August 25, 2006

FCC Questions Verizon, BellSouth Internet Fee

WASHINGTON (Reuters) - Verizon Communications and BellSouth Corp. will be asked by U.S. regulators to explain a new fee on high-speed Internet customers that replaces a government surcharge that ended this month, a source familiar with the matter said on Friday.

Verizon and BellSouth, the No. 2 and No. 3 telephone carriers respectively, will be sent "letters of inquiry" to see whether the new charge complies with Federal Communications Commission rules that require "truth in billing," the source said on the condition of anonymity.

The companies no longer have to pay a part of their high-speed Internet revenue into the Universal Service Fund (USF), which subsidizes communications services to schools, lower-income households and rural areas, as of August 14.

They had passed that USF cost onto their customers. An FCC decision a year ago phased out the USF fee for the telephone companies' high-speed Internet service known as broadband.

However, Verizon said it would impose a new monthly surcharge of $1.20 or $2.70, beginning August 26, which it said was to help subsidize connection costs. BellSouth said it has continued charging $2.97 a month, equivalent to the old USF fee.

Verizon had charged digital subscriber line (DSL) Internet customers a monthly fee of $1.25 or $2.83 to cover the USF contribution, depending on connection speeds.

AT&T Inc., the largest U.S. telephone company, was not expected to receive a letter from the FCC, the source said. Letters of inquiry are typically the first step in an agency investigation into whether enforcement action is warranted.

A spokeswoman for the FCC declined to comment. Verizon spokesman Brian Blevins declined to comment while a BellSouth spokesman had no immediate comment.

AT&T has agreed to buy BellSouth and needs the FCC to approve the transaction.