Phone Companies Get an FCC Spanking

A number of consumer advocacy groups and others have trying to encourage the FCC and government to put a stop to the consolidation of service providers that is taking place. They argue the old AT&T is being rebuilt and the telecom industry is heading in the wrong direction.

In response the FCC has publicly commented that there is more competition that ever from cable companies as well as wireless and satellite providers.

But the FCC’s comments about an abundance of competition seems to have been put to the test recently as Verizon has announced a new broadband surcharge. According to an article in the Wall Street Journal, last weekend, Verizon began emailing its roughly six million high-speed Internet subscribers, informing them they would no longer be charged the Universal Service Fund fee — which was $1.25 or $2.83 a month, depending on speed of service. But it went on to say that it was instituting a "supplier surcharge" of $1.20 or $2.70 a month beginning Aug. 26.

Many point to this new fee as evidence there is a lack of real broadband competition in the market and they further argue the timing of this increase – just as the FCC decided broadband subscribers no longer had to pay into the Universal Service Fund, is especially sneaky.

It is for this reason the FCC decided to send a “letter of inquiry” to Verizon in order to ascertain the reasoning behind the surcharge. The letter is the first step toward a formal investigation. Verizon said it decided to impose the new fee on all Internet subscribers because of increased costs of providing service to customers who only buy high-speed Internet. Verizon strongly disputed the idea that it hadn’t been upfront with consumers about the new charge and said its timing was designed to minimize the impact on consumers, who won’t see their bills change significantly.

From my vantage point it is bizarre that the FCC needs to step in and protect consumers. The following statement perhaps explains the point best:

"The commission takes its obligation to protect consumers very seriously," said FCC spokesman David Fiske. "Consumers must be provided with clear and nonmisleading information so they may accurately access the services for which they are being charged and the costs associated with those services."

Let’s put aside the fact that the term nonmisleading is something most people have never heard before – I imagine when most people encounter the term, they get the same confused feeling they get when trying to decipher the fees and taxes on their current phone bills.

The FCC’s actions are admirable. The question is why are they necessary?

If we truly have competition why would Verizon and SBC – who just recently dropped their $2.97 “regulatory cost recover fee,” not be allowed to charge fees to their heart’s content? After all Federal Express and other shippers routine add fuel surcharges to packages their customers ship.

If all of the above-mentioned companies are publicly traded and they have an obligation to shareholders to increase profit, what business is it of the FCC to step in and police the increased fees being charged? After all, isn’t it obvious that Skype, cable companies, Vonage and other VoIP companies are wreaking havoc on the bottom line of Verizon, AT&T and others?

This is the exact irony the public should be thinking about as on the one hand the FCC is allowing large-scale mergers to decrease broadband competition but on the other hand is trying to make sure the companies in the new telecom landscape don’t take advantage of their newfound power.

One has to wonder if the problem is to allow all the mergers in the first place. It would seem that as fewer and fewer real alternatives exist in the market we will need the FCC to step and protect consumers ever-more often. It is worth pointing out that the above scenario is exactly what consumer groups have been afraid of. Perhaps it is worth taking a breath and listening to what these groups and others are saying before we proceed to eliminate more broadband competitors from the market.

In 43 days, Internet Telephony Conference & Expo takes place in San Diego, California. This arena will be the ultimate stage for the debate about the future of telecom. There will be content for service providers helping them find new ways to generate revenue such as the IPTV Summit. There will further be sessions focused on how cable companies can maximize revenue with IP communications. The industry’s richest conference offering will allow you to take advantage of IP communications to generate more revenue at a time when revenue is most crucial to your company’s future.

  • Onofrio ("Norm") Schillaci
    August 28, 2006 at 2:13 pm

    The recent actions by the FCC of considering that DSL is not a telecommunications service but rather an information service excluding DSL from paying into USF, provided the opportunity for Verizon to capitalize on the FCCs position.
    There are 2 issues at hand:
    1. As you have already stated on the issue of competition for data and voice, however the FCC will take a position that comparable competition does exist largely from cable operators today and from mobile operators tomorrow.
    2. How can Verizon , an ILEC that is required to file a tariff in each served market that justifies price based on cost?
    Issue number 2 was a contributory factor in the lack of naked DSL (DSL without dialtone for TDM voice) as ILECs could not argue a lower cost and thus a lower price in some of the markets they serve.
    So how can a tarriffed service now be victim of a surcharge to insure return on investment, whereas the filed tariff did not consider this argument?

  • Rich Tehrani
    August 28, 2006 at 4:48 pm

    All great points!

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