Cellphone surcharges

You know you're paying more for your cellphone service than you need to, right?

Cellular subscribers are paying hundreds of millions of dollars each year to subsidize landline telephone service, enriching big telecommunications companies while providing little or no benefit to cellphone users.
The subsidies are intended to reimburse the companies for providing traditional phone service in rough terrain and rural areas where stringing lines can be costly. But rampant development has transformed some of these backwaters into booming subdivisions, with no real adjustment to the distribution formula; others, like the oceanfront celebrity playground of Malibu, are receiving subsidies simply because of their difficult topography.

Outdated formulas for tabulating the surcharges -- coupled with feeble government oversight -- have meant a windfall for phone companies, which are fighting to preserve them.

"It's egregious," said Kimberly Kuo, executive director of MyWireless.org, a national non-profit advocacy group for cellular users. "By nature, these fees are highly discriminatory because cell users pay in far more than they get out of it."

Nineteen states charge customers a fee to defray the costs to phone companies of providing service in high-cost areas. Of these, 12 do not exempt cellphones -- Alaska, Arizona, Arkansas, California, Colorado, Kansas, Maine, Nebraska, Nevada, Texas, Utah and Wyoming.

Since 2003, these states have together collected more than $4 billion, an Associated Press investigation found. The burden is shared by cellular and regular phone customers alike. In some states, cell users appear to be footing more than half the bill.

"There's an enormous inequity with wireless contributions," said Joe Farren of CTIA-The Wireless Association, a trade group representing the nation's cellular providers and wireless equipment manufacturers. "We think these funds should be no larger than necessary and not favor one technology over another. It's a major issue for us."

[...]

Some states' subsidy programs are managed by private companies that receive little oversight from regulators.

In Texas, which contracts with a private administrator, the state's 15.6 million cellphone users were substantial contributors to the $1.9 billion collected for universal services since 2003, of which $1.3 billion was distributed in high-cost subsidies. Although carriers aren't required to pass along the costs to customers, they almost always do. Last year, nearly 80% of these subsidies were paid to AT&T, Verizon and two smaller carriers.

"The fund keeps growing in a way that's disturbing because it takes more and more consumer funding," says Roger Stewart, a telecommunications attorney for the Texas Office of Public Utility Counsel. "There should be a detailed accounting of how the money is being used. There's no reporting by companies as to how they are using the pots of money."

Boy, imagine that - a privatized government entity in Texas that's operating with insufficient oversight. If only there'd been some kind of telecom reform performed by the Lege to deal with it and maybe save the consumer a few bucks. Ah, well, maybe next time.

Posted by Charles Kuffner on January 16, 2007 to Technology, science, and math