Press Release February 25, 1999	Contact: Mark Cooper, CFA, 301/384-2204 Gene Kimmelman, CU, 202/462-6262 Consumers Union Washington, DC Office

WASHINGTON - The Federal Communications Commission's decision today to reclassify Internet Service Providers (ISPs) as interstate could make using the Internet cost more, according to two of the nation's leading consumer groups.

"At a minimum, today's decision ensures a continued morass of conflict and litigation, with no possible gain to the public and a severe potential loss," said Gene Kimmelman, co-director of the DC office of Consumers Union. "We predict the result will be increased costs of Internet use either directly or indirectly. Costs could go up directly through local usage charges or federal access charges being levied on Internet traffic. They could go up indirectly because Internet Service Providers could decide to reconfigure their networks to avoid the charges."

At issue, is an FCC decision that reclassifies calls to ISPs as interstate in nature. These calls involve reciprocal compensation contracts between incumbent local phone service providers --like regional Baby Bells and GTE -- and their competitors.

The consumer advocates said the FCC's decision is "muddled" and that it appears to avoid the fundamental consumer problem of inflated access charges. Although the FCC appears to hope that it can avoid per-minute charges on the Internet, the consumer groups expressed "serious doubts" such an outcome could be avoided.

"Today's muddled decision leaves fundamental questions unanswered," said Mark Cooper, Research Director for Consumer Federation of America. "We think that the public has every right to be fearful when the Commission declares that a substantial portion of Internet traffic is interstate and therefore subject to federal jurisdiction, but FCC Chairman Kennard states that 'dialing up the internet is just like a local call."

This decision starts the FCC down a path that could well lead to per-minute charges on Internet uses, like long distance calling or local measured service, according to Kimmelman, who called such an outcome "a disaster for consumers". FCC Commissioner Ness also came under fire for comments he made that "one could readily imagine, for example, that states will not seek to assess per-minute fees on Internet-bound calls."

"The public should be fearful that the states, goaded on by the incumbent local phone exchange companies (ILECs), which have always wanted to impose local measured service on consumers, could slap per-minute fees on Internet-bound calls," said Cooper.

"If the real problem is that inflated access charges attach to some services but not others, the better decision for consumers would be to bring access charges down to cost," said Kimmelman.

Last November, the CFA and CU wrote the FCC to express their concerns about the impact of this ISP decision on consumers. In that letter, the groups said allowing "incumbent local exchange carriers to carve out of (their) contracts (with competitors) the one type of traffic that is not to their advantage and lower the rate, while they charge the higher rate on traffic that is in their favor, is not only fundamentally unfair, it also would be horribly anti-competitive. No matter how the FCC tries to mince its words with respect to exiting contracts, an FCC decision to claim jurisdiction will give the ILECs another excuse not to pay their bills."