Verizon Ruling May Tax Dial-Up Customers 147
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."
more information (Score:5, Informative)
Re:DSL Lines (Score:5, Informative)
title misleading (Score:2, Informative)
Re:Why the hell shouldn't they pay by the minute? (Score:3, Informative)
Re:DSL Lines (Score:3, Informative)
DSL links are always connected. Your computer (or router/firewall) may need to periodically refresh/obtain a DHCP lease, but the link itself is always up.
Re:What's the status quo? (Score:3, Informative)
Re:What's the status quo? (Score:3, Informative)
Re:DSL Lines (Score:1, Informative)
Read the ruling... (Score:5, Informative)
Re:more information (Score:3, Informative)
If I read that right, Global NAPs acts as a telephone service provider and offers "local" numbers that aren't actually physically in the exchange area they are logically in (mostly to ISPs). Because (for reasons I don't understand) with these local-but-not-really calls the originating local carrier pays the receiving local carrier on a per minute basis, Global NAPs has previously been getting paid by Verizon by the minute for these calls.
This ruling allows a state regulatory action to stand which would change that arrangement so that Global NAPs would pay Verizon for those calls, rather than vice versa.
It certainly does not allow Verizon to charge dialup users on a per minute basis; it allows Verizon to charge Global NAPs -- the ISPs phone company -- on a per minute basis, rather than vice versa, for the calls.
Now, of course, this (if other states follow suit) is likely substantially discourage companies from providing virtual local numbers for ISPs, which could well adversely effect the dialup market [especially the big national and regional dialup ISPs -- the surviving local dialups might rely more on real rather than virtual local numbers, and not be hurt at all], but its hardly a tax on dialup users, as such.
Re:So what (Score:1, Informative)
In the US just to have a phone number you pay $30+ which generally gives you local phone service, local meaning your neighborhood not necessarily the entire city. Anything besides that costs additional to the $30+.
Re:What's the status quo? (Score:5, Informative)
For long distance (LD) calls there are 3 carriers involved. The originating carrier, the terminating carrier and the Inter eXchange Carrier (IXC). For LD calls the IXC bills the customer and pays the originating carrier and the terminating carrier a slightly bigger amount per minute. This is call Access Charges.
The problem arose when the FCC determined that Internet traffic, including dialup is considered interexchange traffic and is therefore considered LD calls. The way GNaps operated they established local phone numbers in every rate center in a LATA. That would allow the dialup user to dial a local (aka toll free) phone number. Just because the call is 'local' doesn't make it truly local. The call, according to the FCC is 'long distance' and because of that the originating carrier (Verizon in this case) is owed money by the terminating carrier (Global NAPs) that was acting as an IXC.
One of the issues in the law suit was that Verizon was billing GlobalNAPs access charges based off the MA state tariff while GNAPs said they should be billing off the FCC Federal Tariff. The MA state tariff is an order of magnitude more expensive than the federal tariff.
In any event, I had less than 24 hours notice and this 'event' knocked 5000 of my dialup users offline for almost a day. Luckily I could port my numbers to another carrier quickly
The Real Deal (Score:5, Informative)
First, rewind about 2 decades to the breakup of AT&T and the very beginnings of competitive local phone service. Or rather what would have been the beginning... the regional bell operating companies (RBOCs) didn't want any competition.
A couple companies said, "Look, we're going to sell phone service to this office building over here. You Mr. RBOC have to provide us with access to the local phone network." The RBOCs like Verizon said, "We don't want to. These bozos should have to buy service per-minute just like the long distance comanies. Otherwise they'll flood our network with free calls and the residential consumer who doesn't have a hundred phone lines will get stuck holding the bag."
That didn't fly in court so the RBOCs came up with a hairbrained scheme called "reciprocal remuneration": Anybody could be a competitive local exchange carrier (CLEC) but the carrier who originates a call would have to pay the carrier who receives the call a per-minute charge. Its "fair" since either company has to play by the same rules, but if you cherry-pick that office building over there, their outbound calls will exceed the received calls and you, Mr. CLEC, will pay a mountain of money to Ma Bell. So sorry. Buh bye.
This twistedly clever strategy backfired. Do you see the problem yet?
Along comes the commercial Internet. Suddenly there are scores of companies with a very special need: They have to receive a large number of phone calls 24 hours a day while originating none. Its an ISP with dialup modem banks. And along come companies like Global NAPs who know the phone company rules. What do you think they did?
That's right. They went and wired the ISPs on the cheap -- sometimes as little as a tenth of what the RBOC charged. Why would they do such a thing? Because all the calls were inbound. Every time Joe Blow dialed his ISP and stayed connected for 18 days, GNAPS got to rape Verizon for a per-minute charge.
And good for them. Verizon deserved it. Its always great to see a monopoly eat crow.
After a number of successively more effective attempts, Verizon has closed the loophole.
Since the AT&T breakup there have been buildings called "tandems" where the long distance carriers connect their phone lines to the RBOC. Each local calling area has several of these tandems. Now, if you're a CLEC you can go into Verizon's tandems and connect to Verizon. They pay their half, you pay yours and you can trade calls with all the phones served by that tandem. Which isn't the whole local calling area. If you want the whole calling area you have to go to all the tandems.
Verizon, of course, will happily sell you a "virtual" presence in the other tandems where they carry the traffic back to the one tandem you connected to. They'll even sell you a virtual presence in all the tandems and carry your calls back to a connection in another state. For a fee.
Bad news for GlobalNAPs. No more reciprocal remuneration, and worse they have to buy expensive infrastructure to multiple tandems or else pay for a virtual presence.
They didn't want the gravy train to end so they went to court. They lost.
Some inside skinny (Score:5, Informative)
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