Phone companies bank on
AT&T recently tacked on a $4 a month fee for local service
users, but hid it as a "connectivity" cost.
By Bruce Meyerson, The Associated Press
Tursday, March 30, 2006
New York - It's
hard for phone companies to raise prices in the
hyper-competitive telecom business. But since phone bills are
already a blur of surcharges and taxes, many companies find
there's no need to risk angering customers with a rate hike.
They can just tack on another fee with a confusing name.
The latest example comes from AT&T Inc., which is imposing a new
"Local Connectivity Charge" of up to $4 a month for 1.6 million
of its local phone subscribers rather than just boosting its
As with so many other surcharges assessed by AT&T and just about
every other major wired and wireless phone company, this new fee
is designed to defray a basic cost of supplying the service
being provided. And like the other fees, it will generate tens
of millions of dollars per year in added revenue for the
In just about every other industry but telecommunications, the
advertised price of a good or service reflects the entire cost
of that product except for taxes and, in cases such as a cab or
restaurant, the tip. Sometimes, as with gasoline, the
advertised price covers all applicable taxes.
Not so with phone service, where it has become a widely accepted
norm for companies to advertise rates that don't come close to
reflecting the final tab a customer will pay.
Airlines have been treading this path also, advertising one
rate, then adding on surcharges for rising fuel and security
To be sure, a century of federal and state regulation has
saddled the telecom industry with an array of costly burdens,
from providing 911 emergency calling capabilities to ensuring
that rural and low-income customers have phone service.
Federal and local lawmakers also have set a poor example for
companies to follow. For a century, elected officials treated
phone bills as a piggy bank to cover unrelated government
In recent years, state and local governments have repeatedly
diverted funds that were supposed to be used to upgrade 911
emergency systems so dispatchers can better locate cellphone