AT&T ticks off FCC head

The chairman of the Federal Communications Commission today issued an unusual statement castigating the nation's biggest carrier for a price hike.

The rebuke from FCC Chairman William Kennard came shortly after AT&T revealed it will begin levying a 5% surcharge on residential interstate and international phone calls in July.

AT&T said it needs the money to pay for expanded FCC-mandated universal service subsidies, including discount Internet access and schools at libraries.

Kennard disagreed. "AT&T's announcement is premature, unwarranted and inconsistent with its own public proposals to the FCC," he said in his statement.

If anything, Kennard said, AT&T should be disclosing to customers that FCC policies gradually reducing access fees that AT&T pays to local carriers to complete calls are responsible for lower long-distance rates.

An AT&T spokesman quibbled that AT&T made no "announcement" of the new surcharge but revealed it in a tariff filing.

Either way, the spat puts in full public view a simmering dispute between carriers and regulators over universal service. The key issue: How to pay for the new E-rate program, which guarantees 20% to 90% discounts for schools ordering Internet access and other telecom services.

The FCC voted for E-rate in May 1997 and levied new charges on long-distance carriers to pay for it. But at the same time, the FCC simultaneously ordered regional Bell operating companies to reduce their inflated access charges over a period of five years.

The long-distance carriers, grumbling that the access charge reductions weren't large enough, quietly implemented surcharges on commercial voice and data services when E-rate went into effect in January 1998. Some of those surcharges are just now showing up on business users' bills because of delays in reprogramming carrier billing systems.

Then, just last week, several consumer and business user groups petitioned the FCC to drop E-rate collections until the whole funding system is reformed. Meanwhile, Senate Commerce Committee Chairman John McCain (R-Ariz.) has attacked the entire E-rate program, citing government auditors' allegations that some schools are trying to use the subsidies to buy cameras, scanners and cable TV service.

Despite the escalating war of words, observers widely expect other long-distance carriers to follow AT&T's move and impose new charges on all of their customers - business and residential - to recover their universal service costs.

Statement by Kennard
about AT&T's announcement.

Universal service charges cause a furor
Includes links to the FCC's universal service page and a speech by Kennard on universal access. Network World, 3/9/98

AT&T financials.