NetNews Usenet Archive 1992 #16/NN_1992_16.iso/spool/comp/dcom/modems/11117

Internet Message Format | 1992-07-25 | 5.0 KB

Path: sparky!uunet!hayes!tnixon
From: [e-mail]
Newsgroups: comp.dcom.modems
Subject: Re: Modem tax surfaces again.
Message-ID: <[e-mail]>
Date: 24 Jul 92 13:10:43 GMT
References: <[e-mail]> <[e-mail]>
Organization: Hayes Microcomputer Products, Norcross, GA
Lines: 86

In article <[e-mail]>, [e-mail] (Wolfgang S.
Rupprecht) writes:

> Nowhere does it say what the fees are, how they are calculated, or who
> they are levied against.
>
> Wasn't the old "modem tax" just something that applied to service
> companies that had modems remotely located (via long distance leased
> lines)?

Essentially, yes, that is true.

The situation is this.  Think about CompuServe: they have a huge
collection of mainframe computers in Columbus, Ohio, and want to
give dial-up access to them to users all around the country (the
world, really).  There's two basic ways for them to do that: install
a bunch of modems in Columbus (so that everybody was to call them
long-distance, either directly or through 800 numbers), or, install
modems all around the country, and link them to Columbus by
high-speed backbone channels (either leased from the phone company,
or private lines or one sort or another).  Typically, when the
latter is used, the modems are installed on local, flat-rate
business lines; no per-minute charge is paid for ANSWERING calls.

A lot of people don't realize that when they place any long-distance
call, the long-distance carrier pays the local phone companies ON
EACH END a per-minute access charge; this is one reason why there is
a "floor" to long distance rates, such that no matter how efficient
AT&T, MCI, Sprint, and the rest become, rates will never go below a
certain point.  Thus, if we had to call CompuServe long-distance,
the local phone companies would get their cut, PER MINUTE; it
wouldn't matter whether WE were paying for the call ourselves, or
CompuServe paid via an 800 number, because the local company would
get their per-minute cut anyway.  But when CompuServe "BYPASSES" the
long-distance company by providing its OWN local modems in each
city, the local phone companies (under current FCC rules) do NOT get
to collect a per-minute charge from CompuServe; instead, CompuServe
pays only the basic monthly business line access charge.

"Modem tax" is really a misnomer.  What the local phone companies
want is to be able to collect a per-minute charge from ANY company
that takes calls off the local network and uses separate circuits to
transport that call to another city.  The fact that it is a DATA
call is really irrelevant.  The local phone companies get a lot of
revenue from the access charges paid by the long-distance phone
companies, and from their perspective companies like CompuServe are
JUST LIKE a long-distance phone company, and thus should pay the
same charges.

CompuServe currently charges a $9 per hour premium to access their
systems via an 800 number.  They pay essentially all of that to
their long-distance carrier.  But the long distance carrier then
passes along MOST of that amount back to the local phone companies
in access charges!  If CompuServe had to pay those same per-minute
access charges on the lines they use to provide modems in each city,
we'd see about a $9 per hour increase in the rates for local calls,
bringing them in-line with the charges we pay to access CompuServe
via a long-distance call to Columbus.

Users are rightly concerned about their costs going up.  CompuServe
is rightly concerned about the potential loss of subscribers if
their prices doubled. But are the phone companies rightly concerned
about what they see as an inappropriate exemption granted to
providers of "enhanced services" that allows them to take calls from
the local network at rates substantially less than what is paid by
the voice call long-distance carriers?  Perhaps the debate should be
on whether the LONG-DISTANCE CARRIERS should be paying this
per-minute access charge themselves, rather than on whether enhanced
service providers should ALSO be paying it.  CompuServe and other
information providers look upon this as an attempt by the local
phone companies to price remotely-located information services out
of reach of most customers, so that the information services
provided by the phone companies will be more attractive; this is
viewed as an inappropriate use of the local phone companies'
monopoly over local access.

Whatever the conclusion, I must point out that I am simply laying
out the issues (as I understand them) here, and neither Hayes nor I
necessarily have a position on the issue.

--
Toby Nixon, Principal Engineer      | Voice   [phone]  Telex 401243420
Hayes Microcomputer Products, Inc.  | Fax     [phone]  CIS   70271,404
P.O. Box 105203                     | BBS     [phone]  AT&T    !tnixon
Atlanta, Georgia  30348             | UUCP uunet!hayes!tnixon  Fido   1:114/15
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