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Say hello to higher cell phone fees

With subscriber growth stagnating and new services still on hold, some cellular carriers are asking their customers to pay more for what they're already getting.

When Lois Bass called Sprint PCS customer service earlier this year with questions about her bill, she didn't know Sprint would charge her $3.50 for the call.

When she saw the charge on the following month's bill, she was shocked and called customer service again to question the charge. Bass was charged $3.50 for a second time.

Now the retired social worker from St. George, Utah, drives 10 miles to the nearest Sprint store to resolve problems with her wireless phone service. While she's there, store employees usually call Sprint customer service to assist her, Bass said. She isn't charged for those calls.

Customer service fees are only one of several new charges and policies that cell phone network operators have introduced this year to dig deeper into the wallets of consumers. These kinds of additional fees are one way for top U.S. network operators such as AT&T Wireless and Sprint PCS to increase their revenue, industry watchers say.

Revenue in the industry has stagnated as cell phone subscriber growth has waned and newfangled data services have been slow to appear.

On Thursday, Sprint PCS became the last of the big four national operators to launch an advanced data-capable network.

Sprint PCS' new service--dubbed PCS Vision--will lets subscribers exchange photos, check Web sites and e-mail, and download games. Wireless carriers in the United States have fallen behind their international peers on next-generation, or 3G, networks. Lacking a must-have application to stoke sales, wireless carriers have resorted to the time-honored practice of boosting fees to increase revenue.

"It's nickel-and-diming, which is very common in the telecommunications industry," said Lee Biddle an attorney for the Utility Consumers' Action Network, a nonprofit in San Diego dedicated to protecting consumers from abusive utility practices.

"Network operators are really trying to get as much as they can out of every subscriber," said Biddle. "Their stock prices are falling, so they're taking the tactic of squeezing a few more cents out of their customers. With millions of subscribers across the country, that's a lot of money."

Cell phones themselves are also getting more expensive. Meanwhile, cell phone users are hankering for lower prices and better basic services.

Sprint instituted the customer services fees in November for subscribers of its ClearPay plan, a special program for customers viewed as a credit risk, said Sprint spokesman Dan Wilinsky. He added that the fee is $3, not the $3.50 that customer Bass said she was charged. None of Sprint's other customers is charged for customer service, Wilinsky said.

The company also extended peak-time hours an extra 60 minutes to 9 p.m. earlier this year. Calls made during peak time are charged at a higher rate. And starting Aug. 28, the company will deduct air time whenever customers use their cell phones to check their phone usage, said Wilinsky. Subscribers will still be able to check usage on the Sprint PCS Web site for free, he said.

AT&T Wireless has also increased fees. This month the company raised the fee for calling directory assistance from 99 cents to $1.25, said Ritch Blasi, an AT&T Wireless spokesman. And the company began deducting air time for calls lasting longer than 30 seconds. Before, calls under one minute didn't count as air time.

Verizon Wireless will raise directory assistance fees in October from 99 cents to $1.25 per call and recently introduced a new late-payment policy across most of the country that will take full effect by the end of the year. Instead of charging 1.5 percent of the amount due, the company will charge customers either $5 or 1.5 percent of the amount due, whichever is greater.

The companies said such fees are becoming standard.

"This brings us in line with rest of industry," Blasi said. "We're competitive with our prices and plans. Certain fees have been charged by other companies for a while, so it was time to make an adjustment."

But telecom analysts say consumers are sure to lament the multiplying of additional fees and the confusing rules that accompany them. It's a reversal of previous strategy, in which many network operators phased out extra charges to attract new customers with simpler, all-inclusive plans.

"This is taking us back to three or four years ago, with charges that really aggravated people," said Michael Doherty, a telecommunications analyst at technology research firm Ovum.

Too low?
Bass said that if she'd known about the customer service fees, she wouldn't have chosen Sprint PCS as her service provider. But she can't switch now because she's locked into a 12-month contract, which expires at the end of the year.

"I've had cell phones before and have never been treated like this," Bass said. "I think they're blatantly disregarding their customers."

The problem, said telecom industry watcher Herschel Shosteck, is that cell-phone and long-distance service rates dropped too low as numerous rivals competed fiercely for business. Now, in the shadow of the WorldCom bankruptcy, telecom companies are feeling pressured to focus on profits while also investing in infrastructure to improve service on overloaded networks.

"The interesting question is not whether rates are going up stealth-wise, but why it is taking so long," said Shosteck, chairman of the wireless industry consulting firm Shosteck Group.

Acknowledging that network operators face financial pressures, Doherty said new rate plans, not hidden fees, are needed.

He said cell phone service plans that rely on more variable pricing structures--plans that are common in Europe--are fairer than U.S. models. In the United States, it's common for companies to offer a low monthly fee but with additional charges and to allot customers hundreds of minutes of air time that few people ever use.

Cell phone network operators Cingular Wireless and T-Mobile USA (also known as VoiceStream in some locations) said they have not recently raised or introduced any new fees.