WARNING TO MASSACHUSETTS CONSUMERS:
BIG PHONE COMPANIES PUSHING MORE THAN $150 MILLION IN
HIGHER LONG-DISTANCE TAXES FOR STATE

Here They Go Again!  Some of Same Phone Companies That Tried to Hustle Consumers With “Mystery Fee” on DSL Broadband Up to Their Old Tricks Again With USF Tax.

CAMBRIDGE, MA///March 8, 2007///A warning today for consumers in Massachusetts:  You stand to be among the biggest losers in the United States under a widely criticized plan to shift the burden of who pays the federal “Universal Service Fund” (USF) long-distance phone bill tax.  A proposal backed by America’s biggest telephone companies could saddle Bay State consumers with up to a $158 million annual tax hike, according to the Massachusetts Consumers’ Coalition and the Keep USF Fair (KUSFF) Coalition.

Under the major push now being mounted in Washington by BellSouth, Verizon, AT&T, USTelecom, IDT Corporation and others, Massachusetts consumers would suffer as the result of a shift of the USF from a consumer-friendly, pay-for-what-you-use tax on long-distance to a regressive per-connection charge that would be imposed on every phone line whether or not consumers made any long-distance calls at all.   This fall, Verizon and BellSouth were forced by pressure from consumer groups, the Federal Communications Commission (FCC) and others to back off plans to create a new “mystery fee” to replace most of the USF tax recently eliminated for DSL broadband connections.

According to research from the Keep USF Fair Coalition, senior, Latino, low-income and rural consumers in Massachusetts and elsewhere would pay the most in additional USF taxes under the controversial per-connection approach.  For Massachusetts, the change in USF to a per-connection tax would mean an increase in taxes of $158 million per year at the rate of $1.50 per connection.  Massachusetts consumers already pay more than $108 million in USF taxes.  For full state-by-state data on the phone companies’ proposed USF tax hike, see the chart here.
     

Massachusetts Consumers’ Coalition Chairman Paul Schlaver said:  “We support the concept of the Universal Service Fund, but that certainly does not mean that we want to see the funding formula shift radically in a way that disadvantages Massachusetts seniors, rural residents, Latinos, the poor and others.   That is obviously a ‘wrong number’ for consumers in Massachusetts, particularly when the burden would shift so sharply from high-income/high-volume long-distance callers to low-income/low-volume long-distance users.  Our message to Washington is clear:  Hang up now on this anti-consumer plan from the phone industry.”

Maureen Thompson, executive director, Keep Universal Service Fund Fair Coalition said: “We support the goals of the USF, but today many Americans already are paying too much to support the fund.  The plan of big telephone companies for the Universal Service Fund is bad news for consumers because it would significantly worsen the inequities in terms of who foots the bill for USF and who reaps the benefits of the Fund. The data for Massachusetts points out how no one in the industry has really taken the time to explore the implications for consumers of changing the USF funding scheme. It is increasingly obvious that they have not been forthcoming with this information because it paints such a damning portrait of switching to ‘numbers’ or line-based funding methodology.  In addition, the FCC should explore other ways to improve efficiencies to make sure that companies are providing quality services at the lowest -- not the highest -- cost.” 

On November 17, 2005, the Keep USF Fair Coalition released a report entitled “Losing Numbers: How America’s Most Vulnerable Consumers Could Suffer Under Universal Service Fund (USF) ‘Reform.’” That report concluded: “The currently consumer-friendly ‘pay for what you use’ approach to funding the Universal Service Fund would be replaced under the … (connections-based) plan with a regressive, flat-fee arrangement of $1-$2 or more per phone line – regardless of whether or not consumers even make a long-distance call. For a consumer who now dials only a handful of long-distance calls per year and pays correspondingly low USF taxes, the effective tax rate under the … (connections-base) plan would soar by more than 1,000 percent on an annual basis! With low-income and elderly consumers already socked with high gas prices, higher home energy costs and the prospect of soaring summer cooling bills and continued inflation in medical prescriptions, the wide range of diverse groups in the Keep USF Fair Coalition are opposing the (industry-backed) ‘numbers’ based plan. These groups caution against balancing USF finances on the backs of the very consumers who use long-distance the least and are unable to afford phone bills that would rise under ‘numbers’ simply in order to subsidize high-income/high-volume callers.”

On February 9, 2006, the Keep USF Fair Coalition reported:  “Millions of Latino and Hispanic long-distance phone customers in the United States would be socked with higher federal fees on their phone bills under a widely criticized proposal … to force phone users who make few long-distance calls or use pre-paid wireless phones to either start paying or pay more into the Universal Service Fund … Other than older Americans, Latinos and Hispanics account for the largest number of Americans who would end up paying more under the (industry) plan for USF … Three to five million Hispanic and Latino households in the United States could be included among the 43 million Americans paying more in federal phone fees …”