Why raise prices when all you need is a fee?

But in the telecom business, there's an extra "Supplier FUSF Recovery Fee" on a DSL Internet bill from Verizon Communications Inc. Sprint Nextel Corp. charges a fee for "Federal Wireless Number Pooling and Portability" to Sprint cell phone users and a surcharge for "Federal Program Cost Recovery" to Nextel customers.

Thanks to all this conveniently confusing terminology, consumers are hard pressed to understand what the fees are about. Many mistakenly presume that their phone company is collecting taxes for the government rather than additional cash for its own bottom line.

To its credit, AT&T is being forthright about its new charge. "This fee will help AT&T recover increased connectivity costs associated with providing local service," a notice to customers states. "This fee is not a tax or charge required by the government."

Still, the rationale is twisted. The expense being "recovered" by AT&T does not involve some peripheral regulatory burden. It is central to the cost of providing phone service, not unlike the price of cotton for a clothing manufacturer or the cost of washing the dishes at a restaurant.

The new fee is being charged to 1.6 million subscribers who live outside the 13 states where AT&T owns most of the local phone network. Because it can't use its own phone lines to serve these customers, AT&T has to pay a monthly fee to other companies such as Verizon to use their local networks. Likewise, rivals such as MCI, now a unit of Verizon, pay a monthly fee to AT&T so they can sell local service in AT&T's 13-state region.

Until recently, local network owners were forced to discount these wholesale rates under regulations designed to fuel competition. AT&T was among the most outspoken opponents of this system, arguing that the discounted rate didn't cover its operating costs. Once the Federal Communications Commission backed away from dictating wholesale rates, AT&T and other local operators began charging more.

By imposing the new fee, it would appear AT&T wants it both ways: to charge rivals more for access to its network, but to pay the old discounted rates to use another company's property. Otherwise, it makes no sense to start treating the recent increase in the wholesale rates it pays Verizon and others as a separate expense from what it already pays those companies to serve the 1.6 million customers affected.

It doesn't make sense, that is, unless you'd like to continue to give the appearance that your prices are $4 less per month than you're actually charging.

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