Bell Changes Could Mean Higher Internet Costs

Unlimited access to the Internet soon will become more expensive for some service providers in Arkansas.

Beginning Jan. 17, Southwestern Bell Telephone Co. no longer will allow businesses, including Internet service providers or ISPs, to combine offerings that create unlimited access to long distance for a flat monthly fee.

The services, Telebranching and One Plus Saver Direct, still will be available, but customers won’t be able to combine them. The One Plus Saver Direct service, available since 1995, allows subscribers to pay $15 a month for unlimited calls to one number. Telebranching permits a company to create a local phone number in one city that will be forwarded to another location for $31 a month.

With another fee for multipath call forwarding, several people can use the number simultaneously.

ISPs have used this combination to expand their customer bases. Local numbers were forwarded directly to a main equipment center, which housed banks of modems that created the company’s point of presence on the Internet, often in cities that were a long-distance phone call away.

Without the combination of services, Internet providers must have local access in markets they plan to serve. This will call for either renting space or paying per-minute long-distance charges, which could result in exorbitant bills for typical Internet usage.

The rule change leaves some small ISP owners wondering if Southwestern Bell has decided to stop the services to enhance its own Internet service in rural areas.

Southwestern Bell officials say that’s not the case.

“For us, this is a network issue,” says David Schlosser, legislative and regulatory press officer for Southwestern Bell Arkansas. “Our tariff requires us to maintain the integrity and reliability of our network.”

Charles Sharpe, president and chief executive officer of the Internet provider Arkansas.net, says being able to combine One Plus Saver and Telebranching helped his company and others build ISPs to the size they are now.

“We designed our entire system around this service,” Sharpe says. “Basically, this means that there will not be any other statewide providers unless it is the phone company. Who’s here is who is here, unless someone comes along with a whole lot of money.”

Neil Willis, president of Sherwood-based Alphanet, estimates that about 18 percent of his customers will lose direct local access when he shuts off his One Plus Saver Direct line. He says he’s looked at what possible action he might take against Southwestern Bell because of the new rule.

“This is on the brink of using their monopolized service to gain a larger market share in remote areas,” Willis says. “I think the move was made to eliminate competitive market share in the smaller areas. Period.”

He says he also suspects Bell plans to use its internal network to support its own Internet service, but Bell officials say that isn’t true.

“This is not a competitive issue for us,” Schlosser says. “Southwestern Bell Internet Services provides Internet service only in Little Rock. They are an affiliated company, and we are prohibited from providing them with any competitive advantage. They operate under the same tariffs, rules and regulations as any other ISP. Any special deals are explicitly prohibited by law.”

Schlosser adds that the subsidiary has no plans to expand its market in Arkansas in 1998.

He maintains the rule change was simply to maintain service for both Telebranching and One Plus Saver Direct customers.

“When [One Plus Saver Direct] was first offered in 1995, Internet service was not the booming industry it is right now,” Schlosser says. “These two services that were offered in conjunction with each other have resulted in an extraordinary explosion in the use of our network, and it is not designed to handle all of that usage at one time.

With a flat rate, Schlosser says, people don’t care about usage.

“Like any big company, we have different departments who do different things,” he says. “We had marketing people who said, ‘Hey, we can really sell this service.’ And back then we did not have network resource people saying, ‘Wait, you can’t do this.'”

Can They Make It?

Since receiving notification of the change in September, some Internet service providers say that whether intended or not, the change being imposed by Southwestern Bell could make or break their business.

Southwestern Bell’s Telebranching service still will be possible; but, without One Plus Saver Direct, companies will have to pay by the minute while their customers are online. Even for companies with small customer bases, this could easily amount to thousands of dollars.

“I know where I previously worked [in Benton County], we used it to call to Fayetteville, and one month Southwestern Bell miscoded our account, and we were charged by the minute,” says Chris Corke, owner of Creative Network Concepts in Springdale. “We ended up with a bill for around $9,000.”

In addition to the purchase of point-of-presence equipment, which ranges from $10,000 to $20,000 per location, companies wishing to maintain remote service also must find space for that equipment.

Some Internet companies are asking their customers to subscribe to One Plus Saver Direct at a cost of $15 a month. That would allow the customers to call points of presence for a flat-rate fee.

But most Internet companies are choosing to place equipment in areas where they hope to continue service.

“To actually ask my customers to pay the extra cost, and then have [the competition] turn around and say they can offer local access, makes putting in equipment our only option,” Willis says.

Differing Plans

“We’ve tried to keep our clientele informed on this,” says Dan Dixon, general manager of World Lynx in Little Rock. “We wanted to do this in an organized manner. We did not want to be caught off-guard. We had quite a bit of equipment out there already, so we are just adding on.”

Dixon estimates his company will spend about $100,000 to add equipment in 10 cities around the state.

IPA of Fort Smith is adding not only equipment but other ISPs. The company recently made nine acquisitions throughout the state.

“In this situation, you either pull away from customers or you run toward them,” says Chuck Duffield, president of IPA. He says IPA’s recent investments have been “substantial” but declines to give more specific figures.

“For us, using the telebranch was not simply an issue of cost; it was also an issue of support,” says Corke, who adds that even the most technologically advanced companies eventually will have to deal with problems that have to be fixed on-site.

“If we were having some problems with our equipment or needed to replace a part, everything was right here. But if someone has an office in Fayetteville and equipment in Fort Smith, what’s going to happen when their modem goes down? Even if they can get in their car and drive down there right at that moment, that is still a two-hour delay. It causes people, and their service, to be spread a little thin.”

Corke would not share Creative Network Service’s plan to continue servicing its remote customers, but he did say it doesn’t involve buying equipment.

Not All Bad

Some companies actually are excited about the change, believing that it will shake up the market.

“I don’t think other companies are going to invest the money to expand like we have,” says Sharpe, who estimates Arkansas.net will spend $500,000 adding equipment statewide. “We basically need 120 customers in an area to maintain service.”

“We have wound up finding a gold mine in this situation,” says Kim Woodson, president of CSW Net in Danville. His company is working closely with Southwestern Bell to make large changes in its Internet service.

“We built a market and [Southwestern Bell has] taken it away from us,” Woodson says. “But it is going to allow us to have a lot of new features we could not have known about if this had not happened.”

“I don’t think the other companies put in the money and bought the equipment that we bought,” says Woodson, who estimates CSW has invested about $500,000 so far to make the change. “We have managed our money real well in the past, and we have the resources to put this equipment out there.”

J.D. Robinson, senior programmer for Aristotle Internet Access in Little Rock, says the changes “can only do good things for us.”

He adds, “We do not use [telebranch] at all. It will make it harder for our competitors to do what they do.”

Despite the upbeat predictions for business by some in the industry, Alphanet’s Willis says that not being able to combine telebranch and One Plus Saver Direct services will be the end of the line for some ISPs.

“I would not be surprised if a couple of the major ISP’s have closed by next spring,” Willis says. n