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Report: Bells to push for Web fees
Phone companies want Internet content providers to pay for data moving over networks, paper says.

NEW YORK (CNNMoney.com) - Large phone companies are seeking payments from Internet companies for high-quality delivery of music, movies and other content that will move over their telecommunications networks, according to a published report.

The Wall Street Journal reported the push by telephone companies could set the stage for the next big battle in the ever-changing telecommunications sector.

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Movielink LLC, a joint venture of five major movie studios that offers movies to consumers over the Internet, said it has discussed the issue of payments with BellSouth (Research), the newspaper reported, while BellSouth said it is in early talks with Internet movie companies and at least one gaming company over reaching agreements on some kind of payments.

The Journal also reports executives at AT&T (Research) expressed support for charging companies to ensure that their content gets priority delivery over its network, while Ivan Seidenberg, CEO of Verizon Communications, said he might favor reaching deals with companies to do the same.

"We have to make sure they don't sit on our network and chew up our capacity," Seidenberg told reporters Thursday.

But the paper reports that the Internet companies are likely to fight the demands for payments from the phone companies, arguing that making them pay for priority delivery of their content amounts to holding them ransom, thus hurting competition and, ultimately, the consumer.

"They want to charge us for the bandwidth the customer has already paid for," said Jeffrey Citron, CEO of Vonage, a leading provider of telephone service over the Internet "The customer has to pay twice. That's crazy."

The newspaper reports that executives at large Internet companies such as Google (Research) worry that broadband providers will exert too much power over content that travels on their networks if they start charging providers for delivery. And it reports that smaller companies say they may not be able to afford paying for premium network access.

But one Internet company, Movielink, said it is open to such a fee arrangement, according to the report, because its executives believe it could benefit from high-quality delivery of its products.

"Movielink is certainly interested in increasing the quality of service to customers," said CEO Jim Ramo. "We're willing to explore a commercial relationship where we can get that done." But he added that his company's talks with BellSouth are still in the conceptual stage.

Until recently, phone companies were required to treat all data sent across their high-speed networks equally and without discrimination, according to the newspaper. But last year, a Supreme Court decision opened the door for the Federal Communications Commission to deregulate Internet services, which it promptly did. The Journal reported the change allows the type of pricing plans now being proposed by the local phone companies.

William Smith, chief technology officer of BellSouth, told the newspaper he envisions charging content providers a fee based on the volume of material they send over BellSouth's network, as well as the bandwidth the content takes up. He compared his model to that used by Google, which charges advertisers more for ads with better display. BellSouth intends to neither to restrict consumer access nor block providers, the paper reported.

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