Networkers face double whammy from FCC ruling

This article in the August 1983 issue of Today, CompuServe's magazine for CIS subscribers, was the first of a few articles about phone companies adding modem access charges to household phone bills as well as increasing what they charge companies like CompuServe.

Subscribers to computer information utilities, such as CompuServe and The Source, face a double threat that may make the cost of communicating considerably higher.

At least one local telephone company, Southwestern Bell, has begun charging computer owners who use modems an extra $50 a month beyond normal residential basic connect charges.

At the same time, the Federal Communications Commission (FCC) is considering a major change in the fees paid by interstate data and voice transmission companies, including computer networks, for connections to local telephone systems. This charge could raise the cost of using a packet network from $4 to $6 an hour per customer — a 50 percent increase in a single jump.

Southwestern Bell — which serves Missouri, Arkansas, Texas, Oklahoma and Kansas — is imposing a data transmission line rate on every customer it finds using a telephone line for data transmission.

The flat monthly fee is charged to each computer customer, regardless of whether the computer is for business or personal uses and no matter what amount of time the customer devotes to data communications on the line, according to Deborah Michaels, district staff manager for public relations for Southwestern Bell in Tulsa. The only exceptions the company makes are for handicapped persons who can only communicate using terminals.

The charge is intended to cover the cost of supplying “data grade” lines to these customers, she said.

The data grade rate is not new at Southwestern Bell, although it recently became a public issue in the Tulsa area, Michaels said.

“We've been levying this rate right along. It just happened that a customer complained that he was getting annoying and obscene messages through his computer. We checked our records and found we were charging him the wrong rate. The story was reported in the local papers.”

Southwestern Bell is one of several local telephone operating subsidiaries which will be separated from American Telephone and Telegraph Co. (AT&T) on Jan. 1 under an FCC deregulation.

As part of the deregulation, many telephone companies are seeking state approval for changes to their rates structures.

In Southwestern Bell's case, the company wants to eliminate the present basic rate system for local calls which is based on average usage. In its place, Southwestern Bell would charge each line according to actual volume of use of that line, much as water companies charge.

The use of each line can be constantly monitored by computerized switching equipment, Michaels said. This rate change, however, first must be approved by each state public utilities commission.

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This Heathkit ad ran in the August 1983 Today magazine. Here's a larger image you can zoom in your browser.

The AT&T divestiture also is the reason for a separate FCC proposal that would increase charges for data network communications to local telephone systems. The proposal, called “Docket 78-72,” follows a three-year FCC study of the relationship the federal government wants between independent local telephone companies and the interstate long distance networks. Those long distance networks include AT&T's long lines and WATS, which AT&T will retain, and their competitors such as Sprint and MCI.

The plan would establish two classes of connectors to these local systems — end users and long distance carriers, according to Robert Preece of the FCC policy division. The “end users” would include business and private telephone users, while the latter group would be long distance voice and data networks. The long distance carriers would pay about 10 times the rate charged to business end users for each connection to a local system.

This kind of order is necessary, Preece said, because of the dramatic way in which the divestiture of AT&T will change the relationship between the local companies and the nation's dominant long distance voice carrier. Presently, AT&T uses income from its long distance service to subsidize its local groups. After Jan. 1 that will end, with the local groups becoming separate companies.

Under the FCC proposal, data carriers are included with voice networks, Preece said, because the connections technically are the same dial-up and dedicated lines, and the FCC could not discriminate between data carriers and voice systems.

“The commission is very concerned with discrimination between essentially similar services, ” he said. “It has taken the view that if you are involved in interstate transmission you are going to pay the same connection rate.”

This approach, however, flies in the face of the FCC's 1981 Computer Inquiry decision, according to Joe Porfeli, vice president for network services for CompuServe, Columbus, Ohio. This decision, he said, distinguished between data communications networks including packet networks and the common carrier voice networks.

The basis for the difference is that the enhanced networks do more than passively carry data — they have automatic error-checking and correction to eliminate data errors caused by faulty transmission within the system.

The inclusion of data networks in Docket 78-72 came as a surprise and shock to the data processing industry, Porfeli said, because the discussion until then solely concerned voice carriers.

The potential impact of the order on the packet networks is huge because of the large number of connections involved, he said. The networks work by passing messages between special minicomputers called “nodes.” Each of these may have several hundred dedicated and dial-up connections to a local telephone network. The full size of a large network may be judged by Tymnet, one of the world's largest, which just installed its 1,000th node.

Porfeli said the total cost for a local “loop” serving 100 users at a time presently averages about $15 per hour. If the proposed rates are adopted, that cost will increase by $200 an hour or $2 per user per hour, he estimated.

This still would leave the packet network as the least expensive means for data communications, but it would close the gap. The next least costly choice, WATS lines, cost $17.50 an hour.

CompuServe and several other networks have filed petitions with the FCC for reconsideration of Docket 78-72. Preece said the FCC received more than 30 petitions during the public comment period, which ended in May. The commission was expected to act on these petitions during the summer.

“We have received petitions from state regulatory bodies, AT&T, a number of competitors to AT&T's long lines, local telephone companies, GTE Telenet, Tymnet and the Association for Data Processing,” he said. “The list is pretty impressive.”

—G. Berton Latamore

(Next: “Modem wars” in the December 1983 Today magazine.)

(Back to CompuServe nostalgia index.)[2010-05-02]