Hidden Fees Benefiting Phone Companies

ByABC News
February 5, 2002, 8:39 PM

Feb. 5 -- In Dallas, Texas, Sara Deats studied her long-distance bill from MCI with confusion and consternation. The recreation director at a senior center looked at almost a dozen extra fees and charges on her bill and wondered if she was being overcharged.

"What I used to pay $40-something for on a telephone bill seems like I'm paying $90-something. And it's just absurd! I just don't make that many calls," she said.

Consumers Union said today that Deats and millions of other long-distance customers were right to be confused. From its Washington office, the non-profit group issued a study reporting that six years after the deregulation of the telephone business, long-distance bills are loaded with extra charges, many in fine print. And at the same time, long-distance prices are rising.

"The basic long-distance fee has gone up from 50 to 85 percent," said Gene Kimmelman, co-director of Consumers Union's Washington office. That contradicts the Federal Communications Commission, which says the average consumer paid $21 per month for long-distance service in 1995, before deregulation, and paid $18 a month in 2000.

Consumers Union says that's misleading. When monthly fees, minimums and other charges are added, offers of 5 cents to 7 cents a minute actually turn out to cost 20 cents to 30 cents a minute.

"They've dropped the price per minute to try to draw customers," said Kimmelman, "but then the dirty little secret is they've added new fees, monthly charges, new taxes on the bill." Sprint even passes along a charge for its property tax bill.

Feeding Off Hidden Fees?

Consumers Union focuses on the Universal Service Fee. The law requires phone companies to give 7 percent of their income to subsidize things like rural phone service, phone service for the poor and Internet access for schools and hospitals.

But MCI and Sprint bill their customers more than the 7 percent — they both bill 9.9 percent. And AT&T, the biggest long-distance carrier, recently raised its charge to 11.5 percent.