Regulatory fees have been a contentious item for both wireless carriers that claim they are just passing along government-mandated charges and customers who have found up to 30-percent increases in wireless bills due to such fees.
The fees first gained notoriety during the run-up to the implementation of wireless local number portability last November when carriers began charging government-approved fees to help recover the cost of the mandate. Those fees often were lumped together with other fees, including enhanced 911 and number pooling, into what were termed “regulatory charges.” The fees were in addition to variable fees charged by states and counties to cover the cost of local mandates and contribute to the Universal Service Fund.
At the time, consumer advocates questioned why carriers charged customers for a service that many felt was just part of the cost of doing business, while others pointed out the varying charges among carriers and the unknown costs associated with implementing and supporting the government mandate. Carriers originally took cautious approaches to instituting such fees, with Verizon Wireless holding off on charging its customers until after WLNP was initiated, while other carriers used a tiered approach, first charging new customers before rolling out the fees to existing subscribers.
With nearly all carriers now charging some form of regulatory fees, many are starting to report the positive impact such fees are having on their bottom lines.
Verizon Wireless reported revenues associated with regulatory fees increased $14 million year-over-year during the second quarter and increased $53 million from the first half of 2003 to 2004. Cingular Wireless L.L.C. reported an even more dramatic increase, with fee revenue rising $41 million year-over-year during the second quarter, including an $11-million increase in billing to its postpaid customers for USF and other regulatory fees.
T-Mobile USA Inc. even went so far as to note that the $74 million in regulatory and cost-recovery fees added approximately $1.81 to its $55 in reported average revenue per user.
Verizon Wireless notes in the fine print of its rate plans that the 45 cents per line per month it charges customers to “help defray the costs of complying with regulatory mandates,” in combination with the 1.95-percent charge for USF and other fees associated with E911 and gross receipt charges, add between 6 percent and 30 percent to a customer’s monthly access and airtime charges.
While most of the nation’s largest carriers acknowledge a base fee ranging between Verizon Wireless’ 45 cents up to $2.83 for Nextel Communications Inc. to cover such items as E911, number pooling and support for WLNP, it is the gray area associated with fees that vary by both state and county that is causing customer concern.
AT&T Wireless Services Inc., which charges a flat $1.75 per line for its “regulatory programs” plus other various taxes, said it attempts to communicate the meaning of such fees and taxes.
“We compete in a very competitive industry and want to make sure we have clear communications with our customers and feel they are entitled to know what they are being charged for,” said AWS spokeswoman Rochelle Cohen.
Cohen noted that the carrier inserted a description of the fees in its customers’ bills as part of its phased-in approach of charging for government-mandated services beginning last year. In addition, AWS said it plans to reduce or phase out some of the fees, but it is too early to provide a timeframe.
While the regulatory and cost-recovery fees are proving a lift to carrier revenues, many also note the costs associated with supporting such government mandates have increased.
Verizon Wireless noted that while fees collected as part of its regulatory program increased year-over-year, the costs associated with supporting such programs also increased $8 million during the second quarter and $46 million for the first six months of the year. Cingular reported a similar increase with second-quarter expenses related to USF payments and other regulatory funds expanding by $11 million and first-half expenses increasing $61 million compared with 2003.
Regardless of the expenses associated with meeting government fees, consumer groups appear intent on bringing those fees out of the small print and into the forefront of service charges. The National Association of State Utility Consumer Advocates submitted a petition to the Federal Communications Commission earlier this year that would prohibit all “line items and surcharges that are not expressly mandated or authorized by federal, state or local government.” The petition is pending in front of the FCC.
