National class action lawsuit alleges AT&T is charging long distance customers surcharge “significantly in excess” of what it contributes to Universal Service Fund (USF). Suit, filed Wed. in U.S. Dist. Court, L.A., said AT&T was billing customers fee equal to 11.5% of long distance charges, while FCC currently required carrier to contribute 6.808% of long distance revenue to USF. Lawsuit calls fee “huge secret profit center” and said it gave AT&T unfair advantage in highly competitive long distance market: “By hiding revenue in the Universal Connectivity Charge, AT&T is able to advertise lower per-minute rates than it is effectively charging,” suit said. Class plaintiff Roger Gerdes is represented by Stanley, Mandel & Iola, LLP, Law Office of Andrew Kierstead, Matthew Rossman P.C. and Keller Rohrback LLP. Counsel estimates class exceeds 60 million people. Lawsuit follows call last month by House Commerce Committee ranking Democrat Dingell (Mich.) for FCC to investigate AT&T’s increase in USF fee (CD Jan 9 p1). Dingell urged FCC Chmn. Powell to “open the books and records” of AT&T while raising questions whether long distance companies in general were using fee to “gouge” customers. AT&T said it raised USF fee to 11.5% from 9.9%, saying FCC methodology to determine how much company should contribute to fund “was flawed.” Commission makes its determination based on company revenue from 6 months ago. AT&T said “lag” problem, “combined with diminished interstate and international telecom revenue,” necessitated increase.
FCC voted at agenda meeting Thurs. to seek comments on changing way it assessed contributions from carriers for universal service fund (USF). Agency asked, for example, whether it should assess USF contributions based on number and capacity of connections carriers provide to customers rather than on their interstate revenue, which was current practice. FCC Common Carrier Bureau Chief Dorothy Attwood said further notice of proposed rulemaking (NPRM) stemmed in part from proposal by coalition of long distance carriers and large business customers (CD Nov 20 p1). Agency said further NPRM offered opportunity to “further develop” comments made last year in response to initial NPRM on how current assessment and recovery of USF contributions should be modified as marketplace evolves. Under connection-based plan, LECs, long distance companies and wireless providers would contribute $1 per month for each connection to public network for residential users. Paging companies would contribute 25 cents per connection. Business connection assessments would be based on maximum available capacity, or bandwidth, of connection. NPRM also seeks comment on whether carriers that choose to recover their USF contributions through line items do so in uniform manner and don’t recover amounts in excess of their actual USF contributions. Agency adopted order that streamlines current contribution system. Attwood told reporters later that current system created some lack of specificity and agency would ask whether there was better way to handle those problems. For example, wireless carriers pay into USF based on 15% of their revenues under “assumption” that they handle that much interstate traffic. However, new calling plans indicate percentage is probably much higher, she said. She emphasized, however, that USF item makes no conclusions. USTA called action “encouraging.”
GAO report shows Universal Service Fund (USF) should be updated to take into consideration new technology such as IP telephony, Rep. Markey (D-Mass.), ranking minority member of House Telecom Subcommittee, said Mon. Report, requested by Markey, said IP telephony wasn’t widespread yet but eventually “could affect the revenue base from which universal service programs are funded.” Under current regulatory structure, providers of IP voice services don’t have to contribute to USF, GAO said. “As these new voice services gain popularity, concerns exist of whether federal funding levels for universal service might eventually decline,” GAO said: “In addition, there is much debate about whether the current federal regulatory framework for funding universal service -- with its reliance on interstate telecommunications revenues -- is appropriate for digital communications, where voice, video and data are carried in the same manner over networks that lack intrastate/interstate designations.” Report was based on views of state and federal govt. officials, academics and industry officials. GAO also reviewed local telephone rates provided by state PUCs, which Markey said revealed wide disparity in prices across country. He said wide differences were found among rural telephone companies’ rates as well as between rural and urban telco rates.
House Commerce Committee ranking Democrat John Dingell (Mich.) called on FCC to investigate AT&T’s recent increase in Universal Service Fund (USF) line-item fee for residential customers, but Chmn. Tauzin (R-La.) is considering congressional action rather than waiting for Commission response. Dingell urged FCC Chmn. Powell in letter dated Jan. 7 specifically to “open the books and records” of AT&T while raising questions whether long distance companies in general were using fee to “gouge” customers. Committee spokesman Ken Johnson said Tauzin “is giving serious consideration to holding congressional hearings” on AT&T decision to raise fees: “He will make a final decision after consulting with [Telecom Subcommittee] Chairman Upton [R- Mich.], but clearly we are very concerned about the impact the fee hike would have on consumers nationwide.”
As it warned in ex parte filing Dec. 13, AT&T raised monthly universal service line-item fee for residential customers to 11.5% starting first of year, from 9.9%. AT&T had asked Commission for permission to change formula used to determine contributions to Universal Service Fund (USF) because falling revenue had skewed it. It said problem was that FCC determined how much a company should contribute to USF using revenue from 6 months ago. When company’s revenue is falling, as AT&T’s is, using that contribution factor on lower current revenue results in larger per-customer fee, company said. It had asked for permission to base its contribution factor on projected revenue rather than 6-month- old revenue and had offered to true up contributions if there were shortfall once actual revenue total was available.
National Telecom Co-op Assn. (NTCA) told FCC it opposed proposal submitted by Ad Hoc Telecom Users Committee, AT&T, E-commerce Telecom Users Group and WorldCom to revise way Universal Service Fund (USF) contributions are collected (CD Nov 20 p1). In Dec. 21 letter to FCC Chmn. Powell, NTCA said proposal’s goal seemed to be to relieve long distance companies “of their obligation to make equitable contributions” to USF. That is “in direct violation” of Sec. 254 of Telecom Act that requires all interstate carriers to contribute on equitable basis, NTCA said. “The proposal is couched as a plan to replace the current USF assessment mechanism with a flat-rated per-line charge,” wrote NTCA CEO Michael Brunner. “It is more than that,” he said: “If adopted, the class of carriers providing interexchange services such as those provided by AT&T and WorldCom would have no obligations to contribute to the mechanisms.”
Increased deployment of fiber lines for broadband and other uses has expedited need for rights-of way (ROW) fee reforms, govt. appraisers and telecom industry officials said Tues. at forum sponsored by Appraisal Institute. Federal govt. has been reassessing its ROW fee schedule since 1995 review by Interior Office of U.S. Inspector Gen. and 1996 General Accounting Office (GAO) audit. Bureau of Land Management (BLM) and U.S. Forest Service (USFS), which authorize ROW grants, adopted current rental schedule for linear ROW uses on National Forest System and public lands in 1986, and fiber lines aren’t part of that schedule.
Coalition of long distance companies and user groups proposed revising method of collecting Universal Service Fund contributions from carriers, approach that could please some in industry, dismay others. Proposal, outlined to news media Mon. and submitted to FCC in Nov. 7 ex parte letter, was put forward by AT&T, WorldCom, E-commerce Telecom Users Group (ETUG) and Ad Hoc Telecom Users Committee. It would replace revenue-based contribution scheme with flat-rate per- connection fee. Current system collects contributions from carriers for $5.5 billion USF based on percentage of carrier’s interstate revenues. Coalition members told group that current method was unfair to long distance companies that bore bigger share of it than other parts of industry.
Better Business Bureau’s National Ad Div. (NAD) ruled in favor of AT&T in ad dispute with Verizon. AT&T filed complaint in spring saying Verizon’s long distance ads were deceptive because they didn’t indicate consumers had to pay Universal Service Fund (USF) fee. Ads, which since have been changed, touted Verizon’s 10 cent per min. plan and said there are “no hidden charges,” claim AT&T challenged because USF fee wasn’t disclosed. Verizon contended it didn’t need to reveal USF fee because it was tax-like surcharge and consumers knew about it. NAD said it was “concerned that the commercial at issue failed to disclose what NAD believed to be material information to the consumer.” It said USF charge varied from month to month depending on size of consumer’s long distance bill and “had the potential to significantly affect the total monthly charges.” As result, “disclosure was required,” NAD concluded.
AT&T filed formal complaint with N.Y. Attorney Gen. Office alleging Verizon long distance advertising contained 2 misleading claims. AT&T in its complaint about Verizon’s plan that offers 10 cent per min. rate at any time of day without “hidden charges,” alleges Verizon’s imposition of 6.89% universal service fund (USF) fee on long distance bills is hidden charge. AT&T contends USF is Verizon’s passthrough to customers of FCC’s universal service assessment, but isn’t tax because Verizon isn’t required to pass burden on to customers and USF charge is billed with services, not with taxes. AT&T also charged that Verizon’s claim to always give customers its best price was misleading because fine print said promise applied only if prices were cut in customer’s current calling plan, not if company offered lower price in different calling plan.