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FCC Nudges BellSouth Into Giving Up New DSL Fees

Verizon Insists It Has "Added Costs" It Needs to Recover

By Martin H. Bosworth
ConsumerAffairs.com

August 27, 2006

Net Neutrality • FCC Votes To Create Net Neutrality Rules • FCC Chairman Proposes New Net Neutrality Rules • FCC Launches Probe Of Wireless Industry • FCC Chair Vows To Enforce Net Neutrality • House Introduces "Internet Freedom Preservation Act" • Obama Promises Support for Cybersecurity, Net Neutrality • Net Neutrality Advocate Tapped As FCC Head • Internet Providers Ponder Bandwidth Limits For Heavy Users • Comcast, Cox Caught Blocking BitTorrent • Will Antitrust Law Save Net Neutrality? • Few Are Neutral in Net Neutrality Battles • Net Neutrality Supporters Testify • Comcast Blocks Public From FCC Hearing • Congress Gets Net Neutrality Legislation • Time Warner To Test Metered Pricing For Broadband • House Committee To Probe FCC • FCC To Investigate Comcast For Blocking Net Traffic • Verizon Wireless Opens Network to All Devices, Software • Comcast Sued Over Internet Blocking • Verizon Overrides Internet Searches With Its Own Results • Comcast Blocks Subscribers From Some Services • Verizon's Abortion Block Raises Net Neutrality Concerns • FTC Nixes Net Neutrality • Wireless Spectrum May Hold Key To Net Neutrality • Telcos Lift Block On FreeConference.Com • FCC Takes Another Look at Net Neutrality • AT&T Blocks Calls To Competing Conference Call Service • Study: Ending Net Neutrality Would Hurt Consumers • FCC, FTC Challenged To Protect Net Neutrality • Net Neutrality Back on Congress' Agenda • Net Neutrality Opponents Step Up PR Blitz • AT&T Trumpets New TV Service • Verizon Joins BellSouth in Retreat From Unexplained New DSL Fee • FCC Nudges BellSouth Into Giving Up New DSL Fees • FTC Head Urges "Caution" On Net Neutrality • Net Neutrality May Derail Telecom Bill • Google: No Net Neutrality Means Antitrust Fight • Senate Prepares for Net Neutrality Showdown • Congress Moves Quickly To Satisfy Telecoms' Net Neutrality, Cable Entry Demands • Net Neutrality Gets Its Day In Congress • Net Neutrality Wins Committee Vote In Congress • Net Neutrality Attracts Surprising Allies • Congress Wrestles with Net Neutrality

Telecom giant BellSouth has agreed to drop its mysterious new service fee for broadband customers after the Federal Communications Commission (FCC) threatened to pursue an inquiry into the company's pricing policies.

BellSouth had been following fellow Verizon's lead by planning to impose a "regulatory cost recovery fee" on its high-speed Internet customers. The new fee was $2.97, exactly the same amount as the old Universal Service Fund (USF) fee which BellSouth had recently won the right to stop paying into.

Whereas the old USF fee was ostensibly designed to fund development of low-cost telecommunications services in rural areas, the new fee was designed specifically to "recover the costs of regulatory compliance."

However, the FCC, the chief telecommunications regulatory agency, was skeptical about the new fee.

The agency said it had sent an eight-page "letter of inquiry" to both BellSouth and Verizon asking whether the new fees complied with the FCC's "Truth-In-Billing" requirements for clearly explained and understandable customer charges.

BellSouth promptly backed down, stating that it would cancel the fee, and credit any customer charged. The credit would take one to six weeks to appear on customer bills, the company said.

The FCC is generally regarded as giving the big telephone companies a wide berth but this escapade went a bit too far. Several FCC commissioners, including Chairman Kevin Martin, were outraged.

"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."

Last year, the FCC eliminated the Universal Service Fund payments for DSL subscribers. The commissioners calculated the move would cut 10 million DSL subscribers' monthly Internet bills by a dollar or two.

Verizon said that it had received the letter from the FCC and would publicly respond, noting that it had provided reasons for its own fare hike on its Web site.

Verizon blamed its new fee on the "increased costs" of providing service to customers who only buy high-speed Internet, without buying basic telephone service.

BellSouth is currently in the process of being acquired by AT&T, and requires FCC approval to complete the merger. AT&T itself had not instituted any new fees on customer services after receiving relief from the USF, and was not, at last word, a target of the FCC inquiry.

"We want to do what's in the best interest of our customers," said Herschel Abbott, BellSouth's vice president of governmental affairs, attempting to explain the company's about-face.

Observers and tech analysts were skeptical that the FCC would pursue any serious action against the telcos, given FCC chairman Kevin Martin's generally business-friendly approach to the agency's agenda.

A commenter at tech news blog TechDirt remarked that " [A] couple more donations in the right places and the FCC will find that these are legitimate charges and maybe even suggest the telcos overlooked a few more that could also be tacked on."

Critics said the latest "bait and switch" sleight of hand regarding the old and new fees were evidence that "net neutrality" legislation is essential.

After years of touting their dedication to building nationwide broadband access and elbowing out would-be competitors through regulatory machinations and ferocious lobbying, the major telecom companies are showing their true colors as they ramp up their campaign for "tiered service," where the clients paying the most will have access to the fastest and highest-quality Internet service.

Proponents of net neutrality believe that if telecom and cable companies start instituting tiered pricing, it will leave lower-income customers -- Internet users and content providers alike -- in the Internet "slow lane," unable to access the best circuits and forced to put up with slower, glitch-prone access.

"The telephone companies are still in mourning for the good old days when there was something called long-distance service, with rates based on both mileage and time," said one longtime Washington public affairs executive. "The whole concept of the Internet -- unmetered access to the whole wide world -- makes them cry."

"This change amounts to a price increase, nothing more and nothing less," said Samuel A. Simon, chairman of TRAC, a Washington consumers group.

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