State agencies call on the FCC to ban the labeling of charges to suggest the government gets the fees or requires their collection.
By Associated Press
Published March 31, 2004
NEW YORK - Phone companies should be banned from imposing an array of surcharges that are labeled so as to suggest the government gets the fees or requires their collection, state watchdog agencies complained to federal regulators on Tuesday.
The "regulatory assessment fees" and other similarly named surcharges, which reap billions of dollars annually across the industry, are legally permitted as a way for companies to recoup costs for complying with federal mandates.
Such programs include ensuring phone service for rural and low-income customers, or the new rule that lets cell phone users keep their numbers when switching carriers.
In a petition filed Tuesday, the National Association of State Utility Consumer Advocates, which represents 43 state agencies including Florida's Office of Public Counsel, argues that such expenses reflect a regular cost of doing business just like network maintenance or mailing out monthly bills.
As such, the fees charged to cover those costs should already be reflected in the per-minute calling rate or overall monthly fee a company advertises - rather than being tacked on as a fee purportedly beyond the carrier's control, the association said in requesting a rule change by the Federal Communications Commission.
"In the last few years, wireline and wireless carriers have concocted line item charges, fees, and surcharges, purporting to recover all manner of "regulatory,' "administrative,' or "government-mandated' costs, but which do nothing more than soak consumers for the carriers' ordinary operating costs," the petition says.
"We enthusiastically support that petition," public counsel Harold McLean said Tuesday. "It gets to a lot of things that should be done."
The FCC declined to offer immediate reaction, while several telephone companies called the petition misguided and harmful to consumers.
"I'm surprised that anyone thinking of consumers first would want to eliminate information that explains to consumers what those fees are for," said Jeffrey Nelson, a spokesman for Verizon Wireless. "We think it's good practice, although not required, for consumers to know what state, local and federal governments are charging them, whether it's directly or the result of increased costs for wireless service."
Telephone companies have frequently defended their billing practices, asserting that customers should know that it is government burdens that are driving prices higher.
They also point out that many fees are calculated as a percentage of usage charges and can vary depending upon the jurisdiction.
But Billy Jack Gregg, director of the West Virginia Consumer Advocate Division, cited other products such as gasoline where costs incurred as a result of government mandates are not treated as separate charges.
Notably, although the cost of refining crude oil into gasoline now includes a new government clean air mandate requiring producers to remove more sulphur, the added expense is reflected in the overall price for a gallon of gas displayed at the pump.
Such examples, however, are not necessarily the norm. Airlines charge extra on top of their advertised fares for "fuel surcharges" and "passenger security fees."
"If a service is going to cost 8 cents a minute, it shouldn't be 6 cents a minute, plus, plus, plus," Gregg said, stressing that his group is not interested in forcing the companies to improve disclosure about the fees.
"We don't want any better descriptions. We don't want better labeling. We want these line items banned. Let the phone companies recover all of their costs in the prices they charge for the services they offer," Gregg said.
Beyond a general requirement under federal law that the surcharges be "just and reasonable," there is no specific cap for many of the fees. Likewise, the FCC often does not require the companies to report their actual expenses or monitor the fees.
In the case of the new rule allowing cell phone users to switch companies without losing their numbers, the FCC indicated last summer that it was trusting consumers to comparison shop.
Some consumer advocates see that stance as unrealistic since the charges are rarely disclosed for easy comparison. They also contend that allowing surcharges actually hurts competition.
"These policies allow less efficient carriers to stay in the market longer than they normally would because this allows them to advertise a rate lower than what they actually charge," Gregg said.
- Times staff writer Louis Hau contributed to this report.
