updated 8/30/2006 4:34:46 PM ET 2006-08-30T20:34:46

Verizon Communications Inc. said Wednesday that it was dropping a "supplier surcharge" on its high-speed Internet service for retail customers.

The decision comes less than a week after the Federal Communications Commission mailed a letter to the company asking that it explain the reasoning for the charge.

The FCC also had sent a letter to BellSouth Corp., which said Friday that it will stop charging a $2.97 per month fee on a similar service.

"We have listened to our customers and are eliminating this charge in response to their concerns," Bob Ingalls, chief marketing officer for Verizon, said in a statement.

The dispute followed a decision by the government to stop assessing a Universal Service Fund charge on companies that offer digital subscriber line (DSL) Internet service.

The companies had passed the charge, which subsidizes services in rural and low-income areas, on to their customers.

Consumer groups have accused the companies of simply replacing the dropped fee with a new charge rather than passing along savings to their customers.

Verizon dropped the fee on Aug. 14, but informed customers that it would be charging the new "supplier surcharge" on Aug. 26. The company told customers in an e-mail that the monthly fee would be $1.20 or $2.70, depending on their connection speed. The fee affected about half of Verizon's 5.7 million DSL subscribers, according to the company.

Customers who have already paid the charge will receive credit, the company said.

Prior to Aug. 14, Verizon was collecting $1.25 or $2.83 from DSL customers, depending on the connection speed.

Verizon said Wednesday the fee was "imposed by its affiliated operating telephone companies to cover costs associated with providing DSL service to customers who do not also subscribe to Verizon's traditional phone service."

On Friday, BellSouth said it was immediately eliminating the fee and that it was "designed to recover a number of costs remaining from previous regulatory obligations and other network expenses."

FCC Chairman Kevin Martin released a statement supporting the companies' action.

"I am pleased that both Verizon and BellSouth have eliminated fees recently imposed on their DSL customers," he said. "Consumers should receive the benefits of the commission's action last summer to remove regulations imposed on DSL service."

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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