THE BLOG
09/24/2012 05:08 pm ET Updated Nov 24, 2012

Communications Breakdown -- Your Phone, Wireless, Broadband, Internet and Cable Bills

Written with David Rosen

As I stare at the Republican and Democratic party platforms, (which touch on communications) I wonder -- don't these people have a clue? Haven't they bothered to actually ask their constituents what they think of their ever-increasing phone, wireless, broadband, Internet, and cable bills? There's a communications breakdown here -- in multiple ways.

This article is in two parts: Part 1 looks at the price of phone, cable, broadband, Internet and wireless services. Part 2 outlines what needs to be done to fix communications in America.

Insult to Injury -- A New Charge on Your Bill for No Reason.

When was the last time you really checked your wireline phone bill? If you still have a phone line, you get a bill every month, curse the ever-increasing fees and pay it begrudgingly.

Take a minute and pull out your wireline phone bill and look way down toward the bottom to the Taxes & Surcharges section. In most states there is a new fee sometimes called the "Access Recovery Charge" (ARC). (SEE BILL) Residential customers in New York City are being charged $.49 a month per line and in Pennsylvania it's $.39; business customers in New Jersey are paying $.85 a line extra. This is not counting the other taxes and fees and surcharges applied to this charge, like the Universal Service Fund, (USF) that adds at least an additional 15 percent to this one charge, even though you'd be hard pressed to figure that out by the phone bills' presentation.

And worse, this is just the start. ARC is going up, probably to $2.00-$3.00 a month and this is just the first of a series of new fees, taxes/surcharges/rate increases that are going to be added to your bill thanks to National Broadband Plan (NBP), which we wrote about back in 2010. It was created to fool subscribers into thinking its another tax and, in this way, ARC is similar to another dubious charge like the FCC Subscriber Line Charge that is capped at $6.50 a month per line and has been on the phone bill since the break up of AT&T in 1984. Neither fee is really a tax or surcharge but rather direct subsidies to phone companies. In fact, this fee is a ruse as the FCC thought it wouldn't be a good idea to increase the FCC Line Charge to $10.00 --- which has been the plan for a decade -- someone might notice that. To top it off, both the ARC and FCC Line Charge end up getting taxed almost 35 percent in New York City, counting USF, state, local, and other surcharges.

But what is really galling is that the FCC claims it is concerned about low-income families that can't afford broadband or even phone service -- yet is raising rates and taxes in multiple ways. The question that remains unasked: How does adding new fees to the existing bills help poor and minority peoples gain access to broadband?

America Economic Harms -- Your Bills vs. the Rest of the World

America's broadband, Internet phone wireless and cable companies are gouging us, not just with added fees, but on every aspect of your communications service. The chart below draws upon findings from the extensive New America Foundation report, the Cost of Connectivity, that compares the performance and fees subscribers in other countries pay for broadband, phone etc. For example, in South Korea subscribers get two-directional broadband at 50 Mbps with phone, Internet and TV for $32.74 per month. What do you pay?

If America had these prices, maybe "low income" families might be able to afford wireline broadband services. Unfortunately, the phone and cable companies have been on a campaign to hike rates, not to lower them.

Local Phone Service -- Harvesting Customers

The next exhibit details the rate increases for AT&T's local service customers in California from 2004 through 2012. Prices increased 100 to 163 percent, with some services, like unlisted numbers, are up 346 percent.

These rate comparisons do not include the taxes, fees and surcharges that can add from 20 to 50 percent more, depending on services, to the bill.

California isn't unique. As detailed in the next chart, since there's no serious competition, prices in New York City have gone up nearly six fold (598 percent) for the same "basic service" since 1980.

Today, the average local bill for "basic service" New York City can be over $50.00, especially if you have calling features or make calls. The only 'cheaper' service is to bundle other Verizon products. In 1980 it was $7.63 (not counting the rotary phone). This exhibit is based on the author's Aunt Ethel's phone bills and other Brooklyn, New York bills, not FCC or other flawed data. This chart was updated in August, 2012. (The FCC Line Charge includes ARC, and note, many of these charges can vary by quarter or even month.)

But what is most disturbing are the price increases since 2004. For example, basic local service went up 84 percent. Inside wire maintenance, a favorite of seniors, is now $7.99 a month, up 132 percent since 2004 (and a staggering 544 percent since 1980 when it was part of the bill and cost $1.24 per month). (SEE FULL Exhibit)

One would think that if the FCC truly cared about low-income families they would have investigated the rate increases going on in every state -- much less adding new fees to other rate increases.

Cable and Triple Play Pricing

And then we have cable bills. Let's use the current Time Warner cable pricing for New York City.

Many of you have probably seen the 'gim-me' advertising; the price that they advertise for the basic triple play package, which is a promotional price of $89.99 or $99.99. However, the company doesn't bother to explain that the price of this package doesn't include basics, like the cable box or cable modem, and certainly doesn't give you the exact price it will cost after the one year 'gim-me' is over.

Standard phone and Internet is almost $90.00 per month (and Time Warner doesn't offer phone service as a standalone service; at least it is not listed in their pricing). The basic Triple Play goes from $136.23 to $156.25, and that doesn't include taxes, fees, surcharges; the lower price doesn't include the cable modem or even the TV Set-top box.

And talk about bill-shock, the $89.99 price goes to $136.25; the customer pays an additional $46 a month increase -- adding $555.00 a year not counting taxes, fees, surcharges and the other parts of service.

The "Triple Play" is prohibitive to low-income families and, increasingly, middle-income families as well. It averages $1,755 per year -- not counting taxes, fees and surcharges.

And the taxes fees, and surcharges? Here's a current Time Warner $99.95 Triple Play bill, from New York City. There is a potpourri of made up charges, like the "regulatory recovery fee," or paying the companies' taxes, such as the "telecom excise tax." Worse, the cable companies brag about how much they pay in franchise fees -- well, they just make you pay it as a "pass-through" -- to you.

Talk about problematic, Verizon and AT&T announced that they are abandoning the Public Switched Telephone Networks, closing down the PSTN and Verizon has cut a deal to sell cable services with their wireless services -- where's the competition to lower cable rates? Where's any outcry by the FCC to protect customers from these massive, harmful rates?

Instead, this FCC agreed to let Verizon buy the cable companies' wireless spectrum and co-market the cable companies' cable service.

Cell Phone Service

Finally, we come to mobile phone service and the "smartphone." According to a study in Computerworld, "the devil's in the details."

Verizon's new "Share Everything Plans," like comparable plans from AT&T, are pitched to families and are for the single user. Here are its findings:

"How much will this cost? Verizon will charge a monthly line access charge per device, ranging from $10 for a tablet to $40 for a smartphone. Basic cell phones will be $30 a month, while Wi-Fi access devices, netbooks and notebooks will be $20 a month.

"On top of that, data service will be charged at a rate starting at $50 for 1 GB per month, which can be shared across 10 devices. The rates go up as follows: 2GB for $60; 4 GB for $70; 6 GB for $80; 8 GB for $90 and 10 GB for $100. There is an overage charge of $15 for each 1 GB of data service."

So, if you have a cell phone and you want to do what the phone and tech companies tell you to do, which is to use for voice, web searches, watch videos, play games and other "app" functions, you'll be paying at least $50 plus $30 or $80 for wireless phone service.

In short, the companies figured out how to charge customers for two wireless packages -- voice and text, and data, a doubling down of their fees.

In fact, a new study claims that over 50 percent of America is paying over $100.00 a month -- and almost ¼ of households pay more for wireless than for groceries.

There are cell phone deals, and it varies based on the device you are using, but phones are usually tied to a specific carrier and there are contracts that are 1-2 years. Even the 'all you can eat' plans have fine print that can lower the speed after a certain point to where you can't use the features without some pain.

Meanwhile Verizon, because it is 'closing' the wires, has decided to force customers onto wireless services, including "Cantenna," a wireless broadband service that if you were to use it for viewing cable would cost $790.00 a month. It can't compete with Verizon's FiOS or even DSL in price -- so, it's simply not a viable option, especially for low-income families (SEE CHART)

Again, where's any complaint by the FCC or the Republican or Democratic parties?

If the FCC and politicians really serve the needs of low-income families, it should first audit the phone, wireless and cable companies bills -- instead of giving lip service to these companies, and have them explain why other countries can do it better and cheaper.

We'll come back to this in Part 2: The Telecom Riot Act of 2012.