For years, the Federal Communications Commission has levied a “Universal Service Fee” on phone lines, a small tax on everyone’s bill, every month, to subsidize rural phone lines. The FCC recently decided that these fees would not apply to high speed internet plans such as DSL. BellSouth and Verizon saw an opportunity to apply a surcharge in the same amount as the USF, so customers’ overall bills would remain the same. The phone companies would just pocket the $1.20-$2.97 per month, rather than the FCC.
A USA Today story has more details, including the funny (phony? ha ha, I can’t help myself) explanations for the surcharges. Under pressure from the FCC BellSouth and Verizon backed down.
Instead of being greedy and obviously underhanded, the DSL providers could have raised prices by $0.50-$1.00, saying “we’ve wanted to raise prices slightly for a long time, but government taxes were influencing where customers lie on the elasticity curve.” Verizon has over 5,000,000 DSL subscribers. A $0.50/month increase would have given them about $30M/year in incremental profit.