Long-distance carriers boost consumer fee
Two of the nations three major long-distance carriers, AT&T and Sprint, have boosted the rate they charge consumers to recover their share of government fees to subsidize telephone and Internet services in rural areas. WorldCom is expected to follow suit.
AT&T this month increased the Universal Service Fund surcharge on consumers long-distance bills from 8.6 percent to 9.9 percent.
AT&T spokeswoman Claudia Jones said the fees are a "pass-through" to the Federal Communications Commission for a program mandated by Congress, which subsidizes the high cost of providing phone and Internet access for rural schools and libraries and other rural telephone users.
At the beginning of the year, Sprint boosted its surcharges, too. The company has increased the Universal Service Fund charge on business customers long-distance bills from 6.6 percent to 7.5 percent, while increasing the fee on residential customers bills from 8.6 percent to 9.6 percent.
WorldCom officials last week said they were "continuing to study" the most recent quarterly Universal Service Fund contribution assessments compiled by the FCC for the first quarter of 2001. The company currently levies an 8.3 percent surcharge on consumer long-distance bills to cover the cost of such subsidies.
The FCC is responsible for administering the collection of these fees from long-distance carriers. Charges to cover subsidies to promote telephone access in rural areas have been levied since the 1930s, but the subsidies were redrafted in the Telecommunications Act of 1996 to include high-speed data access.
The FCC said in December 2000 that it expected to collect $1.3 billion in such fees in the first quarter of 2001, compared with $1.2 billion in the fourth quarter of last year.
The costs are evaluated quarterly for the four major service areas that Congress determined should be subsidized schools and libraries, rural health care, high-cost areas and low-income people.
While those collections have fluctuated, FCC officials said this is the first time in more than a year that the major long-distance carriers have raised the surcharge rate significantly for consumers.
Nancy Kaplan, a vice president at Adventis, a Boston firm that analyzes telecommunications issues, said the increases by AT&T will mean an increase of about 32 cents on a $25 long-distance phone bill.
While the long-distance carriers characterized the collections as a dollar-to-dollar payment to cover government fees, some consumer advocates said that is not always the case.
Dian Callaghan at the Office of Consumer Counsel in Colorado said long-distance carriers are their own monitors on the collections. "If they collect more than they need to meet their Universal Service Fund obligations, they can keep the rest," she said. "So there is an incentive for them to keep the rate high, which is not necessarily in the consumers interest."
She called the increases by AT&T and Sprint "unwarrantedly high."
"We counsel consumers here in Colorado to shop for long-distance carriers in part based on what they charge them for the Universal Service Fund reimbursements," Callaghan said.
Figures compiled by Callaghans office, which compared the Universal Service Fund surcharges by long-distance resellers and major carriers in Colorado, showed that the charges vary widely.
For example, last year, when both AT&T and Sprint were adding 8.6 percent to consumers long-distance bills, C-Com and GTC Telecom, two Colorado long-distance resellers, were charging 5.9 percent, the reports show.