GOVERNMENT weighs plan that would limit phone charges

Tuesday, May 8th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ The Federal Communications Commission began considering action Tuesday to stop telephone companies from passing on to customers more than the government charges them for a special fund that subsidizes services for the poor.

That could mean a drop in one of the line-item charges _ typically described as a ``universal service fee'' _ that consumers see on their monthly long-distance bills.

Specifically, the commission is looking at a proposal that would constrain phone companies from collecting more through this line-item charge than the percentage they contribute to the government fund.

The FCC now requires telecommunications carriers to contribute 6.9 percent of their interstate and international revenues to a pot of money used to keep phone connections affordable for low-income and rural consumers and provide schools and libraries with cheap Internet hookups. About $5 billion is collected currently for the subsidies, and each quarter, the commission re-evaluates the amount it charges the industry.

It's up to phone companies to decide how and how much to recover from their customers. Most carriers collect from consumers by assessing them a percentage of their total long-distance charges. But this percentage can be significantly higher than what the government asks of the phone companies, the FCC noted in its proposal.

For example, WorldCom in March started charging residential consumers 12 percent of their monthly long-distance total as a line-item charge.

``This discrepancy between the contribution factor and the amount carriers charge consumers is inexplicable to the casual observer,'' the commission said.

If the changes were adopted, the amount of the line-item fee would be capped. It's possible that carriers could seek other ways to charge consumers, like raising per-minute rates. But then it would be up to consumers to find the best plan for their needs _ taking the government out of the picture.

``They've been using these new line items and inflated charges to mask higher long-distance pricing so they can still advertise a lower per-minute rate,'' said Gene Kimmelman of Consumers Union. He said the commission's action reveals that there isn't enough competition in the long-distance market to squeeze out excess costs.

Long-distance companies say they charge customers more to compensate for several factors. For one, the commission may assess a carrier a certain amount based on its historic revenues, even when that company's revenues are falling.

Another problem is that customers switch long-distance carriers so often that some don't pay their bills, said Pete Sywenki of Sprint, the nation's No. 3 long-distance business. So carriers may need to charge their consumers more to guard against these shortfalls.

``Sadly enough it means that other customers pay for the deadbeats,'' he said.

Some of these concerns may be addressed by other steps the commission is weighing. Currently, companies are charged by the government based on how much they actually bill consumers. But if some customers don't pay each month, those that do could end up bearing a greater amount of the subsidy costs.

The FCC sought comment on whether it should charge phone companies based on how much they actually collect from their users. The agency also plans to look at whether companies should contribute based on their current or projected revenue instead of historical revenues _ an important issue for telecommunications businesses that might have shrinking revenues.

Parties will be able to weigh in on the proposals before the FCC decides whether to adopt them.