Bruce Kushnick, bruce@teletruth.org, 718-238-7191

Tom Allibone, tom@teletruth.org, 609-397-2257

For more about Teletruth: http://www.teletruth.org

Teletruth News Alert --- Tuesday, August 17^th, 2004

If the FCC's Intercarrier Compensation Forum (ICF) has its way, every residential and business local phone bill will show an increase of the FCC Subscriber Line Charge ("SLC" and other names) from a current cap of $6.50 to over $10.00 a month, not counting hefty taxes. To make matters worse, this industry group also wants to raise customers' Universal Service charges on everything from local service to even cable and DSL services -- new broadband taxes.

To read an Executive Summary of this ICF plan released August 16th, see: http://www.teletruth.org/docs/ICFExecutiveSummary.DOC

To see the planned increases in a chart. http://www.teletruth.org/docs/SLCincreaseICF(1).pdf

"Teletruth believes that before any increases to these charges are initiated, the FCC should stop listening to closed-door-phone-industry groups who represent their own corporate needs and start representing the customers' interests. As we have filed, based on our recent 2-year investigation into phone bill charges, the FCC should immediately do a cost-justification of every fee, tax and surcharge on the bill because every charge has been inflated or lacks adequate cost-support, or just shouldn't be on the bill in the first place" states Bruce Kushnick, Chairman, Teletruth.

Teletruth Research: To read details of our recent 2-year investigation into phone bills, see: http://www.teletruth.org/phonebillindependencereport.html

If the FCC doesn't listen, everyone from Seniors to Small Businesses will be hit with unjustified increases with these proposed new changes.

The FCC Line Charge Scam, Part One and Two.

In 1999, the FCC backed another industry cabal known as "Calls" claiming that it would help customers by lowering "access" fees, which are the fees long distance companies build-into our long distance rates that are paid to the local phone companies. In exchange, the FCC would raise the "FCC Line Charge" from $3.50 to $6.50 in 2003.

This increase was done with virtually no cost support. In fact, there was ample data presented that clearly showed that the $3.50 charge was inflated.

And now, in a new scam, Part Two, this new industry group, once again in closed-door meetings that closed-out anyone representing customers, wants to continue to lower access fees and once again raise the FCC Line Charge and increase Universal Service funding --- meaning charges to customers.

Why is it a scam? The FCC Line Charge is a very large slush fund for the phone companies. Besides the lack of cost support:

• Most customers believe this charge goes to fund the FCC. However, it is unmarked revenue to the phone companies. The FCC Line Charge is a "non-service". You can't order it and you can't take it off your bill.
• The FCC Line Charge is NOT included in the advertised price of a local-long distance package. This charge with various associated taxes adds 25-35% more to the actual costs of the total package. Also, it is never included in the advertised costs of 'local phone service' even though, in many states, it is part of local monthly charges.
• The FCC Line Charge is quintuple taxed in New York City 27%, and, as in most other states, Universal Service is also being charged to this fee. Any new increases also increase the taxes -- adding additional dollars a month. In NYC, this will be adding an additional $2.70 in taxes ---for a total of $12.70 a month. This will be 131% more than the cost of dialtone for a 'non-service'

Teletruth has filed a "Data Quality Act" challenge and a "Truth-in-Billing" complaint requesting the FCC investigate this charge. To read more see: http://www.teletruth.org/RemoveFCCLineCharge.html

Are Packages Customer Friendly?

The ICF also claims that "customers prefer bundles" and that "Customers do not receive the service packages they want.".

While packages are good for heavy users, the majority of households do not save money on a package, mainly because of the excessive hidden charges and fees that are not part of the advertised price. In fact, our recent survey of phone bills found that 15-25% of the population on packages are paying more than if they simply ordered ala carte.

Another secret -- Prices should have been in serious decline because the costs of offering local phone service have continued to drop, with massive cuts in staff and new construction. However, a package that includes long distance or DSL allows the phone company to cross-subsidize these other businesses, meaning that the phone companies can shift the expense of these other services to local phone customers. This means everything from advertising to even staff and construction are inflated for local phone customers.

If prices are supposed to be going down from competition, how is it that states across the US, from New York and New Jersey to Florida, have seen recent increases in the majority of local services.

Increasing Universal Service Funding? You got to be kidding.

As many know, the Universal Service E-Rate has been under investigation for fraud. More to the point, the largest recipient of these programs are the major vendors -- the phone companies. The schools and libraries get discounts, while these companies are reimbursed full business rates.

But the real secret is the fact the USF "High-Cost" fund, is another slush fund. This fund allows companies who are very profitable to claim they need more subsides, even though many of these companies are under "price caps", and regulators no longer examine their profits. We're talking about companies with earnings (EBITDA) of 55%, making them some of the most profitable companies in the US. And this fund has yet to have any substantial audits performed -- Who's minding the fund?

"Our survey of phone bills also revealed that the USF charges simply don't add up. Many customers are being overcharged for fees in a myriad of ways," states Tom Allibone, Teletruth Director of Audits.

"Teletruth believes USF charges should be slashed, and that the entire fund should be 'needs-based', not 'greed-based," adds Kushnick.

New Broadband Taxes?

As America talks about speeding up broadband deployment, another troubling point in this proposal is that there are increases to Universal Service and Broadband will be seriously taxed. For example "Non-switched, dedicated network connections with capacity of at least 1.5mbps but less than 45mbps are assessed 5 units" ---- five times the charge for a residential line. (The documents do not explain how much a "unit" is.). Thus, a phone line will not only have a major increase for DSL, but the faster you go, the more you get taxed.

"Teletruth believes in Universal Service principles and the need to fix the broken access regime, too complicated to discuss here. However, 'Investigate the FCC Line Charge and USF monies, and not increase these funds', should be the outcry by the public" adds Tom Allibone of Teletruth.

Finally, for those of you who haven't been following this tale of telecom woe, the ICF only represents a small group of the telecom companies. Many were denied access or have dropped out, and it certainly doesn't represent any customers. --- This is not a "consensus" document. This is a "senseless" document.

Tom Allibone and Bruce Kushnick, Teletruth

For more about Teletruth: http://www.teletruth.org