Business phone service can be like a hotel room or a rent-a-car in a tourist town – a magnet for taxes and surcharges. The monthly cost of one business line can close to double when you add in all the applicable taxes and surcharges. The difference is, state and local governments aren’t taxing the heck out of phone service, they’re just requiring phone companies to contribute to certain funds and the phone companies are then passing that expense to their customers.
First off, most fees and surcharges are not mandated by Federal or state governments. Outside of Federal, state and local taxes, phone service providers, like AT&T, CenturyLink and Verizon, are not mandated to collect additional revenue from their customers. Phone service providers are required to contribute to certain funds but it is up to them whether or not they pass through the expense to their customers.
Surcharges fall into one of three categories: fees charged to help phone service providers pay their share of certain funds, fees charged for use of a phone company’s network and fees charged to fund the development of a particular service or functionality.
There are three main funds that phone service providers are required to contribute to: the Universal Service Fund and the funds to support Telecom Relay and 911 services.
The Universal Service Fund helps fund the cost of delivering phone service to rural areas and low-income families. The expense to deliver phone service to rural areas – including family homes, schools, healthcare centers and libraries – can be prohibitive. Meaning, the phone service providers might not be able to recover their initial investment with future service charges. The only way to assure that these services are provided is through government subsidies. The Federal government created the Universal Service Fund to support the delivery of phone services and requires contributions from phone service providers. In turn, phone companies implemented charges to recover this revenue from their customers.
Telecom Relay centers translate and transmit phone calls for the hearing and speech impaired. Phone service providers fund the program and pass on the expense to their customers.
Most everyone understands how valuable 911 emergency services are. Just like with Telecom Relay, phone service providers fund the program and pass on the expense to their customers.
It’s a huge investment for a phone company to build and maintain a phone service network. It doesn’t make sense to have more than one local phone company in an area. To assure competition in the industry, phone companies are required to allow competitors, like TW Telecom, Windstream and Integra, to resell portions of their networks. Phone companies are permitted to charge a fee for network access. This could be a per call charge for long distance or a monthly surcharge applied to phone lines and voice circuits.
This is when things get a little fishy. Many providers label this charge with the word “Federal” when it has nothing to do with the Federal government. Also, it’s a little strange when the phone companies that actually own the network charge their own customers an access fee. It’s equivalent to a gym charging a monthly membership fee and then an additional fee to use their exercise equipment.
Number Portability is an example of a fee that is charged to recover the cost of providing a feature or functionality. Number Portability allows customers to retain their phone numbers when they change service providers. The FCC mandated telephone number portability in 1996. There is a cost associated with managing the number portability process. Phone companies pass that expense onto their customers.
Taxes and surcharges date back to the days of Ma Bell. The Phone Company was a monopoly and needed to be regulated. AT&T was required to file their pricing with various regulatory agencies. Once a price was filed, it was difficult to change. It was easier for them to apply discount codes when they wanted to discount a service and a surcharge when they needed to recover an expense. What’s left is a confusing way to bill services.
If business people aren’t careful, they will match the price listed on a proposal with the price in their head for what they pay for their current services. Telecom sales reps hardly ever quote pricing that includes taxes and surcharges. That’s because it’s almost impossible to calculate and, unless the other sales reps bidding for the business include taxes and surcharges, their pricing will seem high.
It’s important for business people to analyze their current phone and internet service bills and strip out the taxes and surcharges and compare the residual cost to the pricing they receive from sales people vying for their business.
If you’re looking to bring down the cost of your business phone and internet services and want help with the process, contact CarrierBid today. Our professionals know how to decipher phone company bills and can help you maximize your savings.