FCC “Rate Reduction” Will Increase Customer Bills—and Telco Profits

The FCC today saddled consumers with an additional $3 million in federal surcharges

For Immediate Release From The Utility Reform Network

The FCC today saddled consumers with an additional $3 million in federal surcharges on their phone bills at the behest of the nation’s largest and wealthiest long distance companies. These charges will appear on the bills of every telephone customer in the country as increases in the "federal subscriber line charge" which will raise the current $3.50 a month charge for a single telephone line to $6.50 over a five-year period plus a new charge to fund a $650,000,000 universal service fund.

Californians could see their phone bills go up almost $30. per year. "Like many of the recent increases in phone charges consumers have shouldered, this increase is outrageous and unjustified. It will help phone companies keep profits high at the expense of captive customers forced to pay inflated charges just to have basic telephone service," said Nettie Hoge, Executive Director of TURN, the Utility Reform Network.

"The FCC gave in to pressure from the large long-distance phone companies AT&T and Sprint to reduce the payments they make to large local phone companies like Pacific Bell and Bell South to handle their traffic." Hoge explained. "This deal also protects the revenues of these local companies by requiring ordinary telephone customers who must have 911 access to pay these Bell companies what the long-distance companies no longer have to pay them. There is no dispute that customers’ bills from Pac Bell will go up substantially over this 5-year period."

Contrary to its claims, the FCC did not eliminate a charge known as the "PICC," but instead rolled it into another surcharge, the "SLC." By doing so, the FCC forced customers to pay a charge that is scheduled to increase over time and is not subject to competition. The claim that the agreement by ATT to remove minimum usage charges is a new customer benefits is not supported by the facts. Market forces have already driven minimum usage charges out of existence for the most part. ATT itself already offers a long-distance calling plan without a minimum usage charge.

As a result of this deal, consumers will see increased existing surcharges, new surcharges and, perhaps, lower long-distance per-minute charges. This kind of shift in rates will help high volume long-distance users at the expense of ordinary citizens who use their phone primarily for local, not long distance calls.

"This deal that the FCC has sanctioned will hurt consumers. It will hurt the cause of competition. It violates the Telecommunications Act. It will reverse our progress toward Universal Service in this country. TURN will continue to oppose it on behalf of consumers," added Hoge.

TURN is a statewide membership organization representing residential telephone, gas, and electric customers throughout California.