Net telephone fees have users fuming

Trying to soothe state regulators by highlighting regulatory fees, VoIP providers are instead infuriating some of their customers.

John Rolff's latest broadband phone bill contained three words he vowed never to see again: "regulatory recovery fee."

The same charge was the reason he dumped his old phone provider, SBC Communications, in favor of Primus Telecommunications' Lingo, which lets his broadband line double as his phone line. From all appearances, Lingo hadn't been "adding these little nickel and dime charges," he said.

But now, the 38-year-old software engineer--along with 755,000 others--is learning that this had never really been the case. Lingo, Vonage, Time Warner Cable and every other commercial provider of voice over Internet Protocol (VoIP) services have been collecting government fees for years. It's only in recent months that most have been coming clean on their statements--to fend off critics, as the spotlight on Net phone services grows.


What's new:
The line item on unregulated broadband telephone bills saying "regulatory recovery fee."

Bottom line:
VoIP providers say they've been sharing the regulatory burden all along by paying to complete calls on local networks. They're breaking out the regulatory portion to counter demands for direct fees on VoIP, not to get their customers upset.

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Some, notably state governments, have called for broadband telephone services to pay the same regulatory fees that the traditional local phone providers--known as the "Baby Bells"--do. The Federal Communications Commission has so far kept regulators' hands off VoIP.

Hoping to counter calls for direct taxation and regulation, many of the Net phone operators now identify a "regulatory recovery fee" line item of 50 cents to $3 as part of their regular monthly service charges. They say they're highlighting the portion of local phone fees the Bells have always charged them for completing calls on local lines.

"A lot of people were raising this concern that we weren't funding telephone projects like the Bells were," said Jeffrey Citron, CEO of VoIP provider Vonage Holdings. "That's a red herring--I say 'malarkey' to it. We already fund part of it, and we wanted to show our customers and everybody else."

Net phone companies insist that the fees are legitimate, merely offsetting the costs of taxes and regulatory fees passed on to them by the local phone companies for completing Net calls, they say. Nevertheless, some critics say the label is at best misleading--and at worst a misrepresentation with potential for abuse.

The line item attempt to soothe angry state regulators seems instead to have riled VoIP customers, many of whom admire the outsider stance of broadband phone services as well as the cheaper rates. Rolff said he no longer views his operator as a lovable underdog with a hot technology trying to topple the Bell Goliaths.

"Lingo was like this outsider trying to take on the big, bad phone industry," he said Tuesday. "But now, they act just like them. Here I thought I'd found the answer, but it seems like they were just

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