Cell-phone service fee to increase in spring

By David Ho
Associated Press

WASHINGTON — Users of cell phones will see their monthly bills go up next spring because of changes in how the government charges phone companies to underwrite services for rural areas and the poor.

The Federal Communications Commission decided yesterday to almost double the amount major wireless phone companies pay to the fund used to keep phone connections affordable in low-income and high-cost areas. That fund also helps connect schools and libraries to the Internet.

Kimberly Kuo, a spokeswoman for the Cellular Telecommunications & Internet Association, said wireless companies would pass on the increase to consumers as a higher line-item charge for "universal service" on monthly statements.

The amount of the increase would vary depending on the carrier and the minutes used, Kuo said. A cell-phone user paying a $50 bill each month now pays a universal service fee of about 50 cents. That fee could be doubled after the change goes into effect.

The FCC said it needed wireless companies to pay more because of the increasing number of people switching to cell phones for long-distance calls.

Gene Kimmelman, co-director of Consumers Union in Washington, said the increase is appropriate because wireless companies haven't been paying enough when compared with traditional carriers.

The FCC requires all phone companies to contribute 7.3 percent of their revenues from interstate and international calls to the universal service fund. About $5.5 billion is collected each year.

Most carriers recover these costs by billing customers a percentage of total long-distance charges.

This percentage can be significantly higher than what the government asks of the phone companies. For example, AT&T, the No. 1 long-distance provider, charges residential wireline customers 11 percent of their monthly long-distance total for the universal service fee.

Addressing this practice, the FCC said that beginning in April carriers won't be able to inflate universal service charges passed to customers.

Kimmelman said this change could mean savings for consumers but warned that phone companies might bill customers the same fees in different ways.

The way wireless companies contribute to the government fund will change in February.

The FCC said it has been difficult to estimate how much of wireless industry revenues come from long distance because of how cell-phone companies sell packages of local and long-distance minutes.

The FCC is increasing the proportion of wireless industry revenues it considers to be from long-distance from 15 percent to 28.5 percent to reflect changes in the long-distance market.

Most large wireless companies use these estimates to calculate their payments, but firms still will be able to figure payments based on actual long-distance revenues. This option benefits smaller carriers with lower revenues.