AT&T, Sprint to raise subsidy fees

By KALPANA SRINIVASAN

The Associated Press

WASHINGTON --- AT&T Corp. will increase by nearly 40 percent the fees that residential customers pay to subsidize phone service for the poor, people in expensive-to-serve areas and school Internet hookups.

AT&T, the nation's largest long-distance company, plans to raise the fee from 99 cents to $1.38.

The company last week had sought a steeper increase of almost 52 percent, which would have brought the charge up to $1.50. But the Federal Communications Commission said Friday that it wouldn't approve the larger increase and opened an investigation to determine whether AT&T's fees are justified.

On Monday, AT&T modified its proposal to raise the fee to $1.38 instead of the $1.50. The FCC decided not to challenge the new increase, but still plans to review the company's line item charges. The commission hopes to wrap up the investigation before the end of the year, a commission spokesman said.

AT&T says the fee change is needed to cover higher costs of providing the subsidized services. In July, a federal appeals court ruled that the FCC could only assess fees to subsidize cheaper Internet hookups for schools and libraries on interstate telecommunications services, not in-state services.

Because of that decision, the FCC altered its formula for how it collects money to support the Internet program, shifting a greater assessment onto the long-distance carriers. The companies typically pass these fees along to customers in various charges on their phone bills.

Also on Monday, Sprint increased its fees by 18 percent. Residential customers now will be assessed 8.4 percent, up from 7.1 percent, of their long-distance charges to go toward the fund.

MCI, the second largest long-distance carrier, said it wouldn't increase the fee it collects from residential customers.

AT&T also said it is looking into joining MCI and Sprint in charging residential customers a percentage of their long-distance calls for the fund, rather than a flat fee. The company expects to make the transition in the first quarter of 2000.

Consumer advocates criticized this round of fee increases, saying they unduly harm customers who don't make a lot of long-distance calls.

"This is an enormous increase in monthly costs for a majority of consumers who do very little calling," said Gene Kimmelman, co- director of Consumers Union's Washington office.

Long-distance consumers may see other increases in these fees in the months to come.

In late October, the FCC voted to boost the subsidies that help make phone service affordable for people in rural and expensive-to- serve areas. Companies still are determining how that decision, which takes effect at the beginning of next year, will impact the charges they assess their customers.

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