By a 3-to-2 vote late Thursday, the commission stayed the fees between Pacific Bell and Pac-West Telecom. The board said it may consider the issue again in the future, however.

California's decision comes after the Federal Communications Commission ruled in February that calls to Internet providers are interstate in nature. However, it said states have the right to decide reciprocal compensation disputes while it conducts an in-depth investigation.

California is just the latest state to deal with the issue. In most cases, regional phone companies have been dealt losses. Regulators have generally ruled they are bound to handle the calls until interconnection agreements expire.

Massachusetts has been the notable exception so far. That state ruled that Bell Atlantic would be exempt from the fees.

Pac Bell has refused to pay more than $50 million in fees to Pac-West over the last two years while the case was being heard. Those funds have been held in a special account. Pacific Bell and Pac-West signed an interconnection agreement in 1996 that Pac Bell sought to amend in 1998. However, the two were unable to agree on many issues and the case went to arbitration.

The companies disputed several of the arbitrator's rulings, including what constitutes a local call and whether local traffic that Pac-West delivers to its ISP customers is covered by the interconnection agreement. The two must submit a new, signed interconnection deal to the commission within the next five days.

Internet service providers have been closely watching the compensation cases. If calls handled by a regional telephone company's competitors are deemed interstate calls, the smaller phone companies could increase rates ISPs pay for phone service to make up for the lost revenue.

The regional telephone companies have protested that they are unfairly required to pay money to rivals to complete calls for their customers while they rarely handle calls made by competitors' customers.

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