As expected, long distance phone service carrier MCI will begin charging residential customers a new fee in July to cover the cost of funding low-income telephone service, Internet connections for schools, and other federally subsidized institutions.
The fee will appear as a line item on monthly residential phone bills, the company said. A customer will see a 5.9 percent increase for interstate and international phone calls.
The rate hike follows a similar move by AT&T that will also subsidize the costs of Internet. Other services could result in substantial increases for phone service throughout the long distance market.
AT&T is planning to impose a 5 percent surcharge on all out-of-state calls to cover the costs of federally mandated telephone subsidy programs, including Net connections for public schools and libraries.
Both surcharges, roundly criticized by regulators and consumers, may have a domino effect as other carriers follow suit, according to observers.
MCI filed a tariff late yesterday implementing the fee with the Federal Communications Commission.
The fee to residential customers was needed to recover MCI's share of government mandated payments to support affordable phone service for low-income people and those living in high-cost telephone areas, as well as for discounted Internet access for schools, libraries, and rural health care providers.
"The government has restructured and expanded the fund," MCI spokesperson Claire Hassett said. "We have been paying two times more than what we used to pay in the beginning. The first six months of this year we chose to eat the additional cost." Its contribution to the fund is now close to $4.1 billion.
So far, Sprint is watching from the sidelines, declining to comment on the proposed surcharge. "We haven't made any changes from what we're already doing," a spokeswoman said. Sprint yesterday announced a new network for voice, video, and data--another sign of a rebound for the long distance carrier.
The planned increases have drawn harsh criticism from federal regulators and consumer groups. The additional charges are "premature, unwarranted, and inconsistent," said FCC chairman William Kennard after AT&T's hike announcement, according to a Reuters report.
FCC officials had expected the carriers would offset new universal service program charges with planned decreases in the access charges the companies pay to local phone companies. Access charges have dropped by billions of dollars in the past year with another $700 million or more decline expected in July.
Under the 1996 Telecommunications Act and FCC rules, long distance carriers are required to support programs that subsidize phone service in sparsely populated and low-income areas and defray the cost of Internet connections for schools, libraries, and rural health care facilities.
But the FCC has not yet announced how much the carriers must contribute to the programs for the second half of the year. A decision is expected in the next few weeks, an FCC official said.