Phone Companies' $100 Billion Rip-off -- Where Is That Hidden $6 a Month Going in Our Phone Bills?

[unhappycamper]

Phone Companies' $100 Billion Rip-off -- Where Is That Hidden $6 a Month Going in Our Phone Bills?
AlterNet / By David Rosen and Bruce Kushnick

December 11, 2010 | Next time you open your phone bill, check out the numerous anonymous charges listed on it. In particular, note the one identified as the "FCC Line Charge" or the "Federal Subscriber Line Charge" (SLC). Ask yourself two questions: What is it for and why am I paying it?

If you look at your bill, you'll likely have a hard time finding the SLC. Each state's phone billing method is different and the SLC is often hidden in what is labeled the "taxes and surcharges" section or the "monthly service" section -- or completely missing but added to the bill.

The SLC is a monthly fee imposed on every residential and business wireline phone customer. The FCC permits telephone companies to charge subscribers a fee which was originally intended to help them recoup part of the cost of having phone lines connect from the customer's home and office to a long distance service provider. It is currently capped at $6.50 a month for residential and businesses; multi-line businesses fees are up to $9.20 per month.

At the end of 2010, the U.S. will have an estimated 160 million business and residential telephone lines. Since 2000, it is estimated that the phone companies have pocketed about $100 billion or an estimated $750.00 per line through the SLC and have done little to benefit the customer.

Few known that, no matter what it is called, the SLC is not a tax, it is not a surcharge, it is not part of local service and - whatever it name implies -- it does not go to fund the FCC or any government. It is a direct subsidy to your telephone or wireline telecommunications provider; and, adding insult to injury, your pay taxes on this charge.



unhappycamper comment: Another thing most folks don't realize is that long distance calling is a another rip-off. It costs the phone companies less than one cent a minute to provide long distance service in the lower 48 states. How much are you paying for LD?

[Recursion]

1. Before the breakup it funded Bell Labs

Now, not so much...

[myrna minx]

2. I remember being charged for touch tone service in the *1990's*.

Crooks.

[On the Road]

3. The SLC is a Relic That Dates Back to the Breakup of the Bell System

at a time when all telephone rates were set by state regulatory agencies or the FCC. But it recovers real costs.

Before the Bell System breakup, phone company expenses were set by allocating costs by service and geography and adding a mandated profit margin, generally of 12-16%. The most expensive part of the telephone network is the local loop, the wires between your house and the nearest switching center. To keep phone rates low across the board, and to get as close as possible to universal phone service, there were a variety of subsidies built into local phone rates.

One of these subsidies charged higher rates to subscribers in cities to make phone service more afforable in rural areas, where local loops are much longer and costs are much higher.

Another allocated one-fourth of the cost of the local loop to interstate telephone calls, where the costs were recovered by higher long-distance rates. (That's one reason interstate calls were more expensive before 1984.) However, when AT&T was split up, the long-distance network was no longer part of the same corporation. That 25% of the local loop was brought back to the local companies to be recovered on the local phone bill in the form of the SLC.

In the 80s and 90s, most phone rates moved away from cost-plus tarrifs and towards broad price-cap agreements, where phone companies could make as much profit as they could provided rates were frozen or didn't rise above x% per year. By and large those agreements were a win-win, but many elements of the old tariff system are built into the phone bill and rate structure.

Personally, I think it would have much more direct to just raise dial tone rates rather than create a separate confusing charge on the bill. Perhaps it's because they are technically FCC costs, and it fell into the intersection of state and local regulation.

But that's why it's hard to describe and why customer service reps can't explain it over the phone.

I might add that under the old rate-setting systems, local phone rates would almost certainly be higher. As more people drop local service for cell phones, there are fewer subscribers to support the network. As it is, phone companies have to make up the revenues lost in phone service with data and TV.

[leftstreet]

4. K&R

Thanks for posting this. Very interesting and not something many people know about.

I agree with the author: Make public utilities PUBLIC again!

[sixmile]

5. Kicked

Thanks for posting. Just when I thought I couldn't get screwed any more...