BY RICH TEHRANI

Telecommunications pricing is totally illogical and unreasonable, and is in need of a drastic overhaul. This is the conclusion I recently came to as I reviewed my home telephone bill. As a Connecticut resident, I am one of the millions in my state that have Southern New England Telephone (SNET) as our local phone company. Of course, rates vary widely depending on the local telco relative to your geographical location. A superficial scan of other telephone company's rates exposes the fact that irrational phone rates are the norm rather than the exception.

LOCAL OPTIONS
Regional telephone companies such as SNET have a wonderful moneymaking opportunity - enhanced services. Call waiting, call forwarding, conference calling, and other services can be set up by phone companies, and then charged for on a recurring basis. None of this is new to any of us, and in fact most of us have been paying for these services for a great many years.

SNET has a wonderful service called Totalphone consisting of call waiting, call forwarding, conference calling, and a few other features. To me, this is an invaluable service and in many cases call waiting alone eliminates the need for a second line. This enhanced service is reasonably priced, in my opinion, at $5.95 per month. As I am one of a growing number of telephone subscribers with a second line in my house, I know that a second line costs over $20, once taxes and other miscellaneous charges are considered.

So, enhanced services can be a wonderful thing. I look forward to reasonably priced services that read me my e-mail and even faxes. I am not forced to purchase these services - but if I like, I have the freedom to choose them. I always want to dabble in the latest technology that the telephone company can offer to make my life easier. As most of the enhanced services coming on line are made possible with computer telephony components, I feel great ordering new services as I am supporting our industry every time I sign up for something new.

ADDING CHOICE
So why overhaul such a great system? It's ideal, isn't it? Well, yes and no. If the enhanced services can be offered to me by many different sources in a similar manner to Internet access through competing ISPs, then it would be perfect. As it stands, I am stuck with paying $5.95 a month for Totalphone whether I like it or not. No one can offer it to me less expensively. SNET has the market locked. AT&T is an emerging player in the Connecticut market and is doing its best to give Connecticut's residents a choice.

As consumers, we need choices. We need them badly and we need them now. SNET has a monopoly in Connecticut and the effects of this monopoly can be seen in many services, which do not seem to be reasonably priced. In fact many of us are being charged for a fictitious service, which is by no means a service. I am referring to the "non-published service." If you have an unlisted number, take a look at your bill. You may be getting charged for this on a monthly basis. I pay $3.35 per month for the luxury of my phone company not publishing my number. This is actually listed as a non-published service on my bill. I am purchasing it in a single unit quantity and am thankful that the two lines connected to my home do not each need to have separate service costs associated with them. Only a phone company can charge a monthly charge of $3.35 for the absence of a service, and then list it on a bill as a service. Another service, caller ID, costs $6.50 per month on my phone bill. While this is a highly valuable service, I truly feel that I am being taken advantage of at the end of the year when I realize an $80 expense.

SNET also offers long-distance. In the short time they have offered this service, they have produced some great industry breakthroughs. In certain instances, your nationwide calls will cost as low as $0.10 a minute - all while enjoying 1-second incremental billing. Many phone companies round up a call's total time to the next 6-second increment or the next minute. This is a great breakthrough for SNET. So SNET's long-distance prices are dropping, yet we pay $3.35 a month for the non-published "service."

ACROSS THE NATION
An exploratory look at nationwide enhanced services rates turns out to be an interesting exercise. As a Pacific Bell customer, you can add a second directory listing to your telephone number for $0.85 per month and a one-time charge of $5.00. Furthermore, a Pacific Bell customer gets a great deal on their non-published service. A mere $0.30 a month gets Pacific Bell customers all the features and benefits of the non-published service enjoyed by those in Connecticut at less than 10 percent of the cost. Perhaps Pacific Bell can consult with other regional telcos and help them institute this less expensive and obviously more efficient non-service.

But incongruous pricing doesn't stop there. Bell Atlantic, a local cellular provider, offers cellular service in Connecticut. When I recently signed up for Bell Atlantic service, I received free off-peak calling for a whole year, bundled with digital service, voice mail, call waiting, and caller ID. This service was offered to me at a cost marginally higher than my previous analog service from the same company. In short, I was given telephone service and features superior to that of not only my home phone, but my office PBX as well. For the majority of the hours in a week, I can use it for free!

CROSSING THE LINE
Other wonderful examples of the ludicrous billing systems in place in this country are evident when you place a telephone call to another phone in a geographically similar location. To call from one city to a neighboring city is free with SNET and many other telcos. Call a number just over the border of the next city and pay per minute for the duration of that call. If your call originates near a state border, you pay to cross the line. Calling 500 feet west can cost $0.15 per minute, while calling 50 miles east is free. Of course, as long as you use your cellular phone, it may be free to call within the border of your entire state - but no further if you are off-peak.

You might guess I am a fan of cellular service since it is so inexpensive. Guess again. What on earth is a roaming charge? Why are we being penalized for traveling? Whose bright idea was it to dissuade people from using cellular service once they reach their state's border? How can airwaves in Connecticut be free at the same time the airwaves over the New York border cost $1.50 per minute?

INTERNET TELEPHONY: THE EQUALIZER
In every above scenario, there is a winner and a loser. In every case the loser is the consumer and the winner is the telcos. If non-published service became $10 a month tomorrow, I would still have to pay it. The government is aware of this situation and the recent telecom deregulation act was designed to increase competition among carriers. As it stands, this act is having only marginal impact on this situation. What is really needed is a great equalizer: Some way that new and existing competitive telephone service providers can come into entrenched markets and differentiate themselves based on a plethora of features and options that provide greater value to telephone users.

Thankfully, that equalizer exists and has taken form in one of the fastest growing markets the telecommunications industry has ever seen. I am, of course, referring to Internet telephony. In terms of efficiency, Internet telephony provides orders of magnitude increases in bandwidth utilization over the current circuit-switched infrastructure.

Government Regulation
The telecommunications industry has been in turmoil lately due to the fact that telephone companies have been petitioning the government to classify Internet telephony service providers (ITSPs) as telcos, and thus subject them to the telco class regulatory procedures including numerous taxes and financial obligations. Part of these regulations include donations to the Universal Service Fund, which in turn provides resources to schools and people in rural areas, allowing them all equal access to telephone and other communications services.

Thankfully, the government and the FCC realized that Internet telephony is an immature technology that needs to develop, and that any regulation imposed at such an early stage in its development would have wildly unpredictable (but surely negative) effects on the industry as a whole.

PACKETS: TELEPHONY'S FUTURE
It seems evident at this point that the future of telephony lies in transporting voice, video, and fax over a ubiquitous packetized network. This was the founding principle we used in deciding to launch INTERNET TELEPHONY™, the first industry magazine devoted solely to this discipline.

By allowing telephony to be treated as data, the incredible breakthroughs in price and performance known to the world of computers will soon rush to telephony users the world over. Enhanced services today are stuck in the expensive realm of telephony components. As networks transform to natively accept IP telephony at the endpoints, any powerful microprocessor will be capable of providing enhanced services to users on the IP network. We are beginning to see ACDs and PBXs based solely on software - for example, a company called PakNetX is offering such a product.

Internet telephony will be a great enabler, providing telephony efficiency, which is orders of magnitude greater than yesterday's network. New telephone companies are being formed almost daily based on packetized networks, which supplant yesterday's inefficient circuit-based designs. As Internet telephony deployment increases, expect phone costs to regularly drop, and expect functionality and the ability to choose class of telephony service to continue for the foreseeable future.

Now that Internet telephony is out of the danger zone of regulation, the tremendous financial and resource investments will continue in this industry, fueling innovation and rapid growth. As technological innovation continues and companies see opportunities to give customers more for less, we can expect a future that sees competition in telephony on a scale not seen before. Long gone will be the days where large, monopolistic phone companies can charge for services that indeed are absent. Perhaps we will see the day when we can decide whose enhanced services to purchase instead of being locked into a single vendor's pricing. As long as Internet telephony is untouched, we can count on it to be the wild card that provides an even playing field for universal competition in telecommunications.