User groups battle over universal fees

By David Rohde
Network World, 6/1/98

Washington, D.C. - The battle lines are drawn for a war over the government's policy of expanding universal service programs. At stake for corporate users: minimizing the impact of new long-distance surcharges.

On one side is a coalition of consumer and business user groups. Late last month, four groups - the International Communications Association (ICA), the National Retail Federation, Consumers Union and the Consumer Federation of America - asked the Federal Communications Commission to stop collecting fees from carriers to fund the new E-rate program. The program is part of the government's effort to wire schools and libraries to the Internet.

On the other side are the American Library Association and the National School Boards Association, which are asking the FCC to keep E-rate funding going despite the user groups' complaints. E-rate provides discounts of 20% to 90% for Internet access, telecom services and some types of network equipment at elementary and secondary schools. It is paid for by expanded charges the government is placing on carriers. The controversy is heating up as users are finally being hit with a wave of new charges by carriers to pay for E-rate, telemedicine subsidies and other universal service goodies.

The charges were first levied on carriers Jan. 1, but many of the larger carriers took several months to pass them along to users because the carriers needed time to change their billing systems.

The carrier moves have annoyed users, especially those who have recently renegotiated their carrier contracts. "What good is it to negotiate lower rates if the government is going to turn around and negate them with new surcharges?" fumed Woody Randall, director of telecommunications for Anchor Financial Services Corp., a South Carolina bank holding company.

In April, Randall began a new AT&T contract term with long-distance rates 35% to 40% lower than before. At nearly the same time, he said, AT&T and BellSouth Corp. imposed new line charges and made them retroactive to January, which is when the E-rate program began.

Randall, who is based in Columbia, S.C., said he expects Anchor to come out ahead, but added: "I know of several customers [for whom] the impact is greater than a million dollars a year. I don't believe [the FCC] fully understands the ramifications of what they did."

FCC Chairman William Kennard has maintained that long-distance carriers should not be passing along universal service charges because the access-rate reductions offset them.

He even went so far as to write letters to the CEOs of AT&T, MCI Communications Corp. and Sprint Corp. to tell them to stop blaming the government for the charges. But Randall, who is ICA chairman, said Kennard's view is naive. "You know [the carriers] are going to pass it on, come hell or high water," he said.