Verizon Communications' and BellSouth's DSL customers won't see a reduction in their broadband bills, even though a special fee that had been tacked on to bills to pay for a federal program has been eliminated.
Last year, the Federal Communications Commission changed how it classifies DSL (digital subscriber line) services, thus eliminating a fee that had been charged to all DSL subscribers to help pay into the Universal Service Fund. USF is a federal program that helps subsidize rural telephone service and provide Internet access to schools and libraries.
Verizon DSL customers subscribing to its 768Kbps (kilobits per second) service paid about $1.25 into USF every month, and customers of its 3Mbps (megabits per second) service paid about $2.83 per month, the company said. BellSouth customers were charged $2.97 per month for USF, according to the BellSouth Web site.
But now that the fee has been eliminated, as of Aug. 14, neither Verizon nor BellSouth plan to pass the savings on to consumers. Instead, Verizon has added a new "supplier surcharge" starting Aug. 26 that's $1.20 per month for the slower service and $2.70 for the faster service. BellSouth said it will keep its $2.97 fee, which it continues to call a "regulatory cost recovery fee."
Verizon said it is charging its new supplier surcharge to offset the cost of offering its standalone, or "naked," DSL service, which allows customers to subscribe to DSL without subscribing to Verizon's local phone service.
The company said that because it's losing revenue from those voice subscriptions, it must make up the difference in other ways. But instead of simply recovering those costs in the price of the actual service, Verizon has chosen to spread the cost of naked DSL across its entire DSL customer base.
Customers subscribing to standalone DSL pay $5 more per month for their broadband service than customers who buy DSL bundled with a voice service.
"We didn't think the standalone DSL service would be competitively priced if we put all of the cost on the service," said Bobbi Henson, a Verizon spokeswoman. "So we spread the cost across the entire base of our DSL customers. Doing this as another fee was coming off the bill seemed like good timing, since it will have little impact on what customers are actually paying per month."
Meanwhile, AT&T and Qwest Communications International, which also offer standalone DSL, are not adding new fees in lieu of the USF fee. AT&T charges about $10 more per month for the standalone DSL service than it does for its bundled DSL services.
BellSouth had a different explanation for keeping its $2.97 fee. It explained in a statement sent to CNET News.com via e-mail that the charge is "to offset costs incurred in complying with regulatory obligations and other expenses. The fee also recovers costs associated with additional systems necessitated by federal regulation, as well as costs associated with monitoring, participating in and complying with regulatory proceedings, and other network and servicing requirements."
But consumer groups don't buy either explanation.
"Verizon and BellSouth are using the situation to pocket more revenue from every customer by labeling this fee, which customers are already used to paying, something else," said Jeannine Kenney, senior policy analyst for Consumers Union. "BellSouth is clearly misrepresenting what the fee will pay for. I mean how can this be a 'regulatory cost recovery' when DSL is no longer regulated?"
Mark Cooper, director of research at the Consumer Federation of America, believes that Congress should take the phone companies' recent actions as a warning of what could happen if lawmakers do not impose Net Neutrality regulation, a hot topic being debated in Washington. Without Net Neutrality legislation, network owners, such as the phone companies, could charge third parties, like Vonage or Google, extra fees for offering services over the phone companies' broadband networks. Phone companies have argued that if they could provide Internet companies premium services for a fee, broadband customers could ultimately benefit through lower-priced and more innovative services.
Wednesday, August 23, 2006
Verizon Communications' and BellSouth's DSL customers won't see a reduction in their broadband bills, even though a special fee that had been tacked on to bills to pay for a federal program has been eliminated.
Last year, the Federal Communications Commission changed how it classifies DSL (digital subscriber line) services, thus eliminating a fee that had been charged to all DSL subscribers to help pay into the Universal Service Fund. USF is a federal program that helps subsidize rural telephone service and provide Internet access to schools and libraries.
Verizon DSL customers subscribing to its 768Kbps (kilobits per second) service paid about $1.25 into USF every month, and customers of its 3Mbps (megabits per second) service paid about $2.83 per month, the company said. BellSouth customers were charged $2.97 per month for USF, according to the BellSouth Web site.
But now that the fee has been eliminated, as of Aug. 14, neither Verizon nor BellSouth plan to pass the savings on to consumers. Instead, Verizon has added a new "supplier surcharge" starting Aug. 26 that's $1.20 per month for the slower service and $2.70 for the faster service. BellSouth said it will keep its $2.97 fee, which it continues to call a "regulatory cost recovery fee."
Verizon said it is charging its new supplier surcharge to offset the cost of offering its standalone, or "naked," DSL service, which allows customers to subscribe to DSL without subscribing to Verizon's local phone service.
The company said that because it's losing revenue from those voice subscriptions, it must make up the difference in other ways. But instead of simply recovering those costs in the price of the actual service, Verizon has chosen to spread the cost of naked DSL across its entire DSL customer base.
Customers subscribing to standalone DSL pay $5 more per month for their broadband service than customers who buy DSL bundled with a voice service.
"We didn't think the standalone DSL service would be competitively priced if we put all of the cost on the service," said Bobbi Henson, a Verizon spokeswoman. "So we spread the cost across the entire base of our DSL customers. Doing this as another fee was coming off the bill seemed like good timing, since it will have little impact on what customers are actually paying per month."
Meanwhile, AT&T and Qwest Communications International, which also offer standalone DSL, are not adding new fees in lieu of the USF fee. AT&T charges about $10 more per month for the standalone DSL service than it does for its bundled DSL services.
BellSouth had a different explanation for keeping its $2.97 fee. It explained in a statement sent to CNET News.com via e-mail that the charge is "to offset costs incurred in complying with regulatory obligations and other expenses. The fee also recovers costs associated with additional systems necessitated by federal regulation, as well as costs associated with monitoring, participating in and complying with regulatory proceedings, and other network and servicing requirements."
But consumer groups don't buy either explanation.
"Verizon and BellSouth are using the situation to pocket more revenue from every customer by labeling this fee, which customers are already used to paying, something else," said Jeannine Kenney, senior policy analyst for Consumers Union. "BellSouth is clearly misrepresenting what the fee will pay for. I mean how can this be a 'regulatory cost recovery' when DSL is no longer regulated?"
Mark Cooper, director of research at the Consumer Federation of America, believes that Congress should take the phone companies' recent actions as a warning of what could happen if lawmakers do not impose Net Neutrality regulation, a hot topic being debated in Washington. Without Net Neutrality legislation, network owners, such as the phone companies, could charge third parties, like Vonage or Google, extra fees for offering services over the phone companies' broadband networks. Phone companies have argued that if they could provide Internet companies premium services for a fee, broadband customers could ultimately benefit through lower-priced and more innovative services.
Last year, the Federal Communications Commission changed how it classifies DSL (digital subscriber line) services, thus eliminating a fee that had been charged to all DSL subscribers to help pay into the Universal Service Fund. USF is a federal program that helps subsidize rural telephone service and provide Internet access to schools and libraries.
Verizon DSL customers subscribing to its 768Kbps (kilobits per second) service paid about $1.25 into USF every month, and customers of its 3Mbps (megabits per second) service paid about $2.83 per month, the company said. BellSouth customers were charged $2.97 per month for USF, according to the BellSouth Web site.
But now that the fee has been eliminated, as of Aug. 14, neither Verizon nor BellSouth plan to pass the savings on to consumers. Instead, Verizon has added a new "supplier surcharge" starting Aug. 26 that's $1.20 per month for the slower service and $2.70 for the faster service. BellSouth said it will keep its $2.97 fee, which it continues to call a "regulatory cost recovery fee."
Verizon said it is charging its new supplier surcharge to offset the cost of offering its standalone, or "naked," DSL service, which allows customers to subscribe to DSL without subscribing to Verizon's local phone service.
The company said that because it's losing revenue from those voice subscriptions, it must make up the difference in other ways. But instead of simply recovering those costs in the price of the actual service, Verizon has chosen to spread the cost of naked DSL across its entire DSL customer base.
Customers subscribing to standalone DSL pay $5 more per month for their broadband service than customers who buy DSL bundled with a voice service.
"We didn't think the standalone DSL service would be competitively priced if we put all of the cost on the service," said Bobbi Henson, a Verizon spokeswoman. "So we spread the cost across the entire base of our DSL customers. Doing this as another fee was coming off the bill seemed like good timing, since it will have little impact on what customers are actually paying per month."
Meanwhile, AT&T and Qwest Communications International, which also offer standalone DSL, are not adding new fees in lieu of the USF fee. AT&T charges about $10 more per month for the standalone DSL service than it does for its bundled DSL services.
BellSouth had a different explanation for keeping its $2.97 fee. It explained in a statement sent to CNET News.com via e-mail that the charge is "to offset costs incurred in complying with regulatory obligations and other expenses. The fee also recovers costs associated with additional systems necessitated by federal regulation, as well as costs associated with monitoring, participating in and complying with regulatory proceedings, and other network and servicing requirements."
But consumer groups don't buy either explanation.
"Verizon and BellSouth are using the situation to pocket more revenue from every customer by labeling this fee, which customers are already used to paying, something else," said Jeannine Kenney, senior policy analyst for Consumers Union. "BellSouth is clearly misrepresenting what the fee will pay for. I mean how can this be a 'regulatory cost recovery' when DSL is no longer regulated?"
Mark Cooper, director of research at the Consumer Federation of America, believes that Congress should take the phone companies' recent actions as a warning of what could happen if lawmakers do not impose Net Neutrality regulation, a hot topic being debated in Washington. Without Net Neutrality legislation, network owners, such as the phone companies, could charge third parties, like Vonage or Google, extra fees for offering services over the phone companies' broadband networks. Phone companies have argued that if they could provide Internet companies premium services for a fee, broadband customers could ultimately benefit through lower-priced and more innovative services.
Tuesday, August 08, 2006
Sprint Extends Cable Deal
Sprint Nextel said Thursday it has expanded its agreement with Time Warner Cable, the second-largest cable operator in the United States, to offer voice services to the cable firm’s customers.
The new five-year agreement adds another 14 service areas in which Time Warner will use Sprint’s wireline network to offer VoIP services to the cable company’s voice subscribers.
Sprint currently connects more than 1.2 million cable VoIP customers, and the Reston, Virginia-based carrier is expected to double that number to 2.5 million in a year.
Despite the deal, shares of Sprint Nextel fell $2.77 to $17.36 in recent trading, while Time Warner shares dropped $0.17 to $16.50.
Time Warner, the New York-based parent of Time Warner Cable, announced on Wednesday that it added more than 234,000 new VoIP subscribers in the second quarter, bringing its total to 1.6 million.
That places Time Warner Cable in the third spot among cable companies offering voice services.
Cox Communications, which has more than 1.8 million voice customers, continues to lead, barely, followed by Comcast in second place with 1.7 million.
Handing off Traffic
The deal between Sprint and Time Warner Cable will involve the handoff of long-distance traffic from Time Warner’s network to the Sprint network.
Sprint will also provide Emergency 911 services to Time Warner Cable’s voice customers.
Until it sold off much of its local phone business, Sprint used to be one of the largest wireline telephone companies in the U.S.
The company, which operates the third-largest wireless network in the U.S. after Cingular and Verizon Wireless, has built an extensive business around the cable industry.
Last November Sprint teamed with cable leaders Comcast, Time Warner Cable, Cox Communications, and Advanced/Newhouse in a joint venture that will allow the cable firms to resell Sprint’s wireless services.
Sprint invested $100 million in the deal while the cable operators together added another $100 million.
The $200-million investment is going toward the development of integrated voice, data, video, and wireless services, and marketing efforts.
Phone Company Incursions
Cable companies are facing incursions into their pay-TV distribution businesses by phone companies. AT&T and Verizon Communications are now offering all four services in much of their coverage areas.
Both AT&T and Verizon own wireless carriers and they resell satellite TV services as part of their voice, data, video, and wireless packages.
But both phone companies are also upgrading their networks to offer IPTV services. Verizon has already begun rolling out its IPTV services in a number of markets across the country.
Offering multiservice packages has proven to be quite popular among customers. Surveys have shown that customers favor the discounts inherent in these packages, and the single-bill option.
By reselling Sprint’s wireless services, the cable operators can match the phone companies in their ability to offer the full complement of four services.
“Our vision for the cable initiative, whether it’s wireline or wireless, is to deliver compelling, integrated services that provide unique value to customers,” said Gary Forsee, Sprint Nextel’s chief executive.
“This expanded agreement with Time Warner Cable is illustrative of our company’s growing importance in the cable sector,” he concluded.
The new five-year agreement adds another 14 service areas in which Time Warner will use Sprint’s wireline network to offer VoIP services to the cable company’s voice subscribers.
Sprint currently connects more than 1.2 million cable VoIP customers, and the Reston, Virginia-based carrier is expected to double that number to 2.5 million in a year.
Despite the deal, shares of Sprint Nextel fell $2.77 to $17.36 in recent trading, while Time Warner shares dropped $0.17 to $16.50.
Time Warner, the New York-based parent of Time Warner Cable, announced on Wednesday that it added more than 234,000 new VoIP subscribers in the second quarter, bringing its total to 1.6 million.
That places Time Warner Cable in the third spot among cable companies offering voice services.
Cox Communications, which has more than 1.8 million voice customers, continues to lead, barely, followed by Comcast in second place with 1.7 million.
Handing off Traffic
The deal between Sprint and Time Warner Cable will involve the handoff of long-distance traffic from Time Warner’s network to the Sprint network.
Sprint will also provide Emergency 911 services to Time Warner Cable’s voice customers.
Until it sold off much of its local phone business, Sprint used to be one of the largest wireline telephone companies in the U.S.
The company, which operates the third-largest wireless network in the U.S. after Cingular and Verizon Wireless, has built an extensive business around the cable industry.
Last November Sprint teamed with cable leaders Comcast, Time Warner Cable, Cox Communications, and Advanced/Newhouse in a joint venture that will allow the cable firms to resell Sprint’s wireless services.
Sprint invested $100 million in the deal while the cable operators together added another $100 million.
The $200-million investment is going toward the development of integrated voice, data, video, and wireless services, and marketing efforts.
Phone Company Incursions
Cable companies are facing incursions into their pay-TV distribution businesses by phone companies. AT&T and Verizon Communications are now offering all four services in much of their coverage areas.
Both AT&T and Verizon own wireless carriers and they resell satellite TV services as part of their voice, data, video, and wireless packages.
But both phone companies are also upgrading their networks to offer IPTV services. Verizon has already begun rolling out its IPTV services in a number of markets across the country.
Offering multiservice packages has proven to be quite popular among customers. Surveys have shown that customers favor the discounts inherent in these packages, and the single-bill option.
By reselling Sprint’s wireless services, the cable operators can match the phone companies in their ability to offer the full complement of four services.
“Our vision for the cable initiative, whether it’s wireline or wireless, is to deliver compelling, integrated services that provide unique value to customers,” said Gary Forsee, Sprint Nextel’s chief executive.
“This expanded agreement with Time Warner Cable is illustrative of our company’s growing importance in the cable sector,” he concluded.
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