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Phone Companies' $100 Billion Rip-off -- Where Is That Hidden $6 a Month Going in Our Phone Bills?

The phone companies are soaking all of us for a good chunk of money every month, and they're allowed to conceal it in the fine print of your monthly bill.

Next time you open your phone bill, check out the numerous anonymous charges listed on it.  In particular, note the one identified as the "FCC Line Charge" or the "Federal Subscriber Line Charge" (SLC).  Ask yourself two questions:  What is it for and why am I paying it? 

If you look at your bill, you'll likely have a hard time finding the SLC.  Each state's phone billing method is different and the SLC is often hidden in what is labeled the "taxes and surcharges" section or the "monthly service" section -- or completely missing but added to the bill.   

[An example of an SLC can be found at]  

The SLC is a monthly fee imposed on every residential and business wireline phone customer.  The FCC permits telephone companies to charge subscribers a fee which was originally intended to help them recoup part of the cost of having phone lines connect from the customer's home and office to a long distance service provider. It is currently capped at $6.50 a month for residential and businesses; multi-line businesses fees are up to $9.20 per month.  

At the end of 2010, the U.S. will have an estimated 160 million business and residential telephone lines.  Since 2000, it is estimated that the phone companies have pocketed about $100 billion or an estimated $750.00 per line through the SLC and have done little to benefit the customer. 

Few known that, no matter what it is called, the SLC is not a tax, it is not a surcharge, it is not part of local service and - whatever it name implies -- it does not go to fund the FCC or any government.  It is a direct subsidy to your telephone or wireline telecommunications provider; and, adding insult to injury, your pay taxes on this charge.   

The SLC was originally created nearly three decades ago through a massive campaign called "CALLS," i.e., the Coalition for Affordable Local and Long Distance Service.  CALLS is the model for what is known in the telecommunications world as "regulatory capture," the process by which the phone companies, astroturf shills and co-opted consumer groups have, in effect, taken control of the FCC and state Public Utilities Commissions (PUCs).  [The CALLS regulatory capture is the subject of an upcoming article.] 

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The FCC first imposed line charges on telephone customers in 1984 in the wake of the breakup of AT&T.  Then, AT&T was the largest company in the country serving as a regulated monopoly over 80 percent of U.S. telephone households, controlling 22 local phone companies as well as long distance service.  Faced with an antitrust challenge from a tiny upstart, MCI, and others, AT&T, through a civil suit settlement, was broken into seven regional phone companies, the "Baby Bells"; AT&T and MCI would be long distance phone companies. 

The SLC is part of a group "Access Fees" that the long distance telephone company pays the local telephone company for the use of or "access" to the parts of the local network necessary to complete a long distance call.  They were originally designed to subsidize long distance costs of the local networks and it was passed through to the customer as an add-on to their monthly phone bill. The initial charge, imposed in 1985, was $1.00 per month; by 1992, it had increased to $3.50 per month; in 2000, it was again raised and capped at capped at $6.50 in 2004.  

Access charges were fixed at a rate of return of 11.25 percent. However, based on company-supplied information, in 2007, AT&T, Verizon, Qwest and the other phone companies had profit margins more than three times great or 37.5 percent.  

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