Phone Companies Set Off A Battle Over Internet Fees

[SOURCE: Wall Street Journal, AUTHOR: Dionne Searcey dionne.searcey@wsj.com and Amy Schatz]
The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don't pay the fee would find their transactions with Internet users -- for games, movies and software downloads, for example -- moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees. The size and structure of the fee systems remain to be worked out, and the regulatory implications aren't clear. But already, the phone companies are meeting heavy resistance from companies that say making them pay for priority delivery of their content amounts to holding them ransom, thus hurting competition and, ultimately, the consumer. The looming battle between phone companies and Internet content providers has parallels with the fight between local and long-distance phone companies of the 1990s, when upstarts sought free access to the regional phone companies' networks. Until recently, phone companies were required to treat all data sent across their high-speed networks equally and without discrimination. But last year, a Supreme Court decision cemented the FCC's authority to decide the rules for broadband Internet lines. The agency promptly deregulated Internet services, dropping rules that prevented the type of pricing plans now being proposed. Critics of these ideas say that smaller Internet companies will be squeezed out of being able to offer their products at all. "They want to radically change the way they sell telecommunications service," said Mark Cooper, research director of the Washington-based Consumer Federation of America. "We're afraid that they're simply going to pick and choose who's going to win and lose."
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