Verizon Blames New Fees on 'Naked' Users

When a government-required DSL fee dies, Verizon finds a way to keep its price the same

August 22, 2006

2 Min Read
Verizon Blames New Fees on 'Naked' Users

When a government-required fee for DSL users expired, Verizon Communications Inc. (NYSE: VZ) got creative. Instead of raising its prices all around to keep subscriber fees the same, the carrier added a new DSL surcharge and found a way not to save its customers almost $3 a month.

Here’s what happened: Last year, the government changed the rules so DSL subscribers would no longer have to pay into the Universal Service Fund (USF). (See FCC Zaps Broadband Carriage Regs.) That would have saved Verizon’s lower-speed DSL customers $1.25 a month and its high-speed customers about $2.83 a month.

But just as the decreases were to take affect, Verizon introduced new fees -- in almost identical amounts -- called “supplier surcharges.”

“It’s a supplier fee we have to pay to the Verizon LEC,” Verizon spokesperson Bobbi Henson told Light Reading Tuesday afternoon.

Yes, Verizon pays Verizon for the right to use Verizon's networks.

Henson explains Verizon DSL and the Verizon LEC are “totally different entities,” and must be kept “at arms length” from one another. This, Henson says, is to avoid the appearance that the Verizon ISP is being given preferred treatment over the many other ISPs that also pay the Verizon LEC for carriage.

Henson says the "cause" of the new fee stems from the company's "naked DSL" users, which buy broadband but not phone service from Verizon. Because Verizon is not getting voice revenue from those DSL-only customers, yet it still must pay increasing carriage fees to the Verizon LEC, Verizon the DSL provider is making up the difference with the new fee.

Verizon could have passed the costs along only to its naked DSL customers, but it is charging all DSL customers instead.

When asked how many of these naked DSL customers Verizon actually has, Henson replied that her company doesn’t report that stat.

“If we had done this a year ago it would have been added to the bottom of the bill,” Henson says. “Nobody likes a new fee -- we don’t -- but this is a way for us to recover some of this cost.”

The new surcharge kicks in this Saturday.

— Mark Sullivan, Naked Reporter, Light Reading

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