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Verizon Ruling May Tax Dial-Up Customers
cellocgw writes "The Boston Globe is reporting that a court ruling in Verizon's favor could effectively allow phone companies to charge dial-up users on a per-minute basis." From the article: "About 68 percent of US internet users now connect via broadband, according to the latest data from Neilsen//NetRatings. That still leaves millions of users connecting the old way, in which modems in their home call local numbers over a telephone line to access the Internet. Precisely how many people were affected by the court ruling is unknown. Good said the number was in the thousands, but that Global NAPs did not have exact numbers and could not disclose the identities of all the companies that relied on Global NAPs for dial-up numbers."
if you are like me, and found that reading the article didn't really help explain the situation, i found that this legal document really helped. i didn't follow every bit of it, but it does present a surprisingly readable history of the case and the issues.
It's hard to believe that's how Micronians are made. Why don't we see it right now by having you both kiss one another?
Much as it's nice to blame Verizon for everything, it looks as if they have a case this time. Basically, this is about virtual numbers where the ISP has no physical presence in a local calling area, but instead pays the phone company to route the calls elsewhere. Effectively, the ISP is asking Verizon to route calls from (say) Cape Cod to Boston without paying usage charges. As the original article implies, the unfortunate side-effect of the ruling is that people in rural areas may have to pay long distance charges to access their ISP.
For the record, I have been involved with some, uh, related cases, and know Virtual NXX backwards and forwards....
.2-.3c/min).
Remember the 1988 "modem tax"? That's exactly what this is about. The Massachusetts DTE has called for that exact charge, technically called originating access, to be applied to ISP-bound calls, if the modem is in a central location (as it always is) and the caller is not physically in the modem's local calling area. So the modem tax doesn't apply to callers who are local to Quincy (GNAPs) or another big modem bank, but would apply to most of the state, where the carrier hotels aren't.
Now the sorded history in a nutshell...
Global NAPs set up shop after the Telecom Act when its owners' ISP wanted to expand its local calling area. The normal way to do this was to buy Foreign Exchange lines, which NYNEX sold for about $20/mile/T1 (23-24 channels). The Telecom Act allowed open entry for competitors, and said that for local calls, the calling LEC (local exchange carrier) would pay the called LEC for its half of the call. This is called reciprocal compensation. Bell Atlantic actually asked the FCC for this; in a 1996 filing, they demanded it, and said that if CLECs (competitive LECs, what GNAPs is) didn't like it, they should look for customers who get more incoming calls, like ISPs. Really. So GNAPs took them at their word.
Now Foreign Exchange lines are normally charged based on the distance between switches, not rate centers (billing points), and CLECs have one switch covering a lot of area, so the mileage is zero. That's what GNAPs, not to mention MFS-Worldcom, MCI, AT&T, Level 3, and various other companies, did. They could thus provide "local" dial-in numbers to ISPs. And they billed the incumbent telcos for reciprocal compenastion.
Well, the incumbents were caught off guard. Not only didn't they like the Internet, but they really didn't expect it to catch on, and were blindsided by all of this dial-up traffic going to competitors. So they asked to change the rules, and get rid of reciprocal compensation on ISP-bound calls. Global NAPs was the lightning rod for this in Massachusetts, where it was the biggest modem-serving CLEC and its leadership, frankly, had a rather "in your face" style. The Republican-appointed state Commission (DTE) ruled against them in 1999, saying "no reciprocal comp for ISP-bound calls". (The "telecom commissioner" of that era has left the DTE, and has been spotted consultling for Verizon. Duh.) The Republican-appointed FCC in 2001 adopted that as a national policy, capping ISP-recip at $.0007/minute (about a quarter of the typical voice rate of about
Then around 2003, the Romney DTE pulled a stunt on GNAPs. CLECs and ILECs interconnect via contracts, which are arbitrated by state Commissions. Verizon decided to put in new wording that FX (and Virtual NXX, what GNAPs is -- it's FX when the LEC doesn't have live customers where the number is putatively billed as) calls are "toll" calls subject to "access" charges. GNAPs objected, but the DTE let that language in. And then said that while federal law allows CLECs to adopt other CLECs' contract terms, GNAPs couldn't, because arbitration is unescapable (a rather strange interpretation of the law). GNAPs said, however, that the FCC's assertion of federal authority over ISP-bound calls -- that's how they got rid of recip on a nationwide basis in 2001, over CLEC objections -- meant that the state couldn't declare them to subject to intrastate toll access charges. Most states have held that way, and I think the Fourth Circuit Court of Appeals has upheld.
So it was rather odd that the First Circuit ruled for Verizon, though it was on some legal technicalities that GNAPs wasn't really prepared for. That left GNAPs with a theoretical $45M or so back bill for this "modem tax" access charge. They wouldn't pay, so Verizon pulled the plug.
Level 3 and some other CLECs still have different