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The Rip: How All Those Pesky Phone Charges Appeared on Your Bill! If you use 50 minutes of long distance a month, did you know that AT&T’s heavily advertised “One Rate 7¢” will actually set you back 24.7¢ a minute? Or that MCI’s “Five Cents Any Day” rate will cost you 30.9¢ a minute if used during the day? And how about Sprint’s Sense 10 cents per minute rate? Bite your tongue... that can actually cost you 77.8 cents! Background This White Paper will help you understand how all carriers, but in particular AT&T and MCI, have used the 1996 Telecommunications Act to deceive the public by masquerading a portion of their rates as “Federally Mandated Taxes”. Years ago, when AT&T (Ma Bell) ruled the roost, there wasn’t any need to isolate the different components of a long distance call. After all, they all ended on the same bottom line. But in reality, there were three distinct “legs” in each long distance call:
After “Ma Bell” was broken up into AT&T and the “Baby Bells”, these three distinct components of a long distance call became very meaningful. The “Baby Bells”, which were restricted to carrying local traffic, complained that FCC regulations forced them to absorb expenses associated with carrying the beginning and ending portions of a long distance call over their lines. In 1996, the Congressionally passed Telecommunications Act began to address these and other concerns by isolating long distance phone costs into the three different components. Once these costs were identified and isolated, the FCC issued rules changing the method in which the “Baby Bells” could charge long distance carriers for usage of their lines. The old method, charging long distance carriers a flat per minute rate, was replaced by a combined LOWER per minute rate PLUS a flat monthly user line charge called a Presubscribed Interchange Carrier Charge (or PIC C for short). It should be noted that the COMBINATION of these replacements was actually LOWER than the original flat per minute rate. Then to help the “Baby Bells make up for any loss of revenue from the LOWER COMBINED charges to the long distance companies, they were allowed to charge the consumer a new item called a “Subscriber Line Charge”. By instituting this new charge, the FCC actually shifted an additional part of the long distance carrier’s cost to the consumer. And this is where the “smoke and mirrors” begins! The “Subscriber Line Charge” generally appears in the local section of your phone bill as the “Federal Subscriber Line Charge”, the implication being that it is some new type of federally mandated item. In reality, this is in no way a federally mandated charge: it is an allowed charge. The “Baby Bells” claim they call it a “Federal Subscriber Line Charge” because it was allowed by federal regulators as opposed to state regulators. But by doing using the designation “Federal”, consumers have been led to believe it is just another federal tax, which of course it isn’t. Not one cent goes to the federal government or any governmental agency. The local companies are not forced or mandated to charge any amount! But this is only the beginning of the “smoke and mirrors”game! Not to be outdone, the long distance companies were just as quick to capitalize on the confusion. They took the flat monthly line charge (the PIC C), and placed it in the long distance section of your bill as the “National Access Fee”. Once again, especially with all the “Gore Tax” talk, consumers were led to believe this was just another federal tax. But once again, it “ain’t” so! But wait... the FCC wasn’t finished! In 1997, the FCC implemented rules to address that portion of the 1996 Telecommunications Act mandating free or reduced telecommunications services for schools, libraries, rural health care providers, high cost rural areas, and the less fortunate. These FCC rules are referred to as the “Universal Service Order” and directed interstate long distance carriers to fund this quest by paying what they termed, a Universal Access Fee, also called the Universal Service Fee (USF). Although the FCC set the Universal Access Fee to be slightly less than 4% of a carrier’s long distance revenue with a proviso for quarterly adjustments based on projected demand, they did not mandate that it be passed onto the consumer. But no business can survive by absorbing additional non-productive expenses and as a consequence, most (if not all) long distance carriers opted to pass the USF onto the consumer. But after adding their “handling charges” to this fee, the USF is no longer a simple 4%. Instead, it is passed on to the consumer either as a flat rate of so many dollars per month, or as a percent of the users total long distance charges. Depending on the carrier, this fee can run the gamut from $1.00-$8.00 per month or from 4% - 9.5% of the user’s total long distance charges. Because of this variance and the arbitrary method in which it is passed on, the USF, along with the PIC C (National Access Fee) should always be taken into consideration when evaluating long distance carrier’s rates. The Bottom Line The bottom line with all these deceptions is that even folks who seldom use long distance are beginning to see red! With all the hidden charges, it’s not unusual for them to receive a monthly bill exceeding $9.00 for a simple five minute call! That comes out to $1.80 a minute! Worse yet, even if you don’t use any long distance, you can still end up paying a “Carrier Line Charge”, the “Universal Access Fee”, a National Access Charge and in many cases, a monthly minimum charge. To see how you can fight these rip-offs, read part two of this White Paper: The Rip: Getting Control of Those Pesky Fees! by clicking HERE This report has been prepared and sponsored by Senitel Communications, a division of Jack Koenig & Associates, consultants to business and industry since 1976. Now serving the small business and residential market, Senitel can be reached toll free at 877-853-9700. To read part two of this report, click HERE To see what service is available in your area, click HERE To leave a comment, click HERE To join our EMail list and receive special alerts, click HERE To receive our bi-monthly, award winning “Fighting Back” series of consumer reports, click HERE To return to the HOME page, click HERE
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