SYDNEY - Australian telecom power Telstra has opened a campaign to overturn an August Federal Communications Commission action that would slash the rates American consumers pay for international calls. Telstra isn't arguing that the American order, which would reduce rates for some across-the-globe voice calls by as much as 80 percent over the next six years, is unfair so much as it is incomplete and, perhaps, outdated.
And the solution to the conflict, Australian observers say, will eventually be found in a fundamental change in Internet reality: a method to precisely meter international usage.
In a petition filed earlier this month with the US Court of Appeals in Washington, DC, Telstra argues that the FCC's order fails to take into account an area in which foreign firms are at an increasingly expensive disadvantage: charges they pay US carriers for the capacity they need to handle Internet traffic.
"Voice and data are migrating from one network to the other, and both are being used to service global communications needs," said John Stanton, Telstra's regional director of Americas and satellite arrangements. As such, they need to be considered increasingly as one � with payments made accordingly, he said.
"We're the first carrier to campaign on this issue, partly because we have quite high Internet penetration and usage in Australia," Stanton said. "But more and more countries are finding themselves with the same problems as us."
Voice is voice, data is data
The FCC rejoins that as far as setting rates go, voice is voice and data is data and that the charges for Net capacity that Telstra is complaining about are a matter to be thrashed out not with regulators but among the telecom companies themselves.
Diane Cornell, chief of the telecommunications division in the FCC's international bureau, acknowledges that Telstra�s position is "unique," but says its claims just aren't relevant to the 7 August order that applies only to an international voice-call settlement regime that predates today's more competitive era.
International settlement rates for voice calls have long been set during multilateral negotiations at the International Telecommunication Union in Geneva. In fact, it was slow progress toward lowering settlement rates that drove the FCC to take its unilateral action, she said.
The issue Telstra is raising is a matter for commercial negotiation; it's a charges system for international private lines and is something that has not been regulated by governments, she said.
Stanton says the FCC is taking an overly narrow view of an international communications system that's changing faster than anyone imagined.
"To say that the Internet is irrelevant to the PSTN [public service telephone network] in our view ignores the very dynamic of the global communication system that's now developing," he said.
Starving for more capacity
In its Court of Appeals petition, Telstra noted that two years ago it had a total of 6 Mbps of international cable capacity across the Pacific Ocean for access to US Internet backbones. That capacity has since been increased to 130 Mbps, and is growing at 10 Mbps per month, Telstra says.
When the additional capacity was first brought online, nearly all the traffic was one-way, with Web surfers from Oz logged on to US sites. Given that fact, US carriers insisted that foreign carriers like Telstra pay 100 percent of the cost of the new capacity, rather than stick to more traditional arrangements under which each carrier paid for half the circuit.
Traffic patterns have changed dramatically. Now, 70 percent of the demand comes from the American side as Yank surfers have started pulling down Australian content.
Nonetheless, US carriers insist that foreign carriers pay for both half-circuits, Telstra asserts. Under these kinds of arrangements, which also exist elsewhere, the overseas telcos are paying US companies a "subsidy" of roughly US$300 million a year for access to US backbones. Given rapidly increasing use, those payments could balloon into the billions in the next several years, Telstra says.
A threat to Net growth
"Unless a fairer means of financing the rapid global expansion of the Internet is found, that growth will quickly become unsustainable and the most powerful new communications medium of the 20th century will be seriously jeopardized," Telstra said in its petition.
Michael Ward, spokesman for Ozemail, a 120,000-customer Australian Internet service provider that gets to US backbones through Telstra, said the imbalance is a historical legacy and needs to be changed.
"Because the US was the place where the Internet was established � there's a feeling people in the US don't have to pay to go anywhere else," Ward said. "It's a very one-way street."
With others, Ward suggests some form of metering or settlement system is needed to allow carriers to settle charges for carrying each other's traffic. There's no way to precisely measuring traffic now, but Telstra's Stanton said that's likely to change.
"Certainly, you can gauge from peak demand how much traffic is going in each direction, so you have some means of accuracy [in measuring]," he said. "But there will be much more work required to get it down to a greater level of precision."
AT&T, MCI mum
US companies that would be directly affected by the Australian campaign don't have much to say publicly about the issue. Sydney-based officials for both AT&T and MCI, both major providers of US backbone services to Telstra, declined to comment on the company's FCC petition.
MCI sources noted the company has had to make huge investments in recent years to handle skyrocketing Internet traffic and argued that current prices partially reflect MCI's need to pay for its infrastructure.
Paul Budde, an independent telecommunications analyst in Sydney, said the Telstra-FCC battle underscores the need to change how the Net is run and the way its resources are paid for.
He said the United States needs to look for better ways to share a network that has gone global. He also said he believes that as the Net continues its migration to a commercial sphere, usage will have to become segmented by price, with faster delivery of bits commanding higher premiums.
"With everything else, you go from a high price down to a lower price over time," he said. "But with the Internet it's been the other way around: It started with a zero price and is now going up."
"While the issue at the moment is the imbalance in payments, it's just the tip of the iceberg," Budde said. "If traffic continues to grow the way it is, things have to change."
