The Checkout

Verizon Value? One Fee Off; Another On

Verizon gives back with one hand, then takes away with the other. That's the best way to explain what the telephone giant is doing to its DSL customers.

Just last week, Verizon Online said it would stop charging the federal Universal Service Fund recovery fee, which ranged from $1.25 a month to $2.83 a month, for its DSL service (Verizon telephone customers still have to pay that fee). But then, in an e-mail to its "valued" online customers, Verizon Online said it would start charging a new fee to DSL users--this one is called the Supplier Surcharge--beginning Aug. 26. This fee will range from $1.20 to $2.70 a month, depending on the speed of the service. In its e-mail, Verizon said the new surcharge "is not a government imposed fee or tax; however, it is intended to help offset costs we incur from our network supplier in providing Verizon Online DSL service." (That network supplier, by the way, is the telephone arm of Verizon.) "On balance, Verizon notes, your total bill will remain about the same as it has been or slightly lower."

That's little comfort to some Verizon subscribers, including this District Heights, Md., reader (who wishes to remain anonymous) who dashed me an angry e-mail about the new surcharge, concluding: "Verizon has just found another way to increase its revenue without increasing its service."

Mark Cooper, director of research for the Consumer Federation of America, is equally outraged. For years, he noted, Verizon and other telecom companies have complained to the Federal Communications Commission, arguing that their broadband services shouldn't be required to charge the Universal Service Fee since their cable competitors weren't forced to. Finally, Cooper explained, the FCC agreed that the DSL arms of the telecom companies "can get rid of the service, to compete with cable, and now Verizon turns around and replaces the fee with another monthly charge. ... Why they did this is beyond me. There's a lot of money at stake. This is what people do with market power."

Verizon spokesman Eric Rabe said the new fee is necessary to recoup some of the costs the company had been previously eating up on its own, particularly the costs of using telephone lines and switches to connect DSL service to homes that are using only Verizon's broadband service without its telephone service. Even though Verizon's DSL-only service costs more ($34.95 a month compared with $29.95 a month for DSL when it includes telephone), that's not sufficient to cover the real costs, Rabe said.

"There are substantial additional costs to provide DSL to these customers because the revenue from the phone service (which they don't have) would have gone a long way toward offsetting the cost of providing the line to their home," Rabe wrote in an e-mail. "That line is what Verizon Online buys from Verizon Telcom. So without the phone line, the cost of the line must be entirely born by the DSL business, i.e. Verizon Online alone. The cost of the line is a major portion of the cost of providing DSL service. We formerly essentially ate this cost but can no longer do so, especially as the number of stand-alone customers grows so fast."

Rabe noted that the telecom industry has long believed in spreading out all the costs to all users to make telephone service affordable to all, even those who live in expensive-to-service areas such as rural out-of-the way counties. So Verizon felt it would be appropriate in this case to impose a supplier surcharge on all DSL customers to help subsidize the overall costs of those consumers who only want DSL service. He added that not all of Verizon's 5.7 million DSL customers will have to start paying the surcharge immediately. Those on one- or two-year contracts will not be charged until those contracts expire. The DSL service is still a great deal, Rabe said: "We have lowered the rate for DSL service steadily. In 2004, DSL typically cost $49.95 for 3 mbps service and that has dropped over time to $29.95. Even with the supplier surcharge, the rate is way down from just a few years ago. ... Even with the surcharge, Verizon DSL is still a very good deal."

The District Heights reader is not so sure: "Consumers can't win in a situation like this because it will never get the level of outrage that it warrants. And since Comcast is excessively pricey as well, what are the alternatives?"

The reader makes her point, ironically, just as Comcast also sent a note to its "valued" customers notifying them of a $2 increase in basic service because of the recent deal Comcast signed with the Mid-Atlantic Sports Network to carry the Nationals and Orioles baseball games. That notice prompted this e-mail from a Dale City reader (who also didn't want her name used): "We think any sports fan should be satisfied with the current lineup, and if they wish to get more -- they should sign up for that as extra service, on an individual basis, like you would for HBO. That's what's called 'having a choice.' ... If we are their 'valued customer,' why weren't we asked for opinion on whether we care to get yet more sport channels and -- most of all -- bear the cost of Comcast's decision?"

By  |  August 25, 2006; 6:40 AM ET Consumer News
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Please email us to report offensive comments.

These virtual monopolies will always have their way with us, unless we vote for people who don't rely on the telecommunication industries for contributions. A tall order because Verizon et. al. know how to cover their bets. Nonetheless there may come a time when we discover that we can do without what seems essential today.

Posted by: Lewis | August 25, 2006 7:28 AM

I entertained myself almost solely by internet in college when cable tv wasn't available. And the internet currently provides several alternatives for phone service.

I only pay for tv and phone service from these big companies because it's less hassle than the free alternatives on the web. But the alternatives get better and easier every day, so the day I switch back to solely an internet connection gets closer (of course these companies will likely gouge me there as well so I hope we get public wireless broadband some day).

Posted by: A. John | August 25, 2006 8:21 AM

I signed up for Verizon DSL in DC in August 2002 for $25.00/month. Clearly, the information they told you are more lies. I now pay $30/month. I have never seen Verizon DSL at $50/month.

Posted by: Michelle | August 25, 2006 9:31 AM

Is it sneaky? Sure. But for anyone who knows about the fee, the choice is simple: pay it or cancel the service and sign up with someone else.

In DC and a lot of montgomery county there is a third choice--RCN (starpower). I've found their pricing and offerings more attractive than Comcast; I've never bothered with Verizon.

Would more competitors be nice? Sure, but there are at least three choices for high-speed internet. If you don't like one, use one of the others.

Posted by: ah | August 25, 2006 9:56 AM

To A. John. You mention your hope for public wifi, and it will come eventually, but these monopolies continue to fight municipalities on this very topic. Just search google for all the articles out there on the topic. Just one example out of Philly:

Posted by: ilikecheese | August 25, 2006 10:36 AM

I would be careful about believing anything that Verizon says. There is a motion to intervene in the DC USDC before Judge Sullivan that outlines how Verizon has lied to possibly tens of thousands of employees for years. The lies are still being told by coprorate mangement including Ivan, William Barr, GC and others. They have told employees that they work in a safe work environment when they know that is not true. Verizon, going back to Bell Atlantic, have knowingly and purposely allowed thousands of current and former employees to work with and use a product they knew could cause severe adverse health effects, disabilities, cancers and deaths , had prepared warnings to give to temployees and then chosen not to give these warnings. This intentional injuries of employees was apparently done to avoid worker comp claims, disability retirements, personal injury claims , wrongful deaths claims and other associated litigation. The attorney for Verizon apparently making these decisions for Verizon now is David Feldman. Current and former employees may want to verify this inforation so they can decide if they have been affected. Although Verizon has frozen pensions for many , perhaps injured innocent employees can seek compensation for injuries.

Posted by: brenda smith | August 25, 2006 10:36 AM

See ... Linda Sherry, co-chair of the Keep USF Fair Coalition and director of national priorities for Consumer Action, warns that Verizon's action means that it can't be trusted to look out for consumers in reform of the Universal Service Fund (USF) long distance phone tax. Sherry says: "... millions of Latinos, seniors, rural residents and low-income Americans ... would pay more if the big phone companies get their way. The need for more consumer voices in the movement to keep USF fair hit home this week when Verizon, relieved from paying USF on DSL, chose to add a new DSL fee of about the same amount."

Posted by: Ailis Aaron Wolf | August 25, 2006 10:56 AM

Here's what is driving me nuts about Verizon DSL right now.

We had DSL through MCI, and received a letter a couple of months ago saying that they no longer would offer the service as of August 15, and recommended we get service through Verizon; they provided contact information and everything (of course, since Verizon bought MCI). So I did just that - signed up for Verizon DSL, the equipment came, and I got it set up and running on August 15, the day the MCI service was supposed to be terminated.

A couple of days later I got a call from Verizon saying there was already DSL service on our line and our order with Verizon would be cancelled within 15 days if the other service is not removed. I called MCI, and it turns out our service was still active after the 15th, and we were really connecting to Verizon through their connection. So I formally cancelled the MCI connection, only to be informed that it would take up to 14 business days for the line to be released - WHAT???

So now, my Verizon order will be cancelled if MCI doesn't release the line by next week, even though they said our service would be automatically terminated August 15th (which it wasn't), and I can't get the Verizon service they referred me to b/c they haven't released the DSL line, even though Verizon owns MCI.'d think they could make this a little smoother.

Posted by: Arlington VA | August 25, 2006 1:00 PM

I'm curious. Comcast recently dropped C-Span 2 (Senate coverage) from its standard lineup in southeastern Pennsylvania. It now requires upgrade to digital service and additional monthly fees.
Did they dare do that in the Washington market?

Posted by: Rick | August 25, 2006 1:32 PM

Wouldn't be so bad if all Verizon phone customers could actually get DSL service in return. I live in King George, VA, where Verizon's web site and sales rep's still say DSL service is not available even though I've been using DSL on a Verizon line for three years now. I originally got service from a third-party provider, but they were using Verizon's DSL and phone lines and my initial activation was done by Verizon. When the 3rd-party went out of business, I had to spend an hour on the phone convincing Verizon reps to let me sign up and pay them for service because I was already using one of their active DSL lines. To this day, however, Verizon still keeps telling all my friends and neighbors they can't get service here.

Posted by: Ann Anemas | August 25, 2006 1:47 PM

We still get both C Span 1 and 2 in Dale City VA

Posted by: to Rick re: CSpan 2 | August 25, 2006 2:17 PM

This just in off Yahoo News:
Verizon Communications and BellSouth Corp. will be asked by U.S. regulators to explain a new fee on high-speed Internet customers that replaces a government surcharge that ended this month, a source familiar with the matter said on Friday

SNAP!!! You greedy greedy business....

Posted by: Momma Daria | August 25, 2006 2:41 PM

Yeah... VZ is pretty clueless but when you own that much infrastructure you can afford to be.

I wish they would keep the FioS roll out more updated. I want it but no one can even tell me in what year I will get it, if I will get it.

Posted by: Sean | August 25, 2006 4:03 PM

Want reliable DSL? Try Earthlink! I've had it for four years with nary a problem. It's faster than Verizon and much more reliable.

Posted by: Occasional reader | August 25, 2006 4:04 PM

I hate how these companies bury fees and expect customers not to notice or care. I used to have a verizon cell phone (never again!). I signed up for the $30/mo plan, but, surprise surorise, when my bill came, it was for $56. Apparently the $30 didn't include all thsoe extra little fees they like to add on. The best part - one of those fees was insurance to cover my phone in case it was lost or stolen, which it eventually was. When I called to get a replacement, they told me they would send me a reconstituted phone (because my model was out of date) for a mere $50. I didn't even pay that for the phone when it was new, and you cuold buy brand new phones for that much. What the hell was I paying for insurance for?

Posted by: Anonymous | August 28, 2006 12:02 PM

I notice that plenty of people complain about Verizon's tactics, and that seems reasonable. What does not make sense, however, is that the local, state, and federal governments get a pass on this, as if their motivations are somehow as pure as the wind-driven snow. A large chunk of your monthly phone bill is taxes--isn't that equally unfair to lower income folks who need phones as well? It's interesting that only companies are the "price gougers," while governments have essentially made Verizon, et al. their tax collectors. Northern VA residents, look again at your phone bill and ask yourself if you aren't also being treated as an ATM by your local and state governments. Any new costs Verizon is charged by regulators will ultimately be absorbed by you, the consumer, so it seems like there is enough blame to go around.

Posted by: CPS | September 5, 2006 1:31 PM

why do they call it "unlimited" wireless? they cancelled my wireless card for "too much" use. when you read the really fine print, no music, video or streaming is allowed. what the heck use is it then? they should call it limited.

Posted by: fortladerdale | September 26, 2006 2:07 PM

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