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?"
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