The Federal Communications Commission has initiated an investigation into whether or not DSL carrier Verizon Communications has violated federal truth-in-billing laws.
The FCC confirmed Friday that an eight page letter of inquiry had been mailed to Verizon seeking information about a new DSL user surcharge that the company plans to levy.
BellSouth had been planning to impose a similar fee on DSL subscribers, but they dropped the idea after they learned that federal regulators were investigating Verizon's new DSL fee structure.
So what's really going on here? Last year the FCC decided that DSL subscribers would no longer have to pay the Universal Service Fund (USF) tax that was being imposed by the government. This tax was paid by the subscribers as a pass-through that appeared on their DSL bill sent to them by the telco providing the DSL service. Cable broadband subscribers have never been required to pay this tax, and it was thought that the elimination of this tax would level the competetive playing field between the telcos and the cable companies. The FCC apparently thought that eliminating this tax would lower DSL prices. However, the FCC thought wrong.
If Verizon had simply dropped the USF tax from the consumer's bill and passed the savings along, Verizon's DSL customers might have realized a savings of about $1.25 to $2.83 per month. But just as the USF tax was being eliminated, Verizon introduced a new fee called a "supplier surcharge." And, this new surcharge being added equals almost exactly the amount of the USF tax being subtracted, so that consumers will see either no reduction, or only a very slight reduction, on their Verizon DSL bill.
"It's a supplier fee we have to pay to the Verizon LEC," Verizon spokesperson Bobbi Henson told Light Reading.
Yes, Verizon pays Verizon for the right to use Verizon's networks.
Henson explains Verizon DSL and the Verizon LEC are "totally different entities," and must be kept "at arms length" from one another. This, Henson says, is to avoid the appearance that the Verizon ISP is being given preferred treatment over the many other ISPs that also pay the Verizon LEC for carriage.
Henson says the "cause" of the new fee stems from the company's "naked DSL" users, which buy broadband but not phone service from Verizon. Because Verizon is not getting voice revenue from those DSL-only customers, yet it still must pay increasing carriage fees to the Verizon LEC, Verizon the DSL provider is making up the difference with the new fee.
Verizon could have passed the costs along only to its naked DSL customers, but it is charging all DSL customers instead.
When asked how many of these naked DSL customers Verizon actually has, Henson replied that her company doesn't report that stat.
As
Techdirt reports:
Perhaps it's no surprise that the telcos would simply tack on a new meaningless fee to replace the old one. They have a long history of hiding price increases behind made up fees -- so in this case, they're simply replacing the USF fees with their own made up fee, that has even fewer restrictions (i.e., none, as opposed to very little) on how the fee money is used.
While claiming it's just a shocking coincidence that the fees almost exactly match the amounts of the dearly departed USF fees, Verizon is still upset that its traditional voice line business is in trouble, but Verizon can't admit it publicly as it would cause investors to beat down the stock. For any normal business, if your basic costs go up, you simply increase the prices you charge. You don't add in some random meaningless and totally unexplained "fee" to cover those costs. Unless, of course, you're trying to pretend you keep lowering prices so that you can claim to lawmakers that there really is competition in a market where there is very little. If that's the case, you need to keep adding in fake fees to raise revenue, while pretending that the "competition" is forcing you to lower prices. And, what better way to sneak in a fee than to replicate nearly the exact dollar amount of the fee the government no longer requires you to collect -- and then just sending it directly to your own coffers?
This may be a new offensive by Verizon against the principle of net neutrality. The proposed "supplier surcharge" sounds suspiciously like the "fuel surcharge" that trucking companies routinely charge their customers. In the U.S., when cargo is shipped via truck, the shipper pays a base rate plus a fuel surcharge. The fuel surcharge changes daily, weekly, or monthly, but these days it is always going up, since fuel prices are going up. If fuel prices are up by 5%, then the trucking companies levy a fuel surcharge of 5% on all cargo. And by the way, the trucking industry in America is deregulated, and this is the model that Verizon seeks to emulate.
Imagine a world without net neutrality. In this world, Verizon would be able to increase rates on popular sites and services, and then pass these rates onto consumers in the form of surcharges. In this world, a consumer's DSL bill would consist of a base rate plus a "supplier surcharge." No telling how high rates would go under this scenario...
Mark Cooper, director of research at the Consumer Federation of America, believes that Congress should take the phone companies' recent actions as a warning of what could happen if lawmakers do not impose Net Neutrality regulation, a hot topic being debated in Washington. Without Net Neutrality legislation, network owners, such as the phone companies, could charge third parties, like Vonage or Google, extra fees for offering services over the phone companies' broadband networks. Phone companies have argued that if they could provide Internet companies premium services for a fee, broadband customers could ultimately benefit through lower-priced and more innovative services.
"They made similar arguments when they lobbied to be excused from USF regulatory obligations that doing so would benefit consumers," Cooper said. "And here they are, free from those regulations, and they still stick it to the consumer."