last few years," when use of the Internet exploded.

Powell up for FCC post U.S. Sen. John McCain, R-Ariz., is endorsing Michael Powell, 33, to fill the Republican vacancy on the Federal Communications Commission. Powell, the son of retired Gen. Colin Powell, is chief of staff for the Department of Justice's Antitrust Division. He previously worked at a California-based law firm that represented GTE and Pacific Telesis. FCC extends olive branch The FCC is forming an advisory committee of local and state government officials to help it implement the Telecommunications Reform Act of 1996. The 15-member committee, to meet at least three times annually, will advise the FCC on mutual policy concerns, public rights of way, facilities siting and other issues.