Monthly Phone Bill Reveals Regulation Run Amuck
by Jerome F. Winzig
Four years ago, Congress passed and the President signed the so-called Telecommunications "Reform" Act of 1996, with curious results. Today, phone bills across America contain a convoluted patchwork quilt of fees for such things as Federal Access, Service Provider Number Portability, Carrier Access, Service Provider Number Portability, Federal Universal Service, and Telephone Assistance Plan.
The Federal Communications Commission (FCC) calls the 1996 law the "first major overhaul of telecommunications law in almost 62 years" and says it will "let any communications business compete in any market against any other." According to the White House web site, the "President and Vice President believe that when the walls of regulation are brought down, prices come down for American consumers."
Our monthly telephone bills, however, tell a different story. Our latest bill, for $100, itemized eleven separate government-mandated fees and taxes. There are so many that the Congressional Research Service publishes a 12-page report called "Telephone Bills: Charges on Local Telephone Bills." Comparing that report against our monthly phone bill reveals how federal regulations are used to benefit a complicated web of private and corporate interests.
The $3.50 Subscriber Line Charge, also called the Federal Access Charge, is paid to our local phone company for the costs of providing access to the interstate long-distance network. Oddly, the charge on a second residential line is $6.07, even though the FCC says the charge cannot exceed the actual amount of the actual costs. Apparently, our second line's long-distance access somehow costs our local phone company 73% more than the first line.
The $1.46 Carrier Access Charge, also known as the National Access Fee and the Presubscribed Interexchange Carrier Charge, goes to our long-distance carrier. It pays for the costs of accessing local telephone company networks. In other words, we pay fees to both our local and long-distance carriers so they can access each other. If road taxes worked this way, there would be a special tax to make sure that highways connected to each other at each state's borders and that local streets connected to each other at each city's borders.
In the past, the $2.56 Federal Universal Service Fee was used to subsidize the costs of rural wiring. Today, the billions of dollars raised from this fee go into a "universal service fund." The National Exchange Carrier Association administers four universal service programs through its wholly-owned subsidiary, the Universal Service Administrative Company. There is the High Cost Program, which provides $1.7 billion in subsidies to high-cost phone companies. The Low Income Program administers the Lifeline Assistance and Link-Up subsidies for low-income phone customers. The Rural Health Care Division distributes $400 million in phone subsidies for rural health care providers. The Schools and Libraries Universal Service spends $2.25 billion to subsidize telecommunications services and Internet access for schools and libraries.
The 86-cent Service Provider Number Portability Charge supposedly pays for the costs of allowing phone customers to retain their phone number even if they switch local phone companies. However, most people do not have the option of switching to another local phone company.
The Relay Center Surcharge, the 911 Charge, and the Telephone Assistance Plan Surcharge add another 90 cents. The Relay Center Surcharge is used to provide operator-assisted long-distance telecommunications services for people with hearing or speech disabilities; funds are administered by the Telecommunications Relay Service Fund. The 911 Charge is paid to the local governmental body responsible for 911 service. The Telephone Assistance Plan Surcharge is used to waive the $3.50 Subscriber Line Charge and up to $3.50 of the local phone service for qualified low-income consumers.
The $2.49 Federal Telephone Excise Tax first appeared in 1898 as a temporary tax to finance the Spanish-American War. It was reinstated in 1914 because of World War I (even though the United States did not enter the war until 1917). It has lapsed several times since then, but was made permanent in 1990. The FCC reports that, in fiscal year 1998, this tax alone brought in $4.9 billion.
State and local taxes cost $6.29 and an additional unspecified "Federal, State & Local Surcharge costs another penny per month. Altogether, these charges add up to $24.14, which means means that our $100 total phone service actually costs $75.86 before 32% is tacked on for government mandates.
Clearly, some government taxes and mandates are justifiable. The 911 service is an important need, as are telecommunications services for the disabled. But it does not make sense for government mandates to increase our phone bills by 32%. Having eleven separate government-required charges is excessively complicated. It is absurd to provide a monthly assistance of $3.50-$7.00 per month when the costs of such assistance must absorb a high percentage of the monthly benefit. Everyone, including the poor, would benefit more by simply eliminating many of these charges.
If the intent is to bring down the walls of regulation, as the President claims, then the federal government would not be establishing "access" charges. Their real purpose seems to be to enable phone companies to increase their charges while blaming them on the government. At the same time, the FCC blames the government's taxes and fees on the phone companies. Its web site tells consumers to contact their phone company rather than the FCC "if you believe these charges [levied by the FCC!] are inappropriate or are too high." It even encourages consumers to ask their phone companies not to itemize such charges, stating that "the FCC does not require your long distance company to place these charges on your bill." Apparently, the FCC would rather see its fees hidden in the phone company's charges.
The result is a confusing mess that makes it difficult to determine responsibility for all these taxes and fees. However, the mess is not likely to change anytime soon, because the dollar amounts involved in these charges are enormous. Judging from the revenues from the federal excise tax and the universal service fee, they almost certainly exceed $50 billion nationwide.
Maybe this web of fees, charges, and taxes is intentional. It is certainly difficult to complain about and oppose a dozen different fees that range from a penny to six dollars; complaints to Congressmen yield non-committal answers and 12-page reports from the Congressional Research Service, while the phone company refers you to the FCC. On the other hand, maybe the situation is nothing more than bureaucracy gone mad. After all, each fee benefits a corporate or regulatory body that has a self-interest in continuing and expanding that fee.
One thing is clear, however. The current state of affairs has neither reduced government regulation nor decreased costs.