Subject: [NEXTEL-1] Mobile users to see higher service fees

From: Marcel <[email-masked]>
Date: Tue, 03 Dec 2002 14:34:17 -0500

http://www.usatoday.com/tech/news/techpolicy/2002-12-03-phone_x.htm
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Posted 12/3/2002 2:59 AM

Mobile users to see higher service fees
By Paul Davidson, USA TODAY

Long-distance bills for most consumers should dip this spring — while mobile phone charges will rise a bit — under a plan to revamp the fees that subsidize phone service for rural areas and poor families.

The Federal Communications Commission this month is expected to approve a staff proposal to modify the $5.5 billion "universal service fund." The new rates would take effect in April. A broader plan to overhaul the fees will be formed next year, say people familiar with the matter.

The goal: to transfer the burden of subsidizing service in high-cost areas from long-distance carriers to wireless firms and Bells as calling patterns shift.

The price cuts and hikes should both amount to $2 or less per customer. Yet the fee has set off a political firestorm: No industry wants to tack even small rate hikes on phone bills amid price wars. "It's a hot potato," says analyst Scott Cleland of The Precursor Group.

Today, the FCC requires long-distance carriers to contribute 7.28% of their revenue to the universal service fund. But the FCC bases the percentage on revenue collected six months earlier. The problem: Long-distance carriers' revenue has been plunging as consumers make more calls on wireless phones, use e-mail or switch to a regional Bell for long-distance.

To make up the shortfall, AT&T, WorldCom and Sprint charge consumers, respectively, universal service fees of 11%, 9.9% and 9.6% of long-distance bills.

Under the new plan, the rate each quarter would be based on projected revenue. The carriers, in turn, must charge the FCC-mandated rate and no more.

That will mean lower fees for the shrinking long-distance giants and their customers. Long-distance customers of the regional Bells, whose long-distance business is growing, already are paying the FCC-mandated rate. The mandated rate is expected to rise in April — to about 9% from 7.28% — as the government runs out of temporary surplus money. Still, thanks to the FCC changes, most customers should benefit. An AT&T customer with a $50 monthly long-distance bill would pay a $4.50 universal service fee instead of $5.50.

To offset the declining contribution of long-distance companies, mobile phone companies would join the Bells in bearing a bigger load. For mobile phone customers, the fee would rise to about 2.5% of the bill from 1%, more than doubling the current 50-cent charge for a customer with a $50 bill.

In a year, the FCC is expected to move to a flat universal service fee of about $1 per phone line or number, to the Bell or wireless provider. Officials say that makes more sense with the spread of bundled plans that don't distinguish local and long-distance.

That plan would more emphatically shift universal service funding from long-distance to wireless providers and Bells. Both oppose it.

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