
The FCC is considering a ruling which may threaten low-cost modem access to
many on-line services, perhaps including Arpa/Milnet TACs and Usenet Unix
systems.  Here are the details from a copy of a file just uploaded to my Remote
CP/M system.

--Keith Petersen

The FCC is considering reregulating the packet-switching networks like Telenet,
Tymnet, Compuserve, The Source and PC Pursuit.  This could result in additional
costs to the user.  This is excerpted from Infomat magazine which is available
for downloading.

COMPUTER AND SOFTWARE NEWS -- PART 1

by Tim ElmeR

FREE LOCAL ACCESS TO PACKET SWITCHING NETWORKS MAY BE ELIMINATED
------------------------------------

 (BPS) -- The Federal Communications Commission (FCC) will vote on a proposal
to reregulate packet switching networks that, if approved, would eliminate
free local telephone access to those networks.

 "If this occurs, it might eventually double or triple the costs to those
using packet switching networks to access commercial on-line databases and
information services and triple or quadruple the costs to those using
Telenet's PC Pursuit," said Philip M. Walker, vice president and regulatory
counsel for Telenet Communications Corp.

 Predictably, the initiative to reregulate packet switching networks comes
primarily from the Bell Operating Companies (BOCs) and secondarily from AT&T.
These companies provide local telephone service to vast majority of telephone
customers throughout the U.S. and will benefit the most from FCC reregulation
of the packet switching networks.

 Under current FCC rules formulated in 1980 in the FCC's Second Computer
Inquiry, called Computer II, a distinction is made between "basic services"
and "enhanced services."

 "Basic services" are those that don't offer protocol conversion such as local
and long-distance voice telephone services.  "Enhanced services" are defined
in an open-ended fashion as computer-based services that are more than a
"basic service," in other words, services such as packet switching networks,
database and on-line type services, and remote computing services that offer
protocol conversion, according to Walker.

 Under the 1980 Computer II Inquiry, the FCC ruled that "basic services" would
continue to be regulated as they had always been.  However, the FCC also ruled
that "enhanced services" would be deregulated, which opened up the industry to
competition.  This resulted in numerous companies entering the packet
switching business, including BOCs, AT&T and at least a dozen others.  The
competition resulted in significant price reductions for packet switching
services.

 To prevent monopolization of the packet switching industry by the Big Boys
(the BOCs and AT&T), the FCC ruled that they had to keep separate accounting
figures for their "basic services" and for their "enhanced services," and that
they could not use revenues from their lucrative "basic services" to cross-
subsidize their "enhanced service" packet switching networks.

 The FCC also ruled that if the BOCs and AT&T used their "basic service"
telephone lines for packet switching services, then they must let their
competitors have access to those lines on the same basis, which would preserve
true competition in the industry.

 "Now, under the FCC's Computer Inquiry III, the FCC is asking, should we
redefine protocol conversion services as 'basic services' rather than enhanced
services?  Should we redefine all those companies as common carriers?  This
would, in effect, subject them not only to federal regulations but, even
worse, to state regulations," Walker said.

 The result would eliminate comparable interconnection requirements currently
imposed on BOCs and AT&T, allowing them to cèarge their packet switching
competitors local dial-in fees to access packet switching long-disôance line
networks.

 It would also allow BOCs and AT&T to offer their own packet switching
services on a non-compensatory basis and, finally, allow them to cross-
subsidize those services with revenues from their much more lucrative voice
telephone service revenues.  In short, it would allow BOCs and AT&T to
monopolize the packet switching industry and probably drive out most
competitors.

 "In terms of cost impact," Walker said, "if we had to pay local access
charges, it would cost us about $3.60 an hour at the originating end, for
calls made by users to on-line databases and informatiompuServe and The Source.

 "And with PC Pursuit, for which we have out-dial modems, we would have to pay
not only 3.60 per hour access fees at the originating end but also $4.80 at
the terminating end, a total of about $8 or $9.  Obviously, to survive, we
would have to add those additional charges to our current fees and pass them
on to our consumers," Walker said.

 That would almost certainly spell the end of PC Pursuit, and it would likely
put out of business not only many independent packet switching networks but
also many on-line databases and information services.

 FCC approval of chaîges being considered in Computer III, Walker said, "would
really have a major impact on anyonå using a packet switching service to
access online bulletin boards, databases, or information services aimed at the
residential user.  They are just going to get creamed if this happens."

 Walker said that is was not clear exactly when the FCC would vote on the
proposal, but that it would probably be the latter part of January or early
part of February, 1987.  "They are moving very fast on this," he said.

 For additional information, be sure to read Alan Bechtold's editorial in this
issue.

 Copyright (C) 1986, by BBS PRESS SERVICE, INC.

 THE EDITOR SPEAKS

 "Low-Cost packet switching Service Threatened"
 by Alan R. Bechtold

 As described in our lead news story this issue, the FCC is now considering a
major change in the way packet switched phone services are defined.  This
change is likely to lead to the demise of many of these services, and to much
higher prices for the use of the few that will eventually remain in business.

[BASIC DESCRIPTION OF PACKET SWITCH DELETED SO ARTICLE WOULD FIT IN MY
BUFFER -elric]


 FCC regulations allow AT&T and Bell Operating Companies (BOCs) to engáge in
packet switching netwïrk operations, but they must also maintain completely
separate accounting of their voice and packet switching operations.  They must
also offer free local-calling access to their lines to any competitors engaged
in the packet switching service industry.

 The above regulations have allowed Telenet and Tymnet, among others, to
operate at a reasonable cost in a competitive atmosphere.  This is a case of
regulation of a business actually RESULTING in increased competition and lower
prices to consumers.

 As things stand now, you can call any local Telenet or Tymnet access number
and use these services to énexpensively access such onlinå services as
CompuServe, The Source, Delphi, and countless others.  In addition, GTE's new
PC PURSUIT service now offers you access, through their Telenet packet
switching service, to literally hundreds of local bulletin boards in cities
all across the country--for a flat charge of $25 per month.

 But, the FCC is now being asked to REREGULATE this segment of the
communications industry, eliminating the FCC requirements that AT&T and BOCs
keep separate accounting records of their voice and packet switching services,
and eliminating the stipulation that the BOCs and AT&T must offer their
competitoró in the packet switching businåss free access to their local
telephone connection lines.
 The idea is patently ridiculous.

 Mark Fowler, Chairman of the FCC, has been hailed by the press as a "fair-
market zealot."  The chances are very good that he views this proposed
reregulation as the magic road to increased competition and fairer pricing for
consumers.

 Unofficially, the word is out that the FCC advisory committee now considering
this matter is indeed leaning in favor of the proposed reregulation of the
packet switching industry.  If the committee recommends these changes, it's
likely that a majority of the five voting members on the Federal
Communications Commission will vote in favor of the changes.

 I have talked to sources within the industry who say it is the BOCs who are
pushing VERY HARD for this reregulation, because they want to get into the
packet switching service business in a big way, and they would like to rid
themselves of needless competition on their way to success.

 What's that?  RID themselves of competition?  But--the proposed reregulation
is supposed to FOSTER competition!  Why would a group of companies (BOCs)
hoping to eliminate their competition PUSH for this reregulation?  I hope the
answer to THAT question is entirely clear.re we have an industry that is current
ly populated with plenty of
competition.  Prices are already reasonable.  Reregulation of the packet
switching service industry will IMMEDIATELY give giant corporations the upper
hand, and will allow them to cut off free access to their local access phone
lines to their competitors, namely Telenet and Tymnet and other similar
services that now offer you high-quality service, in a competitive
marketplace, at reasonable prices.

 The proposed reregulation, however, would force all packet switching services
to compete with the BOCs and AT&T, companies that would be able to use the
enormous profits they earn with their voice telephone services to cross-
subsidize their packet switching services and offer them on a non-compensatory
basis, at least until their competitors are eliminated.  When that happens,
they are then sure to jack up their fees to any level they want.

 It would also force their packet switching competitors to pay access fees for
connection to local phone lines.  The access fees alone could add as much as
$4.00 per hour to the fees packet switching companies would be forced to pass
on to their customers.  This will be added to your hourly connect-time charges
for accessing ALL online databases through these services.

 The proposed reregulation could very well spell the death of PC PURSUIT.
Because GTE also uses dial-out modems at the other end of their Telenet
connections for PC PURSUIT service, the company would be forced to pay an
hourly charge at BOTH ends of the phone line--totaling up to $8 or $9 per
hour.  These fees would have to be added to the flat $25 per month that GTE
now charges for access to PC-PURSUIT.  It would simply make the final cost to
PC-PURSUIT customers too high for the service to remain practical and
affordable.

 So--this is ONE TIME you MUST use your word processor to produce some letters
opposing this proposed reregulation!  Write to:
 Honorable Mark Fowler
 Chairman of the Federal Communications Commission
 Washington D.C. 20554

 Refer to Computer Inquiry III in your letters.  State clearly, in your own
words, that competitive packet switching services should not be reregulated or
subjected to carrier access charges, and then explain why. Hurry, they will
be deciding this in láte Jan., earìy feb.

