Dialup Shutdown in Massachusetts

Today, a billing dispute is cutting off customers of alternative ISPs as Verizon uses a billing dispute to cut off its competition.

We reached one of the ISPs affected, Matthew Crocker of the CLEC Crocker Communications.

“We had less than 24 hours notice,” Crocker told us. “At first, we thought it wouldn’t happen, but then we started seeing our PRIs go dark.”

Yesterday, the company posted an urgent notice to its dialup customers warning them that the company’s dialup service would go down, but that the company would do everything it could to get service back up

The Luck of Crocker

Crocker’s story will not be the usual story for local ISPs. Unlike many local ISPs, Crocker Communications is part of a larger company and has the resources to expand, building out new services.

The company had already invested a year’s worth of time and a great deal of money in building a VoIP infrastructure that it will use to solve its current crisis. “We have our own phone switch,” Crocker told us. “We were waiting for Verizon to program their switches with our local number portability code, and now that’s rolling through our area code, coming online.”

Then, Crocker Communications has to port the dialup numbers its customers know from GlobalNAPs. Once that’s complete, customers will be able to use their dialup service as if nothing had happened. “We should be back up and running soon with a band aid approach, meaning customers have to dial a new phone number,” Crocker explained. “By the end of the day, we should be fully connected and customers should be able to use their usual number.”

The company’s transition from GlobalNAPs to its own facilities will be eased by the fact that the company operates in one area code, 413, and therefore only has to deal with one modem bank.

But the implications of the court’s decision, if it stands, go far beyond a temporary dialup outage.

The Complicated Law

The dialup economy is a multi-tier system where the main provider (Verizon) provides access to a wholesaler or backbone provider (such as GlobalNAPs). The wholesaler provides access to the retail ISP.

Verizon builds the wires, but a company like GlobalNAPs builds modem banks across the nation. In order to ensure that every dialup call is a local call, GlobalNAPs likes to be able to assign more than one phone number to a modem bank. This allows one Point of Presence (POP) to serve more than one local calling area.

However, on April 11, 2006, Verizon won a case against GlobalNAPs in the state of California, saying that GlobalNAPs was avoiding per-minute charges with this scheme.

The court admitted that the scheme is common:

Under the traditional system for rating calls, whether a call is “local” or “interexchange” depends on geographically defined local calling areas. The DTE established the existing geographic local calling area structure for Massachusetts after a generic proceeding “in which all interested Parties had the opportunity to comment.” Verizon implements this system by comparing the “NXX” numbers (the “NXX” is the middle three digits of a ten-digit phone number) of the caller and the recipient. The “NXX” has generally been associated with a particular “switch” (that is, the equipment that routes phone calls to their destination) physically located within a local calling area; NXXs have thus served as proxies for geographic location. This means that if the NXX numbers of the caller and the recipient were within the same local calling area, one could assume that the caller and recipient were actually physically within the same calling area and bill the call as a local call.

Global NAPs has the ability to assign its customers “virtual” NXXs (VNXX), so that a Global NAPs customer can be given VNXX numbers that are different than those that would normally be assigned to him based on his physical location. This allows a party to call what appears to be a “local” number, although behind the scenes that call is actually routed to a different local calling area. When the party making such a call is a Verizon customer, the call is transmitted outside the local calling area by Verizon.

Many of Global NAPs’ ISP customers use VNXX arrangements, and many of these ISPs’ end-user customers use Verizon for local phone service. To access the Internet, the end-user dials in to a VNXX number assigned to his or her own local calling area. Then, Verizon transports the call across local calling areas to Global NAPs’ point of interconnection with the Verizon network. Global NAPs and Verizon agree that “[u]nder VNXX arrangements, the Verizon end user’s call to the ISP’s server is toll-free [to the end user] whether or not the ISP’s server is located in the same local exchange area in which the end-user originates the call.”

The issue is further complicated by the reciprocal compensation regime, set up to regulate phone calls, in which the company originating a phone call pays the company completing the call. The court noted:

The treatment of intercarrier compensation for ISP-bound traffic has been a matter of considerable debate in recent years. Calls to ISPs tend to be long, and generally go exclusively from the ISP customer to the ISP. This has created opportunities for regulatory arbitrage. For example, in the context of reciprocal compensation, since reciprocal compensation flows from the LEC whose customer makes the phone call to the LEC whose customer receives the phone call, an LEC with a high proportion of ISP customers—as Global NAPs has—stands to gain a windfall in a reciprocal compensation scheme which includes traffic to an ISP.

“This has been a very long dispute in which both the DTE and the courts have repeatedly ruled in Verizon’s favor,” said Verizon in a statement. “Global has been well aware for some time that termination of its service would result if it continued to ignore its substantial financial obligation to Verizon.

“To date, this financial obligation exceeds $60 million. Verizon regrets having to take this action, but the responsibility for its impact rests solely with Global’s management.”

Spokespeople for GlobalNAPs did not immediately return our calls.

If Verizon succeeds in charging GlobalNAPs long distance fees for dialup phone calls, those fees will be paid by the customer. The future of dialup in the United States looks like a choice between the monopoly offering service at a flat rate and the “competition” offering services priced per minute.

The case could shut off the internet in large parts of the rural United States. It seems to us that it represents a failure to understand how the internet works. Perhaps the U.S. will continue to lose the internet race until those who grew up with the internet, those who actually understand it, are old enough to be judges.

Alex Goldman is managing editor of ISP-planet.

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