Following Your Phone Bill Fees: What Is That Charge?

By Amy Lester, Oklahoma Impact Team

OKLAHOMA CITY -- There are lots of fees and taxes on your phone bills, but, one in particular caught our eye. It's called the Federal Universal Service Fund. Billions go in and out of it every year. The goal is to provide phone and sometimes internet service to everyone in the U.S. at an affordable rate.

"My belief is that the Universal Service Fund is an out of control slush fund," said Bruce Kushnick, the Chairman of TeleTruth, a telecommunications consumer advocacy group.

Kushnick finds fault with the fund that dished out $7.25 billion to phone and internet companies last year. You see, phone companies are required by law to pay 15% of their long distance revenue into this fund. Most of the time, they pass that cost onto you, as a fee on your bill. Then, the money's dished back out to eligible telecommunication companies.

"All this money's being collected. The question is whether or not consumers should be picking up the bill for some of this stuff and my answer is, there should be massive audits," said Kushnick.

The stuff Kushnick is talking about includes four programs. The high cost, rural health care, schools/libraries and low income.

Click here to learn about the programs.

More than half of the $7.25 billion companies received last year was from the high cost program. That subsidizes phone companies' efforts to provide affordable service to rural or hard to reach areas.

"Our serving territory is in the heart of the Arbuckle Mountains and so we go through some of the hardest places to bury cable in the state," said Larry Jones, CFO, Chickasaw Holding Company.

The Chickasaw Phone Company receives nearly a million dollars a month in Universal Service Fund support.

Click here to see what Chickasaw receives every month in high cost support.

Jones says that money offsets the higher cost of doing business in the rural area.

"I don't disagree that there have been people who have abused the fund. I can only say that for us, our costs are legitimate," said Jones. "I believe that our customers could not afford to have telephone service if it weren't for the subsidies we receive."

Your money also reimburses phone companies for discounts they give to low income customers. It also pays for part of the phone and internet service for many schools, rural hospitals and libraries. It often times picks up the tab for network upgrades as well.

Click here to see where the money went last year.

"We are extremely excited to get it," said Steve Washam, Director of Network Services for the Oklahoma City Public School District.

OKCPS got the okay, last year, to use $21.6 million for upgrades to the wireless network. The district will put $3.5 million of its technology bond money, approved by voters, toward the project.

"A lot of the curriculum is going internet based, so you have to keep the infrastructure and speed of the network up to par with what's going on in the classroom and the desktops," said Washam.

Last year, the district also received $2.5 million to put toward phone and internet bills. Oklahoma City's not alone, $559,351 went toward the Tulsa Public Schools' phone and internet. Even private schools like Bishop McGuinness received $12,849.

Click here to search the list of Oklahoma schools.

The fund may soon expand, to include broadband. The Federal Communications Commission has a plan to bring broadband to everyone. Part of that plan includes reorganizing the Universal Service Fund, to provide funding.

"We are fully supportive of what's going on now at the FCC to overhaul and refocus the Federal Universal Service Fund," said Andy Morgan, spokesperson for AT&T.

AT&T received $12.5 million from the fund last year. Most of it was for reimbursements for low income discounts. $1.5 million went toward subsidizing service to high cost areas. AT&T says it's not financially viable to bring broadband to all homes, without help from the fund.

"The idea of universal service is a great idea. Everybody needs to be connected to the world but, the way the Federal Universal Service Fund is set up, it's mission, it needs to be rethought," said Morgan.

Rural companies worry about what would happen if the government stops subsidizing phone service and only focuses on broadband. They say it could increase phone bills by $50 to $100 a month.

Click here to read the FCC's Broadband Plan