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Cell phone fee increases look tiny, but rake in millions

Cell phone customers gripe about being nickel and dimed to death by their wireless service providers. But guess what happens when you put all those nickels and dimes together?

You get a really huge chunk of change.

Since the start of the year, the four leading wireless companies — Verizon, AT&T, Sprint Nextel and T-Mobile — have each quietly raised a monthly fee to recoup business costs.

Taken individually, the fee hikes represent pocket change for most people. AT&T's fee in California, for example, is up by 40 cents a month; Sprint's is 24 cents higher.

Combined, however, the wireless companies are looking at hundreds of millions of dollars in additional annual revenue. And that's with no significant change in their service to customers.

"We call these 'because they can' fees," said Michael Shames, executive director of the Utility Consumers' Action Network, a San Diego advocacy group. "Every household is struggling right now to pay bills, and these companies put the squeeze on because they can."

California T-Mobile customers received an insert with their latest bill informing them that the company's "regulatory programs fee" has risen to $1.21 a month from 86 cents.

The company explained that the fee "is not a tax but a fee we collect and retain to help us recover the costs associated with funding and complying with a variety of government mandates, programs and obligations."

In other words, T-Mobile is billing customers for its cost of following the government's rules — rules that were put in place to make the company friendlier to customers.

Nice.

Better still, T-Mobile said that, "These programs and the costs of compliance vary over time, as do the costs that T-Mobile includes." That's a nice way of ensuring that customers have no idea what they're paying for, or why, in any particular month.

A company spokeswoman declined to provide more detail about the rationale for the fee.

T-Mobile is by no means alone in this practice. Virtually every wireless company does it. In May, AT&T told cell phone customers that it was nearly doubling its "regulatory cost recovery charge" to 83 cents a month from 43 cents.

A spokeswoman for the California Public Utilities Commission said she was unaware of any significant increase in the regulatory compliance costs of wireless companies operating in the state.

The increases sound puny — which is how the phone companies want you to see them. Even the most dubious fee appears more palatable when customers view it as just another handful of coins each month.

But look what happens when you do the math.

AT&T has about 78 million wireless customers nationwide. An additional 40 cents per customer translates to $31 million a month in extra revenue, or $374 million a year.

But it's impossible to know exactly how much AT&T is pulling down. Even though the company says all of its wireless customers experienced a fee hike, it says the amount charged varies from state to state.

Wireless companies are permitted by the Federal Communications Commission to pass along some of their business costs in the form of an additional fee. The companies typically depict the fee as a normal part of the regulatory process.

"It's not," said Denise Mann, who oversees telecom matters for the Division of Ratepayer Advocates, the watchdog arm of the California state regulatory agency. "It's just a fee they add for their routine business costs because they can get away with it."

Is this legal? Apparently so.

Is it an honest way of dealing with customers? Hardly.

"People should write their wireless carriers and ask for a justification of this fee and what the money is used for," advised Joel Kelsey, telecom policy analyst for Consumers Union.

Will that work?

"It's a good first step," he said.

Nickeled and dimed

Since the start of the year, leading wireless companies have quietly raised a monthly fee that each charges to recoup some of their business costs. AT&T calls it a "regulatory cost recovery charge" and T-Mobile calls it a "regulatory programs fee."

CompanyFee hike*
AT&T+ 40 cents
Sprint+ 24 cents
T-Mobile+ 35 cents

* Fee increase in California. Charges varies by state.

Cell phone fee increases look tiny, but rake in millions 07/20/09 [Last modified: Monday, July 20, 2009 9:12pm]
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