V for Verizon? One Reporter's Telecom Vendetta

     CNN’s Allen Wastler recently dialed up pro-regulation rhetoric in a rant against Verizon (NYSE: VZ). “These telecoms. Somebody ought to regulate them, huh?” a nearly apoplectic Allen Wastler asked his colleagues as he began his August 26 tirade on “In the Money.”


     Nowhere in his story did the CNN/Money.com editor mention the high cost government already imposes on phone customers with taxes and fees, or that the FCC voted recently to expand the reach of the “universal service fee” to voice-over-Internet and cell phone customers.


     Wastler said that “once upon a time” the government required a “universal service fee” of DSL providers to finance rural telephone service that phone companies were reluctant to provide, but that the government stopped requiring the charge for DSL subscribers. That’s misleading.


     According to the FCC Web site, “all telecommunications companies that provide interstate telecommunications service contribute to the Universal Service Fund.” While the FCC “does not require companies to recover their Universal Service contributions from their customer,” “Each company makes a business decision about whether and how to assess charges to recover its Universal Service costs.”


     So what’s the problem? Well, Wastler complained that in lieu of a “universal service fee,” Verizon is charging customers like him $2.70 a month in a “supplier surcharge fee” at a “13-cent savings” over the universal service fee that was previously imposed. Wastler also savaged BellSouth (NYSE: BLS) for levying a “regulatory recovery fee because they have to deal with so many regulations.”


   A frustrated Wastler then exploded: “They should deal with more as far as I’m thinking.” “I got a brief glimpse of hope from down South,” he added, noting that “a federal court in Atlanta” ruled that states “can regulate telecoms for all those little extra charges and the fine print and stuff.”


     The business reporter later sniffed that if phone companies “weren't trying to stiff me out of money that belongs to me,” they wouldn’t have to deal with more regulation.


     Yet nowhere in his story did Wastler consider how government taxes and regulations already “stiff” the consumer or how more government involvement in fee structures could hike consumers’ costs.


     A study by economists Thomas M. Lenard and Brent D. Mast said “the typical wireless user faces a total tax rate (federal, state and local) of over 14 percent on wireless services,” consumeraffairs.com reported in October 2003. What’s more, New York state, where Wastler films “In the Money,” had the highest state excise tax on telephone service, according to the consumer news Web site.


    And the tax bite has only gotten larger, reaching 17 percent in 2005,  “an increase of three percentage points more than in 2003,” Steve Largent, a wireless phone trade group’s president, noted in March 2005.


    What’s more, in June the FCC approved regulatory changes that should make it even harder for consumers to escape charges. It voted unanimously “to require all voice over Internet Protocol services that connect to the public-switched telephone network” to pay into the Universal Service Fund, CNetNews.com’s Anne Broache reported on June 21.


     “The same FCC order would also raise the share that cell phone providers must contribute to the pool,” she added, which could impact consumers.