STOP FCC's RAISING RATES AND TAXES!

SUMMARY:

Summary:

While the current presidential candidates tell us they won’t raise our taxes, rumor has it that on Election Day the FCC will announce a series of increases to your phone rates and taxes.  It is a put on job by AT&T, Verizon and the other local phone companies, who submitted a plan two years Ago that was laughed at because it just gives more money to the phone companies – without a financial justification.

What is really appalling is this major decision could be made Election Day when the country will be distracted, but more importantly, many of the items that are about to be increased are not being done as open meetings with comments but as something called  “ex parte” submissions – separate meetings by the phone companies to raise your rates – You have no say in this process; your rights are being trampled on as there is no due process.

What’s happening? All of these items are on the table:  

1. Raising the FCC Line Charge – possibly to $10.00 a month (it’s on every local bill), which is also taxed. The FCC Line Charge does not go to fund the FCC, but is direct revenue to the phone company.
2. Raising the FCC Line Charge on Business Rates – Rumor has it could reach $13-$15 a month.
3. Raising the Universal Service Fund (USF) Tax, currently at 11.4%. 
4. Raising or adding a new USF Tax --- have customers pay for broadband deployment, even though the FCC has never investigated the billions per state already collected for broadband.

All these actions are being played against a backdrop of:

1. The FCC is using flawed data on local and long distance rates to help raise rates.
2. The FCC isn’t examining the current local rate increases or phone charges, which is happening throughout the US.

These are very complicated, arcane issues but the bottom line is -- We believe these changes are unjustified de-facto rate and tax increases that should be stopped and investigated. 

And your bills? Since 2000, your residential bills have increased over $250 dollars for no reason from a previous FCC Line Charge rate increase and increases to the Universal Service Fund -- both more money to the phone companies. If the plan goes through, it could increase the costs an additional $50+ dollars annually as the FCC Line Charge is also taxed an Universal Service Fee, as well as state and local taxes and surcharges. And this is on top of raising the Universal Service Fund on interstate services, including wireless calls, and possible a new broadband tax.

Meanwhile, there have been a continuous stream of increases on phone rates and long distance charges throughout the US. Virtually every charge, from directory assistance or inside wiring to Call Waiting have seen increases, not to mention basic local rates.

And below the surface, as we discuss, the Universal Service and FCC Line charge fees have become corporate slush funds, with billions being collected as direct payments to the phone companies.

In short, the phone companies, including Verizon and AT&T will get billions in excess fees – your money. This is nothing more than taxation with bad representation.

A) Raise the FCC Line Charge?

First, part of the plan is to raise something called the FCC Line Charge.--- possibly to $10.00 a month. It is a charge on all local phone bills, currently capped at $6.50 a month. See phone bill: http://www.newnetworks.com/dirtyphonebill.htm

No, it doesn't go to fund the FCC as the name would suggest, but is an unaudited slush fund of massive proportions that goes back to the phone companies. It is hidden on most phone bills as it is located in the "Taxes and Surcharges" section of the bill, even though it is not either a tax or surcharge. And it is also taxed heavily, as it is considered both a local charge by the IRS as well as a long distance charge by the FCC. In New York State, taxes applied are over 25% --- adding $1.75 a month --- as it is also taxed Universal Service Fees.

Since 2000, the cost went up from $3.50 to $6.50 with no audits. --- You've already been charged over $250 in extra fees since 2000 and that doesn't take into account the massive taxes or the fact that second lines and business lines can be charged $9.00. Teletruth filed a complaint that this fee, using AT&T data, should never have been raised over $3.50. FCC Commissioner Copps, in his dissenting statement, claimed "I am troubled that consumers will face an increase in the line charge on their local bill without the Commission undertaking a thorough analysis of cost data."

To read our original complaint from 2004:
http://www.newnetworks.com/PRFCCLIne.htm

(We note that this charge has different names and is treated differently by different phone companies.)

The FCC will, of course, make statements like they are balancing 'intercarrier compensation' and 'access fees' and other gobblygook items. The bottom line is that the FCC never audited the actual cost of raising this fee.

B) Raise the Universal Slush Fund?

See our Special Report: "20 Reasons Why the Universal Service Fund Is an Out of Control Slush Fund And What to Do About It."

http://www.teletruth.org/USFReport.htm

A knee-jerk reaction of dismay is the usual response we get whenever we mention issues surrounding the Universal Service Fund. Everyone wants schools and libraries wired or making sure that everyone, even the poor, has phone service. However, this sacred cow has become an immense corporate slush fund, giving telephone companies large government welfare subsidies - all paid for directly from every customer who uses wireless or wireline telephone service.

There are so many things wrong with the current universal service fund that it's hard to know where to start. What was designed to make sure that low income residential customers could get discounted phone bills, as well as fund schools and libraries, both laudable public interest activities, has turned into another way to give gifts to the phone companies and raise your taxes.

To summarize: The USF is currently an 11.4% tax applied to all interstate phone service, and is on virtually every phone bill in multiple places. It has 4 major components - High Cost Support, Low Income Support (lifeline) , Rural Health Care, Schools and Libraries, (the E-Rate.).

1) The USF fund has ballooned. In 1999, the USF fund was only 3.9% tax, but has grown 11.4% and was $6.95 billion in 2007,

2) The largest part, 62%, is called the "high cost fund" which goes directly to the phone companies. It is a mathematical -corporate creation, as there are no regulators examining the profits or the actual costs anymore. Also, the costs of service in most states has been 'averaged' throughout the state, so the high-costs were being paid by everyone already, including low cost areas.

3) It is Greed Based, not Needs Based. Since no one is auditing the actusl payments made to the USF, and there is no actual test that companies' profits are too low to pay their own fair share, many companies have simply been able to claim they need the money, even though they are some of the most profitable companies in America.

4) Costs continue to be in decline for local telephone service as, nationwide there has been a 65% drop in construction for local service and a 60% drop in employees, the 2 largest expenses. And because of faulty deregulatory polices they have been writing off the networks and getting large tax savings.

5) And it is out of control. From 2006-2007 about $1.3 billion was made in 'erroneous payments rates' --- that's 2500% above "a program is at risk" as defined by "Improper Payments Information Act of 2002 ("IPIA").

6) It is also riddled with fraud. The FCC's Inspector General's Office has 33 ongoing USF cases, many involving the E-Rate, and not enough staff to properly audit and monitor the USF programs.

7) The companies receive USFmultiple ways. The Schools & Libraries program offers discounts to schools and libraries, but the phone companies get reimbursed full business rates, and the incumbents are the largest recipient of this fund as in many states, they have gotten rid of most of the competitors.

8) Lifeline is a mess today. Designed to help low income families to get local service, only 30% who are eligible are using the service, mainly because the money being paid doesn't actually cover using the phone or basic costs.

9) There are various overlapping state USF funds. California, alone, has 5 different funds for lifeline, high cost, et al, with little or no financial oversight to examine actual needs. In 2007, they created another new $100 million over 2 years called a "California Advanced Services Fund".

10) There is massive cross-subsidization of phone company expenses with the Universal Service funds. There is no test to analyze if the money being given for high costs is also funding other projects that should pay their fare share. For example, Verizon's FiOS and AT&T's U-Verse are both skimming funds from local service rates to pay for their deployments - which is illegal as these networks are not upgrading the utility but are 'interstate information' services that should not get funding through increases in local rates.

See the full Mini-Report: “20 Reasons why the Universal Service Fund is an Out of Control Slush Fund And What to Do about it.” http://www.teletruth.org/USFReport.htm

C) Paying for Broadband with the Universal Service Fund Is Giving More Money to Companies who Didn't Deliver.

Many groups are calling for increasing the Universal Service fund to include broadband. Teletruth is adamantly against using the USF funding for broadband because, as we've written in many places, customers, --- all of us - already paid for the deployment of high-speed broadband--- services which we never got.

America is 15th in the world in broadband because the companies that received billions per state didn't deliver and pocketed the money. By 2008, $280 billion dollars was already collected --- about $2800 a household to be exact,--- to have your home, apartment, business, school, library, government agency rewired for fiber optic-based broadband services capable of 45mbps in both directions..

The networks we paid for were 'open' to all competitors, and were 'ubiquitous', meaning rural, urban, and suburban areas equally. The fact that the FCC's data on broadband covered over the entire history of broadband to not hold these companies accountable for commitments made on the state level, is also one of the largest cover-ups in American telecom history. See: http://www.teletruth.org/fiberopticstates.htm

Why should we all now be charged to give these incumbents more financial incentives, instead of getting the money back, is the issue?

D) Increases to Local Rates Are Happening Throughout the US, but the FCC Doesn't Care.

These proposed increases are being done against a backdrop of the local phone rates being raised.

• In California, for example, AT&T is raising rates 23%,
  http://www.latimes.com/business/printedition/la-fi-att24-2008oct24,0,3867945.story
  However, some services have had outrageous increases already. Since 2004, Call Waiting went up 86%, inside wire 101%, unlisted numbers up 346%, directory assistance up 1630% -- None of these increases were properly tracked by the FCC.
• In New Jersey and New York there have been and continue to be increases to rates. New Jersey is expecting an 80% increase, while virtually every charge, from directory assistance to inside wiring continues to have massive increases.
  http://www.newnetworks.com/verizonincreases.htm

Ironically, in all of these states, local service was 'deregulated' because the companies made statements and commitments to rewire the state with excess profits - which was never done. And they claim that there is competition --- which is simply not true. How can a company raise rates 80% if there was actual competition?

Neither the FCC or the states actually examine either the profits from local service or includes the FCC Line Charge, which is considered a "federal" charge in the actual cost of local service calculations. No one is protecting your interests in these increases. Raising the FCC Line charge is being done on top of raising all of the other local rates - from local service to directory assistance or even inside wiring.

E) The Data Quality of the FCC's Phone Rate Information Is Appalling, Inaccurate, and a Serious Cover Up.

The FCC's data is so flawed that it allows any policy the FCC wishes to make because they have mauipulated the data to fit the occasion. We have filed multiple complaints pertaining to this topic, especially about the long distance rates, which continue to increase. This is important because the FCC's claims that it wants to fix 'access fees' and "intercarrier compensation,' which are fees the local phone companies charge the long distance companies and competitors - Read our complaint on FCC data pertaining to AT&T and Verizon(MCI).

And AT&T and Verizon claim that these increases will lower long distance rates. The FCC should read how AT&T and Verizon/MCI's long distance rates have skyrocketed over the last 8 years.
http://www.newnetworks.com/dataqualityharvest.htm

Shouldn't the FCC actually get accurate data on phone costs before it makes a decision?

The "Missoula Intercarrier Compensation Plan" is the name of the plan AT&T wants to have become law. We've outlined the problems with the AT&T plan and the FCC's data in our comments pertaining to the AT&T
http://www.teletruth.org/docs/TeletruthMissoula.doc

Take Action:

http://www.teletruth.org/StopFCCIncreases.htm