Feds Deny AT&T Request On Internet Phone Calls

WASHINGTON (AP) -- AT&T's effort to avoid paying fees to other phone companies by routing some calls through the Internet was rejected Wednesday by federal regulators.

A unanimous Federal Communications Commission said the service resembles the more traditional telephone service rather than the less-regulated Internet phone technology known as Voice Over Internet Protocol, or VOIP.

FCC chairman Michael Powell said the decision does not change his belief that voice over Internet calls should be "very lightly" regulated. But he said the service AT&T was describing was "the same plain old telephone service."

In a petition filed with the agency in October 2002, AT&T argued that its use of the Internet for its long-distance calls meant the carrier shouldn't have to pay fees to local telephone companies to complete the calls to conventional phones.

The FCC disagreed but made no ruling on whether AT&T should have to pay retroactive access fees to the regional former Bell companies--Verizon, BellSouth, Qwest, and SBC.

The agency has encouraged the advancement of voice over Internet technology, which Powell says "offers enormous potential for consumers." At the same time, the agency is wary of efforts by companies to avoid regulation by defining their service as VOIP.

AT&T painted the decision as a reversal of the agency's promises to protect investment in new technologies.

"Despite such explicit statements, the FCC today did a stunning about face and chose instead to protect the monopoly revenues of the Bell companies at the expense of consumers everywhere." said Jim Cicconi, AT&T general counsel. "This sends an ominous signal as the FCC prepares to tackle even more critical questions that will either spur Internet telephony, or stifle it in order to favor four monopoly phone companies."

Traditional phone calls are converted to electronic signals that traverse an elaborate network of switches. Regional carriers get paid for calls that pass through their switches.

But with the newer VOIP technology, the calls are converted into small packets of data--about 50 packets for every second of conversation--that are transmitted over the Internet. The packets get reassembled and converted to sound on the other end of the call.