As I recall, the alleged "subsidy" consists of lack of payments so rural areas can have subsidized phone service - thus making their costs borne by everyone else. -Allen
_________________________________________________________________ Avis _________________________________________________________________ INTERNET IS HURTING PHONE NETWORKS, STUDY SAYS __________________________________________________________________________ Copyright © 1996 Nando.net Copyright © 1996 San Francisco Examiner
SAN FRANCISCO (Aug 27, 1996 3:11 p.m. EDT) -- Hoping to reduce or end a subsidy that has kept down the cost of on-line service, local phone companies here have presented the Federal Communications Commission with studies arguing that Internet users are overtaxing phone networks and ought to pay more for monthly service.
The studies, one of which was published on the Internet, argue that a 13-year-old subsidy lets Internet service providers (ISPs) pay a fraction of what a long distance company pays to get a phone line, even though Internet calls may use more phone system capacity than voice traffic.
[...]
For their part, ISPs are alarmed at the remote possibility that the FCC might let phone companies raise their monthly costs from the current monthly average of $30 to anything approaching the $600 that some long distance carriers pay for a phone line.
"If we had to pay anything like long distance access charges, it would put all the ISPs out of business," said Ronald Plesser, the Washington, D.C., attorney who represents the Commercial Internet Exchange, an ISP trade group.
FCC staff attorney Kevin Werbach said the subsidy began in 1983, when the five-member federal commission created a special rate to encourage the growth of on-line services, voicemail companies and other emerging industries that offered enhanced electronic services over phone lines.
In 1987, the FCC considered ending the subsidy but backed down after public protest over what came to be characterized as the "modem tax." Given the growth in on-line usage, ISPs assume any talk of ending the subsidy would create a bigger backlash today.
"There are a minimum of 20 million and perhaps as many as 40 million on-line and Internet users and many of them are registered voters," said William Schrader, president of PSI Net, an ISP in Herndon, Va.
Schrader said when he visited several FCC members recently, he suggested that many of those users would be happy to send a letter of protest to FCC Chairman Reed Hundt.
[...]
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