Have you guys seen this yet?
--Paul
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STUDY ESTIMATES MONTHLY $56 ACCESS FEE FOR INTERNET SUBSCRIBERS
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Date: Monday, November 11, 1996
Source: Inside Washington
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WASHINGTON TELECOM WEEK : In studying the likely impact
of impending access charge reform on Internet Service Providers (ISPs),
analysts anticipate a sharp decline in the number of providers. This
decline, they say, will be a direct result of fees they will be required to
pay for the privilege of connecting to the networks controlled by local
exchange carriers (LECs).
It is anticipated that ISPs will be charged approximately $56 per subscriber
per month and will not be able to absorb that cost or pass it through to
customers.
The analysis was conducted by Bern Communications, a New Jersey-based firm
dedicated to helping independent LECs profit from the Internet. Bern founded
its study on the premise that the Federal Communications Commission, in an
upcoming access charge reform proceeding, will eliminate the access charge
exemption which Internet service providers have historically enjoyed.
The consulting firm arrived at the $56 monthly charge by estimating an
average monthly on-line time of 20 hours per subscriber and an access charge
of 3-cents per minute. An industry observer said the
3-cents-per-subscriber-per-minute rate is a reasonable estimate of what ISPs
can expect to be paying the LECs by this time next year.
"The ISPs won't have to do the same thing as long distance carriers at the
beginning. [The FCC] will give them time to get ready for it," the industry
observer said. "The introduction will be delayed. It may start at half a
cent and go up incrementally. It will probably be volume sensitive and
related to size [of the company]."
Bern's analysis concludes that almost 85% of the Internet service firms are
not adequately capitalized to absorb the estimated access charges. Internet
subscribers, who are accustomed to paying a flat, monthly rate which many
say is below cost, will not tolerate an additional $56 fee. Bern predicts
that the "prognosis for those firms is extinction."
For telephone companies, however, the situation provides an opportunity, a
source with the company said. As the smaller ISPs go out of business and the
larger providers shift to traffic-sensitive and subscription-based pricing
to cover the cost of access, the telcos will have the chance to get into the
Internet business.
Industry observers say this will also offer an opportunity for alternative
local exchange providers to enter the local market through the back door. By
offering Internet service, IXCs or other new entrants will be able to gather
information on customer needs and usage patterns.
"The cost of customer acquisition is large," one source said. "The Internet
is the way to play into the local market. It's a cheap date for [new
entrants] to play into local markets and acquire local customers."
Other predictions would have on-line service providers building their own
wireline networks or turning to wireless technologies to avoid LEC access
charges. There could be major ISP mergers that will invest in independent
infrastructure.
"The basic law of economics is coming in," the industry observer said.
"Regulation is starting to leave the industry, and the gates are being
lifted so predators are being let out. Small entrepreneur who arbitraged a
regulatory situation will no longer be able to."