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UPDATE: Internet Charges for Phone Lines

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>This is available at
>This fact sheet offers informal guidance on an issue that has generated a
>great deal of public interest. For more specific details about the
>proceedings currently before the Commission, please visit our web site
>In December 1996, the Federal Communications Commission (FCC) requested
>public comment on issues relating to the charges that Internet Service
>Providers (ISPs) and similar companies pay to local telephone companies. On
>May 7,
>1997, the FCC decided to leave the existing rate structure in place. In other
>words, the FCC decided not to allow local telephone companies to impose
>per-minute access charged on ISPs. 
>Please Note: There is no open comment period in this proceeding. If you have
>recently seen a message on the Internet stating that in response to a request
>from local telephone companies, the FCC is requesting comments to
><isp(--nospam--at)> by February 1998, be aware that this information is inaccurate.
>The FCC issued an unrelated public notice, DA 98-2, on January 5, 1998 in
>connection with a report to Congress on universal service. Pursuant to the
>FCC's 1998 appropriations legislation, the Commission must submit a report by
>April 10, 1998 on several issues including the legal status of Internet
>services under the Telecommunications Act of 1996. Comments in response to
>the public notice are due January 20, 1998, and reply comments are due
>February 2,
>1998. Informal comments may be sent by email to <usreport(--nospam--at)>. 
>Background Information 
>Each long distance telephone call you make includes per-minute fees that your
>long distance carrier pays to the originating and terminating local telephone
>companies over whose facilities that call also travelled. Those fees, which
>designed to recover the costs to local telephone companies for use of their
>facilities, are referred to as "access charges." 
>As part of its Access Reform proceeding, CC Docket 96-262, the FCC in
>December 1996 sought comment on the treatment of ISPs and other "enhanced
>service providers" that also use local telephone companies' facilities. Since
>access charge system was established in 1983, enhanced service providers have
>been classified as "end users" rather than "carriers" for purposes of the
>access charge rules, and therefore they do not pay the per-minute access
>charges that long-distance companies pay to local telephone companies. 
>In the Access Reform Order, FCC 97-158, adopted on May 7, 1997, the FCC
>concluded that the existing rate structure for ISPs should remain in place.
>In other words, the Commission reaffirmed that ISPs are not required to pay
>interstate access charges. 
>When it began the Access Reform proceeding, the Commission also issued a
>Notice of Inquiry, CC Docket 96-263, seeking comment more broadly on usage of
>the public switched telephone network by Internet and interstate
>information service providers. A Notice of Inquiry is a request for
>information that does not involve any specific proposed action. The
>Commission stated in the Access Reform order that it intended to use the
>Notice of Inquiry record
>to develop a Notice of Proposed Rulemaking (NPRM) proposing actions to
>facilitate the efficient deployment of data networks. 
>Frequently Asked Questions on Internet Services and Access Charges 
>Q: Does the FCC regulate the rates charged by Internet Service Providers
>A: No. ISPs are considered "enhanced service providers" under FCC rules. The
>FCC does not regulate the rates that enhanced service providers charge to
>their subscribers.
>Q: How does the FCC regulate the rates that local telephone companies charge
>to ISPs? 
>A: ISPs purchase local phone lines so that customers can call them. Under FCC
>rules, enhanced service providers ISPs are considered "end users" when they
>purchase services from local telephone companies. Thus, ISPs pay the
>same rates as any other business customer, and these rates are set separately
>in each state. By contrast, long-distance companies are considered
>"carriers," and they pay interstate access charges regulated by the FCC.
>Q: How are access charges different from the rates ISPs pay now? 
>A: Today, ISPs typically purchase "business lines" from local phone
>companies. Business lines usually include a flat monthly charge, and a
>per-minute charge for making outgoing calls. Because ISPs receive calls from
>subscribers rather than making outgoing calls, ISPs generally do not pay any
>per-minute charges for their lines, which is one reason many ISPs do not
>charge per-minute rates for Internet access. Access charges, by contrast,
>per-minute fees for both outgoing and incoming calls. The rate levels of
>interstate access charges are also in many cases higher than the flat
>business line rates ISPs pay today.
>Q: Have local phone companies requested authority from the FCC to charge
>per-minute rates to ISPs? 
>A: Since 1983, there has been an ongoing debate about whether enhanced
>service providers should be required to pay access charges, based on the
>contention that these companies use local networks in the same manner as
>long-distance carriers. In June 1996, four local telephone companies (Pacific
>Bell, Bell Atlantic, US West, and NYNEX) submitted studies to the FCC
>concerning the effects of Internet usage on these carriers' networks. The
>argued that the existing rate structure did not reflect the costs imposed on
>local telephone companies to support Internet access, and that Internet usage
>was causing congestion in part of the local network. In connection with these
>studies and other pleadings, several local phone companies have asked the FCC
>for authority to charge interstate access charges to ISPs, although they have
>not filed a formal petition for rulemaking.
>Q: Is the FCC considering allowing local phone companies to impose access
>charges on ISPs? 
>A: The FCC requested public comment in December 1996 on whether ISPs should
>pay current access charges, and more generally on how Internet and interstate
>information services that use local telephone networks should be
>treated. The Commission concluded on May 7, 1997 that ISPs should not be
>subject to interstate access charges. There is currently no open comment
>period on this issue.
>Q: Does the FCC currently have an ongoing proceeding on Internet and
>interstate information services? 
>A: The FCC issued a Notice of Inquiry (NOI) in December 1996, at the same
>time as it asked for comment on whether ISPs should be subject to access
>charges. The NOI asked generally about how to create incentives for companies
>make the most efficient use of the telephone network for Internet and other
>information services. The comment period for the NOI is closed, but the FCC
>has stated that it plans to issue a Notice of Proposed Rulemaking (NPRM)
>for comment on more specific proposals based on the responses to the NOI. The
>NPRM will consider actions other than imposition of per-minute access charges
>on ISPs.
>Q: What is the difference between a Notice of Inquiry (NOI) and a Notice of
>Proposed Rulemaking (NPRM)? 
>A: A NOI is the earliest step in the FCC's process and typically asks
>questions in an effort to gather enough information to make informed
>proposals on a given topic. A NPRM is a request for comment on specific
>proposals made by
>the Commission. After the FCC reviews the comments filed in response to an
>NPRM, the FCC can issue a Report and Order adopting new rules.
>Q: Are comments filed by other parties be available for review? 
>A: Yes. All formal comments are available for review in the FCC Reference
>Center in Washington DC, and copies may be purchased through International
>Transcription Services, which can be reached at 202-857-3800. In addition,
>copies of comments that were submitted on diskette are available for review
>Q: Is the FCC considering taxes for use of the Internet or online services? 
>A: No. The debate involves charges levied by local phone companies, not
>government taxes.
>Q: Is this the "FCC modem tax" that has been floating around the Internet in
>various forms for several years? 
>A: The "modem tax" referred to a proposal in 1987 to require enhanced service
>providers to pay interstate access charges, which at that time were
>significantly higher than they are today. The 1987 proposal was abandoned in
>The current Access Reform proceeding is entirely separate.
>For more specific questions, see the Access Reform page on the on the FCC Web
>site at