HolidayBuyer's Guide

BellSouth drops Internet fee after FCC threat

Phone carrier was about to be sent "letters of inquiry" to see whether new charges comply with FCC rules.

update BellSouth, the No. 3 U.S. local telephone company, on Friday said it will immediately drop a $2.97 monthly fee for high-speed Internet service after U.S. communications regulators threatened to investigate the charge.

The U.S. Federal Communications Commission had been poised to send a letter of inquiry to BellSouth asking the carrier to explain the new fee, which replaces a surcharge for a government subsidy program, FCC officials said.

Most customers would see the change on their bills within a week, but it could take up to six weeks, BellSouth said. It added that customers charged the fee dating back to Aug. 16 would receive a credit.

However, the FCC's enforcement bureau on Friday did send a letter to Verizon Communications, the No. 2 U.S. telephone company, for information on its own new charge instituted to replace the fee for the government program.

"The bureau is investigating whether Verizon's practices are consistent with the obligations set forth in the commission's Truth-in-Billing rules," said the letter, which requires a response within 20 days.

The FCC could seek enforcement action, including fines, against the company if any regulations have been violated.

As of Aug. 14, providers of high-speed Internet service, known as broadband, are no longer required to contribute part of that revenue to the Universal Service Fund (USF), which subsidizes communications services to schools, lower-income households and rural areas.

The carriers had passed that USF cost on to their customers, but an FCC decision last year phased out the USF fee for the telephone companies' high-speed Internet service.

Still, BellSouth continued charging its nearly 3.3 million high-speed Internet customers $2.97, and Verizon said it would impose a new monthly surcharge of $1.20 or $2.70, beginning Aug. 26, which it said was to help subsidize connection costs.

Verizon had charged broadband customers a monthly fee of $1.25 or $2.83 to cover its USF contribution, depending on connection speeds.

"When the FCC phases out a fee and a major broadband provider rushes in to replace it with a new company surcharge, consumers get burned," said FCC Commissioner Michael Copps, a Democrat. "Pulling a fast one like this won't fool consumers and I don't think it will fool the commission either."

Verizon spokesman Eric Rabe said the company received the FCC letter and would respond. He also said that Verizon informed customers about the fee, the reasons for it and posted a notice on its Web site.

A spokeswoman for the FCC declined to comment.

AT&T has agreed to buy BellSouth and needs the FCC to approve the transaction. AT&T, the largest U.S. telephone company, did not impose a replacement fee and the FCC did not send the company an inquiry letter.

Story Copyright © 2006 Reuters Limited. All rights reserved.

Close
Drag