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Nuisance Charges-Legitimate Taxes and Surcharges or Questionable Price Increases?

Ever since Congress deregulated the telecommunications industry, the majority of telephone customers have benefited from more choices, lower costs and better service.

Ever since Congress deregulated the telecommunications industry, the majority of telephone customers have benefited from more choices, lower costs and better service.

But the Telecommunications Act of 1996 also created new surcharges for telephone services, adding to the confusing mix of mandatory charges already in place. While some of these surcharges are legitimate, others are simply price quotes and billing practices meant to confuse and possibly deceive customers.

The result is a range of "nuisance" charges, none that is required by regulation or paid to a legitimate third party. Rather, most nuisance charges have been created or manipulated to generate revenue for the carrier.
What should you know about legitimate telecommunications charges versus nuisance charges? Legitimate charges are generally paid to a third party, such as a governmental agency. Considered “below the line” costs, they are an added cost beyond the prices quoted by the carrier.

Nuisance charges provide additional revenues to the carrier, and are usually line or access charges. While most carriers include such charges, customers should obtain in writing the exact fees to use when comparison shopping.

Businesses can save hundreds of dollars every month simply by understanding the surcharges and taxes on their bills, and knowing which are legitimate and which are not. Since nuisance charges can vary from carrier to carrier, shop around and ask carriers to provide written explanations for all fees that are not considered legitimate.

Legitimate Charges and Taxes
Emergency 911 (E911): Most state governments have allowed the Emergency 911 operator (typically a county or city government agency) to impose a per line surcharge to fund their operations. The surcharge the local telephone company collects goes to the E911 organization, not the local telephone company.

Telecommunications Relay Service (TRS): Like E911, the TRS charge is paid to a third party to fund the operation of the Telecommunications Relay Device for the Deaf (TDD) translation service. This service allows hearing impaired and/or deaf callers to communicate with non-hearing impaired/deaf callers using a TDD device and an operator who translates between the two.
Universal Service Fee (USF): The FCC established three funds as a result of the Telecommunications Act of 1996, collectively called the Universal Service Fund. The largest fund pays money to high cost, primarily rural, local telephone companies. The other two funds are the Schools & Library fund and the Rural Health Care fund. A third party under contract to the FCC administers all three funds, but be aware of extra “handling” costs that are not legitimate charges.

Payphone Surcharge: An FCC-created charge that charges the long distance carrier for payphone service that originates from their payphones. The charge was created to cover toll-free calls from payphones, for which the payphone operator made no money.

Federal Excise Tax: The Federal Excise tax on telecommunications service was put in place more than 100 years ago to fund the Spanish American War; today, the excise tax now goes into the U.S. Treasury and is a legitimate surcharge. The charge, however, should only apply to services that connect to the public switched telephone network (i.e., local service). It is not to be charged on services such as private lines, Internet Access & Frame Relay. Additionally, if taxable services are bundled together into a package with services not subject to the tax, only the portion of the bundle subject to excise tax should actually be taxed.
State & Local Taxes: State and local governments also tax telecommunications services, and the tax is generally equivalent to a sales tax.

Gross Receipts Tax (GRT) or Gross Receipts Surcharge (GRS) – Some states impose a Gross Receipts Tax or Gross Receipts Surcharge; it is also known as a Franchise Tax. The carrier collects these taxes or surcharges and pays them to the state.
Other Mandated Charges – Depending on the state or local government, a variety of other surcharges may be required by law. Telecommunications services are a popular taxable item, since they are necessary and are in demand. If other mandated surcharges are listed, ask the carrier to explain them.

Nuisance Charges
Customer Access Line Charge (CALC): Back in the days of rate-of-return regulation, assets of the local telephone company were split, and the state public service commission and the Federal Communications Commission (FCC) separately regulated rates of return on the assets. The CALC charge represented the FCC’s charge for the assets under their jurisdiction, separate from the other telephone line charges. In today’s price cap regulation, the FCC sets maximum rates that the incumbent local telephone company can charge for CALC. However, they can charge less than this maximum. Competitive local telephone companies are not subject to this maximum rate and can charge whatever they choose. This charge is often misrepresented by some as a mandatory surcharge collected for a third party, when in fact, the money from this charge goes to the carrier.
End User Common Line Charge (EUCL): This charge is synonymous with CALC, although some carriers might charge it in addition to CALC.

FCC Access Charge, FCC Charge or FCC Subscriber Charge: Another way to describe CALC or EUCL, but which implies that the FCC imposes the charge, and/or the funds collected go to the FCC; they actually go to the carrier.

Local Number Portability (LNP) or Number Portability Charge: The local telephone companies had to invest significant sums of money to make local numbers portable between carriers. The incumbent local telephone companies sought to recover the cost from their customers, and the FCC allowed this through a separate per-line LNP charge. However, competitive local telephone companies were not regulated to the same degree, and they charged for LNP at their discretion.

Single Bill Fee: With the Telecommunications Act of 1996 and the diminished distinctions between local telephone companies and long distance carriers, some service providers have begun charging a premium for combining the different services onto a single bill. This is not paid to a third party, and represents revenue to the provider.

Primary Interexchange Carrier Charge (PICC): Local telephone companies’ revenues were reduced when the FCC reduced interstate switched access rates that local telephone companies charged long distance companies. The FCC allowed the local telephone companies to partially recover the lost revenue by charging a per-line PICC fee to the long distance carriers. Customers should not be charged a PICC from an incumbent local telephone company if they have a long distance carrier.

Jeff Blackey is a senior vice president for US LEC. Based in Charlotte, NC, US LEC is an integrated telecommunications carrier providing voice, data and Internet services to over 10,000 mid-to-large-sized business customers throughout the southeastern and mid-Atlantic United States.

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