BellSouth drops Internet fee after FCC threat
By Jeremy Pelofsky
Fri Aug 25, 6:43 PM ET
BellSouth Corp. (NYSE:BLS - news), the No. 3U.S. local telephone company, on Friday said it willimmediately drop a $2.97 monthly fee for high-speed Internetservice after U.S. communications regulators threatened toinvestigate the charge.
The U.S. Federal Communications Commission had been poisedto send a letter of inquiry to BellSouth asking the carrier toexplain the new fee, which replaces a surcharge for agovernment subsidy program, FCC officials said.
Most customers would see the change on their bills within aweek, but it could take up to six weeks, BellSouth said. Itadded that customers charged the fee dating back to August 16would receive a credit.
However, the FCC's enforcement bureau on Friday did send aletter to Verizon Communications (NYSE:VZ - news), the No. 2 U.S.telephone company, for information on its own new chargeinstituted to replace the fee for the government program.
"The bureau is investigating whether Verizon's practicesare consistent with the obligations set forth in thecommission's Truth-in-Billing rules," said the letter, whichrequires a response within 20 days.
The FCC could seek enforcement action, including fines,against the company if any regulations have been violated.
As of August 14, providers of high-speed Internet service,known as broadband, are no longer required to contribute partof that revenue to the Universal Service Fund (USF), whichsubsidizes communications services to schools, lower-incomehouseholds and rural areas.
The carriers had passed that USF cost onto their customers,but an FCC decision last year phased out the USF fee for thetelephone companies' high-speed Internet service.
Still, BellSouth continued charging its nearly 3.3 millionhigh-speed Internet customers $2.97, and Verizon said it wouldimpose a new monthly surcharge of $1.20 or $2.70, beginningAugust 26, which it said was to help subsidize connectioncosts.
Verizon had charged broadband customers a monthly fee of$1.25 or $2.83 to cover its USF contribution, depending onconnection speeds.
"When the FCC phases out a fee and a major broadbandprovider rushes in to replace it with a new company surcharge,consumers get burned," said FCC Commissioner Michael Copps, aDemocrat. "Pulling a fast one like this won't fool consumersand I don't think it will fool the commission either."
Verizon spokesman Eric Rabe said the company received theFCC letter and would respond. He also said that Verizoninformed customers about the fee, the reasons for it and posteda notice on its Web site.
A spokeswoman for the FCC declined to comment.
AT&T has agreed to buy BellSouth and needs the FCC toapprove the transaction. AT&T Inc. (NYSE:T - news), the largest U.S.telephone company, did not impose a replacement fee and the FCCdid not send the company an inquiry letter.