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updated 5/14/2004 6:48:41 PM ET 2004-05-14T22:48:41

Regulatory Programs Fee. It sure sounds like a government tax.

It isn't. The latest addition to T-Mobile's monthly bill is merely the latest example of telephone companies passing their own cost of doing business to their customers with an array of surcharges that one might easily mistake for taxes being collected on behalf of the government.

Actually, T-Mobile's monthly charge of 86 cents is among the more clearly labeled.

At Verizon Communications Inc., monthly bills for high-speed DSL Internet service will now include a surcharge ranging from $2 to $3 a month called "Supplier FUSF Recovery," while DSL bills at SBC Communications Inc. now show an "FUSF pass-through fee" of $1.86 for new and renewing subscribers.

Cell phone subscribers at Nextel Communications Inc. pay $1.55 a month for "Federal-Programs Cost Recovery." Other extras include a "Federal TRS Charge" and "State-Gross Receipts Recovery," though thankfully there's at least a footnote below owning up to the fees as Nextel's doing.

With millions of subscribers at each company, these relatively small fees add up to billions of dollars per year in extra revenue from what amounts to an unofficial price increase. And in the case of the cell phone industry, companies are forcing their customers to reimburse them for basic marketing and customer retention costs.

In truth, many of the surcharges like those imposed this year by DSL and wireless providers reflect real costs related to each company's compliance and payments in support of government-mandated "public goods." These include emergency 911 service and maintaining phone service for poor and rural customers.

Compounding matters, the telecom industry has been seized upon by opportunistic state and local governments as a convenient source of additional tax revenue.

But in turn, companies are increasingly seizing upon vague regulatory rules to extract compensation from customers in a less-than-forthright manner.

Stealth price hikes
The companies are legally permitted by the Federal Communications Commission and local regulators to defray many of their regulatory burdens by charging extra.

But nowhere in the rules does it say that the companies should recover their costs through a surcharge to the basic price of service. Unfortunately, the rules also don't force them to include the fees with the advertised price.

Beyond a general requirement under federal law that such fees be "just and reasonable," there is no specific cap. Likewise, the FCC does not closely monitor many of the fees or the expenses they purport to recoup. Instead, they have left it up to companies, arguing that consumers will comparison shop and punish those carriers with excessive fees.

Not surprisingly, then, nearly every major wired and wireless phone company has exploited these vagaries to boost their prices without having to raise their advertised rates. And since all the companies have imposed these stealth price hikes, the market forces regulators expected to contain them have proven negligible.

Most troubling is the new breed of fees rolled out by all the major cell phone companies to defray the costs of complying with the federal rule allowing subscribers to switch service providers without losing their phone numbers. On Thursday, the FCC reported that more than 2 million people had switched carriers since the rules took effect in late November.

The wireless companies, which are each collecting from $10 million to $25 million a month in surcharges, clearly incurred some expense in upgrading their computer systems and operations to handle the new process. Verizon Wireless and Cingular Wireless both estimated their set-up costs at more than $50 million. But assertions by all the carriers that they've spent hundreds of millions more remain undocumented and questionable.

Paying for marketing
Verizon and T-Mobile, for example, opened new facilities to focus on processing requests to move phone numbers to and from their companies. But the hundreds of new employees hired to staff such centers are also essentially selling the company's product, and presumably spend considerable time either luring new business or trying to dissuade potential defectors.

The costs for these new centers, therefore, largely involve basic marketing expenses brought on by a change in the industry rules. In the case of Verizon and T-Mobile, both big winners under the new rules, their subscribers are being asked to shoulder the burden for an effective marketing campaign.

All the phone companies vehemently defend the practice of using surcharges, saying they want their customers to know that overbearing government taxes and regulations are forcing them to pad the bill. In other words, they've taken it upon themselves to teach customers a lesson with sticker shock.

But couldn't they accomplish the same by advertising a final tally or near-final tally? Then they could break the bill down in painful detail for customers to grimace at and _ if they are so inclined -- call their elected officials to complain.

More importantly, regardless of whether the new wireless and DSL surcharges are appropriate, the wording that appears on customer bills should not be unclear, if not intentionally deceptive.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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