The following text is copyright 1997 by Network World, permission is hearby given for reproduction, as long as attribution is given and this notice is included.
Oh modem, where is thy sting?
It seems like it was only yesterday that the regional telephone companies were lamenting the impact of the Internet. All of those modems that the Internet Service Providers (ISPs) had installed were overloading the telephone infrastructure. Lots of money was going to be needed to deal with this crisis and the way to get the money was to add and extra charge on ISP modem lines.
Bell Atlantic and Nynex both reported significant increases in revenue for the last quarter at least in part because of strong growth in the number of secondary residential lines, lines that people get because they have teenage kids or because they want to get to the Internet without tying up the phone line. During the quarter Bell Atlantic added over 225,000 second lines, a 7.6% increase from the same quarter the year before. Nynex did not report the number of secondary lines but their total line growth was at a rate of 3.5%, a rate I would expect is far in excess of the rate of families acquiring teenagers. Surely some of this revenue growth could be used to pay for some the infrastructure upgrades.
This has never been as simple a picture as the two sides in the discussion have been asserting. The phone industry has been complaining about the duration of the calls relative to traditional voice calls (ignoring teenagers). Their statistical models did not take into account lots of people on the phone for many hours at a time. They dismiss the revenue from the secondary lines as too small to cover the added costs and want some sort of call duration-based access fee. Multiple cents per minute has been mentioned -- a bit scary. (Note that one cent per minute is over $100 per month for someone who is connected for 6 hours per day.) The opponents have been saying that the revenue generated by the secondary lines should do just fine (sort of like I did above.)
There is a real problem here but it is not ISP or call duration specific. Phone revenue comes from two sources, monthly line charges and usage charges. In the past it was reasonable to assume that most phones would generate both types of revenue. (Note that flat-rate calling plans just charge for a rate of usage that past statistics say is "normal".) In the last few years there has been an explosion in the number of lines that are receive only. Frequently lines that support fax machines, corporate dial-ins and ISP modems are never used to place outgoing calls so that part of the assumed revenue stream is never collected.
There is a real problem here but just focusing on ISPs misses the root issues. There is more diference between a phone that is used to only receive calls and a phone that also places calls than there is between someone who calls an ISP for 4 hours each evening and someone who talks to their sweetie for 4 hours each evening. Somehow the prices should reflect this.
disclaimer: Harvard hardly ever talks to its sweetie on the phone so the above must be my logic.