For your information and discussion as to how clec will be affected short term.<NEW YORK, Oct 27 (Reuters) - Upstart local phone companies called competitive local exchange carriers may face the reduction or elimination of certain fees they receive to connect telephone calls to Internet service providers, analysts and industry sources said Tuesday.-- If the fees are changed, certain small phone companies that rely on those fees for a significant revenue source could be hurt, Merrill Lynch said Tuesday.-- The Baby Bells contend they should not have to pay fees to the upstart local phone companies that connect calls to Internet service providers. The Baby Bells contend that calls bound for the Internet are interstate or global in nature instead of merely local phone calls.-- The regional Bell companies are expected to pay an estimated $600 million to the competitive local exchange carriers (CLEC) in 1998 to connect those calls, Merrill Lynch telecommunucations analysts said Tuesday in a conference call. The CLEC group included in that estimate includes the independent upstarts, as well as units of long distance giants MCI WorldCom Inc.(Nasdaq:WCOM - news) and AT&T Corp.(NYSE:T - news), Merrill Lynch said.-- If the rules remain unchanged, those fees could swell to $1 billion in 1999 and to $2 billion in the year 2000, Merrill Lynch said.-- Merrill Lynch estimated those fees, after taxes, would dampen Baby Bell earnings by about two percent in 1998, three percent in 1999 and five percent in the year 2000.-- The Federal Communications Commission may decide as soon as Friday that the telephone calls to connect commputers to the Internet are more like long distance calls than local calls and therefore subject to the agency's jurisdiction, industry source said.-- The FCC may decide to keep in place the fees, called reciprocal compensation, until the contracts between the Baby Bells and the upstart companies expire next year. At that time, the fees could be reduced or elimated, analysts and industry sources said.-- Industry and agency officials said the FCC's plans were still in flux on Tuesday, but the broad outlines of a decision had formed.-- competitive local exchange companies such as US LEC Corp. (Nasdaq:CLEC - news), Hyperion Telecommunications Inc. (Nasdaq:HYPT - news) and Electric Lightwave Inc. (Nasdaq:ELIX - news) appear to have the most exposure to changes in the reciprocal compensation rules, Merrill Lynch said.-- companies such as USN Communications Inc. (Nasdaq:USNC - news), Teligent Inc. (Nasdaq:TGNT - news), NEXTLINK Communications Inc. (Nasdaq:NXLK - news), GST Telecommunications Inc. (Nasdaq:GSTX - news) and RCN Corp. (Nasdaq:RCNC - news) appear to have the least amount of exposure out of the CLEC group, Merrill Lynch said.-- Merrill Lynch said it expects the issue remain clouded for months and may drag on in court battles.>Jim D
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