From: tnixon@hayes.com
Newsgroups: comp.dcom.modems
Subject: Re: Modem tax surfaces again.
Date: 24 Jul 92 13:10:43 GMT
Organization: Hayes Microcomputer Products, Norcross, GA

In article <Brt7sM.FE8@wsrcc.com>, wolfgang@wsrcc.com (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   +1-404-840-9200  Telex 401243420
Hayes Microcomputer Products, Inc.  | Fax     +1-404-447-0178  CIS   70271,404
P.O. Box 105203                     | BBS     +1-404-446-6336  AT&T    !tnixon
Atlanta, Georgia  30348             | UUCP uunet!hayes!tnixon  Fido   1:114/15
USA                                 | Internet                tnixon@hayes.com
Newsgroups: comp.dcom.modems