Additional fees, some specific to Pa., lead to bloated cellphone bills
Megan Williams signed up for an AT&T cellphone plan advertised at $69 a month. But when it was time to pay, the total due was close to $90.
“I look at each bill, and there's this tax and this tax and this tax,” said Williams of Mt. Washington, who works in the credit and loan industry.
Allegheny County cellphone users pay about 19.95 percent of their bills in federal, state and local taxes each month, the eighth-highest combined wireless tax rate in a country where the Pew Research Center reports nine in 10 adults own cellphones.
“It's a service that we need,” said Juan Jones, 50, of Penn Hills, who has had plans with AT&T, Sprint and Cricket. “There's no way around it.”
Most of the taxes and fees are specific to Pennsylvania, but nearly 6 percent went toward the federal Universal Service Fund, which netted $8.7 billion in 2012 to increase wireless access in rural areas, schools and libraries.
The Federal Communications Commission recalculates what it collects from carriers to feed the fund quarterly, a figure consistently on the rise and passed on to consumers through a “universal service” charge. The rate for the first quarter of 2014 is scheduled to be 16.4 percent, up from 5.7 percent in 2000.
The amount could increase under a proposal by President Obama to expand high-speed Internet to 99 percent of schools, through the E-Rate subsidy program, one of four USF programs and the government's largest educational technology fund with a cap of $2.38 billion.
Whether that increase happens depends on the FCC and lawmakers agreeing to expand the program's boundaries, potentially charging carriers and consumers more.
“More and more schools and libraries want to provide reduced-rate Internet,” said Scott Mackey, a Vermont-based economist who researches wireless taxes for carriers. “There's really no need for them to restrain spending when they can just keep raising the rate to cover all the costs.”
Mackey's research surmised that the FCC's contribution factor totaled a USF charge on consumers of nearly 6 percent in 2012, up from 2 percent in 2003.
Obama's proposal could increase cellphone bills by an estimated $5 a year, an amount a White House spokesman said Obama considers a “no-brainer.” According to figures from the White House, less than 20 percent of schools say they have Internet connections that meet their needs. Expanding E-Rate could mean raising its cap, or shuffling money from other USF subsidies for rural broadband, rural health care facilities and telephone service for low-income populations.
Some critics caution that E-Rate subsidies aren't always used to connect classrooms with high-speed access and instead are spent on outdated technologies.
Republicans, including Sen. John Thune of South Dakota, a member of the Senate's Committee on Commerce, Science and Transportation, have said the government should make efficient use of existing revenue and “stay within their means in this difficult fiscal and economic environment.”
Jim Kail, president and CEO of Laurel Highlands Total Communications, said USF subsidies are critical to ensuring rural customers have the same level of service as city dwellers. The company provides telecom services for a 175-square-mile swath of rural Western Pennsylvania.
Connecting rural areas to broadband Internet is more expensive than doing so in urban regions, Kail said, and quarterly subsidies from USF are used to offset those costs.
“You've got a lot of ground to cover, and you're picking up hardly any customers,” Kail said. “That's why if you had to build those facilities and people had to pay for what it actually cost, they'd be paying an astronomical bill.”
From 1998 to 2012, the USF disbursed $90.5 billion nationwide, $1.9 billion of which went to projects in Pennsylvania, according to federal records. The state received $194 million in USF money in 2012, including $65 million toward schools and libraries.
Scott Bergmann, vice president of regulatory affairs for CTIA-The Wireless Association, said the industry is wrestling with an equitable way to address taxes and fees on service plans. Wireless consumers are subject to “unduly high levels of taxation,” he said, at a national average of 16 percent, compared with the average of 7 percent sales tax on other goods.
Bergmann said that although the FCC has put more of an emphasis on using USF funds for broadband during the past two years, the industry is pushing for more.
“If you're going to be making an investment in communications technology, it ought to be to where the world is heading,” he said. “We think consumers in rural areas are going to want to have broadband, and they're going to want to have mobile broadband.”
Melissa Daniels is a Trib Total Media staff writer. Reach her at 412-380-8511.