29 August 2006

Verizon, AT&T and the USF

This article does a nice job summarizing a debate that has been going on in telecom policy circles over the past month or so (this is another related item). One interesting thing about the universal service fee is that the FCC never required telcos to separately itemize this fee ... they chose to do so. Now, with its elimination for DSL, it becomes obvious to consumers who take the time to look at their bills.

Do you think Verizon's ability to retain the revenues from this fee (basically increase prices by the amount of the fee) is evidence of significant market power? Do you think that Verizon is within their rights to do this, or do you think it is an abuse of regulatory relief? Do you think that the FCC (or another government agency) should take action? If so, what should they do?

Update: On 30 August 2006, Verizon agreed to drop this "surcharge" (see this article, for example). If Verizon claimed to require these revenues to support their network upgrades, where do you think they will find them now? Is there a connection to network neut* here?

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2 comments:

Pat said...

As mentioned, the telecom giants continue to collect surcharge plan for high-speed internet although FCC no longer requires payment of USF fees on DSL services. The reason for the surcharge should not be legally changed to “recover a number of costs remaining from previous regulatory obligations and other network expenses” but FCC may need to do nothing for now since they already dropped the surcharge due to competitive market, especially with different technology such as Cable and VoIP.

It is more interesting that they can call it something else like supplier surcharge [Verizon] or regulatory cost recovery fee [BellSouth]. They may claim it to offset the cost of offering DSL-only service or to comply with regulatory obligations. FCC should take serious action on this.

Martin Weiss said...

They all seem like they are ways that the supplier can claim to offer a product or a service for a lower price than what it actually is. Another example of this is in airline tickets.

Here, airlines have taken to charging a "fuel surcharge". If they did not do this, they would assume significant risk in the face of unstable fuel prices (as we have today) when they sell tickets for flights in the future.

Can Verizon make a similar claim? Is the airline's surcharge questionable (as they could potentially make more money when fuel prices decline)?