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Verizon to add DSL fees

The carrier plans to tack on $3 a month to its price, with the increase labeled as a government-imposed fee the company had been including in its basic rate.

Verizon Communications on Tuesday said it will begin charging its broadband subscribers an additional $2 to $3 monthly "regulatory fee," joining a trend embraced by other local phone giants.

The charges will begin appearing on Verizon digital subscriber line (DSL) bills in May or June, depending where a customer lives. Verizon charges $34.95 a month for DSL, or $29.95 a month when purchased with long distance and local phone service.

Verizon joins other Baby Bells, including SBC Communications and BellSouth, which have begun introducing additional regulatory charges to customer DSL bills. These fees are part of a regulation requiring phone companies to contribute to a federal Universal Service Fund (USF) that underwrites phone service costs in low-income or rural areas. While the Bells charge USF fees for all phone and DSL services, they claim they have up to now absorbed all DSL charges.

Verizon said the decision to add regulatory fees was based on a number of factors, including the growing expense in running a DSL service. But like its Bell cousins, Verizon also blamed the Federal Communications Commission for regulations that favor its cable competitors, who are not required to contribute to the USF.

"We had hoped that this fee Verizon pays to the USF would go away, but it hasn't," Verizon spokesman Eric Rabe said in a statement. "Cable companies are not required to pay the USF charge, and they don't. We have argued it should not apply to DSL providers either, but the FCC has not acted, and probably won't for some time to come."

For more than a year, the Bells have made a concerted effort to grow their DSL businesses. Most Americans get their broadband from cable companies, such as Comcast, Time Warner Cable and Cox Communications. Cable companies bundle high-speed Internet with video and phone service, a move that has caused customer erosion of the Bells' coveted phone business. In response, the Bells last year introduced heavy discounts for their DSL offerings and have witnessed strong growth in these businesses.

DSL remains cheaper than cable, costing $30 to $40 monthly, compared with cable's $45 to $50 a month for broadband service. However, cable responded to the Bells' discounts by nearly doubling downloads speeds to 3 mbps, well ahead of DSL.

The Bells continue to lobby the federal government to either remove its regulations on the phone industry or level the playing field by forcing cable companies into similar rules. For consumers, the debate just means a more expensive DSL bill.

"It sounds like they're passing on a few bucks to the consumer and passing it off on regulatory terms that have been there all along," said Jim Penhune, an analyst at Strategy Analytics. "It wouldn't be an exaggeration to say this is a minor price increase by other means."