Editorial: Verizon's Fee Error is an ISP Opportunity

As Verizon thumbs its nose at its customers, ISPs should seize the opportunity.

by Alex Goldman ISP-Planet Managing Editor [August 23, 2006]

The moment the government eliminated a fee, the phone company stepped in to collect the tax money for itself. People hate tax increases, and they hate price increases. Surely they'll hate a stolen tax rebate that's really a hidden price increase even more? And what if the fee was a government cronyism fee? Doesn't that make you even angrier?

Internet junkies may have celebrated when the FCC lifted the USF charge on broadband, but Verizon customers soon learned they had nothing to be happy about. According to Broadband Reports, the company sent a note to its customers saying:

"Effective August 26, Verizon will charge a Supplier Surcharge for all DSL customers. The surcharge helps offset costs we incur from our network supplier. The Supplier Surcharge will be $1.20/month for 768 Kbps service customers and $2.70/month for higher DSL speeds.

Verizon Online will cease charging an FUSF recovery fee, beginning August 14, 2006. The impact of the elimination of the FUSF fee is for DSL customers up to 768 Kbps, fee eliminated is $1.25.month; for DSL customers of up to 1.5 Mbps and 3 Mbps services, the fee eliminated is $2.83/month. On balance your total bill will remain about the same as it has been or slightly lower."

Of course, the phone company needs to recoup USF funds, because this was always a phone company subsidy. The phone company always claimed, on the bill, that these were taxes, but the proof that this money is used to fund the basic operations of the company is right here: the so-called universal service fee was actually paying the phone company's DSL provider—which is, of course, the phone company.

Dave Burstein of DSL Prime wrote a few years ago that USF rules were written purely for the benefit of phone companies:

DSL Prime strongly believes in universal service, including broadband. But the actual cost of universal voice service, including schools and libraries, is a small fraction of access and USF. The best way to save universal service is to actively and aggressively target it, eliminating waste and pork barrel spending. A good first step is to change some arbitrary rules that force schools and libraries to choose high-cost providers at public expense. 80 percent of the erate money doesn't go for Internet, but to pay for the school's regular phone charges. Smart buying, such as a national group that gets a great VoIP price, should be able to save an amazing amount-probably $300 million or so, a fifth of the budget right there. But rules, written largely by a board loaded with oldline carriers, currently prohibit this. Anyone who wants to defend universal service, including state regulators and honest public interest groups, should look first at fighting these ripoffs, not stopping VoIP.

David Hughes, broadband pioneer, wrote much the same:

the E-Rate rule that prohibited schools from buying and owning with E-Rate funds wireless broadband devices (either unlicensed or licensed—as in microwave links) was, and still is, a huge mistake.

Instead, Hughes asked that the FCC fund WISPs (but that would be a problem—they don't donate to politicians, and the FCC's role is to increase political donations, especially during an election year):

The E-Rate has become a perpetual cash-cow for local telephone companies. They love it—while school districts are still unable to buy, except with their own separate-from-E-Rate funds, unlicensed broadband radios by which they could be connecting up their buildings, modular classrooms, and even teachers and students across the district from homes! That would be the face of future education!

Bruce Kushnick of TeleTruth sums it up in his e-mail alert of August 22, writing:

This is what happens when you still have a monopoly offering wireline DSL services—they can add new bogus surcharges because there is no real competition to lower the price.

And when you add bogus taxes and surcharges to the internet connection and the broadband pipe, aren't you illegally taxing the internet?

Customers aren't stupid
Customers want an alternative. Jupiter Research analyst Asaf Buchner recently dropped a broadband provider for charging one price increase too many but is finding dialup painful.

In Verizon's case, one Broadband Reports user was quick to spot the potential for a cross subsidy, writing:

Come on Verizon DSL Folks, the FiOS program needs funding and investors are getting worried! Now they got their extra funding. :-(

Another user claims they received the same treatment from Speakeasy:

Just got my latest bill from Speakeasy. Of course the FUSF fee was reduced from $4.35 to $0.00, but, strangely enough, the "Regulatory Compliance Fee" was increased from $3.71 to $6.90! Amazing that their cost for "Regulatory Compliance" increased even though they don't have to collect and track the FUSF fee anymore. I would have thought it was less work for them.

Clear prices, happy customers
Companies that actually bill what they say they will bill get happy customers. A Voice Pulse user writes:

Sure love my Voice Pulse VoIP—the price I get billed is the monthly service charge—no other crap (although perhaps that will be changing thanks to the ruling cited).

We've argued for years that Accurate Billing is a Value-Added Service. Now we have to add to that truth in advertising. If you buy from your local ISP, you'll pay the advertised rate. If you buy from a national, expect hidden fees and charges.

On the ISP-Wireless list this week, one user wrote:

None of us can get away with it and that is why we are in business. We get subscribers because they don't like the telco's BS. If it were not for their fees, we would not be in business.

Humor site The Onion noticed, in its article, "Verizon Introduces New Charge-You-At-Whim Plan". Note that the article says this plan went into effect a few months ago.

Jupiter Research's broadband analyst, Joe Laszlo, comments on The Onion article in his blog, writing:

This feels fairly accurate to me, surprising given that it's not actually strictly speaking true.

It should be easier than ever to sell to customers who feel ripped off. Go for it.

—End