FREE MONEY (for the carriers)

The creation of the Universal Service Fund (USF), Telecommunications Relay Service (TRS) (used to help pay for services that translate calls for those with hearing disabilities), and payphone surcharge unleashed a monster.  Carriers realized that by tagging a fee as a “regulatory” fee, they could add the fee to the bottom of the bill with little inquiry and thwart attempts to eliminate those fees.  In addition, the fees have grown substantially in the last decade.  In the first quarter of 2007, the USF charge (set by FCC based on the ratio of total projected quarterly costs for USF) was 9.7%.  The USF recently went above 20.1%. 

Now, to be fair, the USF is a “real” charges, but it is imposed on the carriers who are not required to pass it along to their customers, and many of those carriers receive significant fees back from the fund to support providing services in low income/high cost areas.  Carriers that pass it through (and they all do) can’t mark up the USF amount set by the FCC, but they can impose an “administrative” fee to cover the cost of collection – and most do.  Carriers have been creative in adding other “fees” such as the Property Tax Allotment fee, the Cost Recovery Fee and the Federal Regulatory Fee.  These fees are primarily vehicles for carriers to recoup the cost of regulatory fees and expenses incurred (or property taxes they pay).  They are not set “regulatory charges” and are not set by a regulator.  USF, combined with these other “regulatory fees” can increase your total invoices for certain services by more than 25%.  It is hard to budget when these charges are unchecked and unexpected.

New telecom managers and corporate IT bosses look at the outrageous levels of USF and other add-on “regulatory” fees and vow to “do something” about them. But when they demand that the surcharges be eliminated – and find out their account team can’t do anything about them – they become resigned to never having any influence over surcharges.  A more sophisticated view can yield better results.

There are measures you can take in your procurements to eliminate any attempted retroactive application of surcharges, to make carriers justify the application of surcharges on key services over the course of your contract, and to look for offsets to crushing surcharges elsewhere in a competitive deal.  Knowing where to find these fees and how to address them up front in your procurement (before you commit to a carrier or new service) can be critical in reining in the fees (even if you can’t eliminate them).  Realism and proactive approaches, not bluster and after-the-fact protests, are the right approach to surcharge issues.