DSL Prime: The $100 Million Price Increases

Does anyone in D.C. know or care? It's tasteless for Verizon's website to offer DSL for "As little as $14.95/month" when their least expensive package is $16.15 (requires Verizon phone, order on-line). Truth in advertising, anyone?

by Dave Burstein of DSL Prime and Future of TV [August 25, 2006]

$100 million price increase at Verizon DSL, Similar at BellSouth
Does anyone in D.C. know the meaning of cui bono?
"Verizon is essentially pocketing the money that consumers would have gotten back," Amy Schatz and Dionne Searcy write in the Wall Street Journal. Their Dow Jones colleague Siobhan Hughes adds Verizon "is imposing a new surcharge on high-speed internet service customers just as those customers were set to receive lower bills, thanks to a decision last year to deregulate the service."

Verizon raised prices about 8 percent, calling it a "Supplier Surcharge" and claiming "The surcharge helps offset costs we incur from our network supplier." I jumped to the conclusion that Verizon was putting on a surcharge for their supplier of internet transit (far higher than cost), as did several posters at DSL Reports, the source of my story.

Bobbi Henson of Verizon explained instead it was to pay the supplier of the loops for the new naked service—another division of Verizon. It's simply deceptive to hide a "surcharge" that should be part of the price.

The amount is also wildly exaggerated. The extra $5 for dry loop service should be enough to make it profitable, considering these are customers that otherwise would be completely lost and Verizon has so much excess copper. Direct costs of DSL to a large telco are $5 to $10 a month, so the $23 and $37 prices are profitable even with the cost of copper—if the accounting is honest.

The price increase should be especially offensive to Washington, where senior officials took political risks to eliminate the USF tax on DSL, expecting a consumer benefit. The effective income flow is from VoIP providers and their users (as well as wireless) to the bottom line of Verizon, one of the most profitable companies in the world. Bravo, FCC.

DSLR has the notice: "Verizon Online will cease charging an FUSF recovery fee, beginning August 14, 2006. The impact of the elimination of the FUSF fee is for DSL customers up to 768 Kbps, fee eliminated is $1.25.month; for DSL customers of up to 1.5 Mbps and 3Mbps services, the fee eliminated is $2.83/month. On balance your total bill will remain about the same as it has been or slightly lower."

It's tasteless for Verizon's website to offer DSL for "As little as $14.95/month" when their least expensive package is $16.15 (requires Verizon phone, order on-line). Truth in advertising, anyone?

Marguerite Reardon of CNET News advanced the story, discovering that BellSouth is also charging a $2.97 fee, despite the FCC dropping the USF charge for DSL. They call it a "regulatory cost recovery fee." I guess they need it; they spent $7 million just on official Washington lobbying companies last year. BellSouth and USTA are continuing strong support for Jack Abramoff's partners, a story worth investigating.

Satire from The Onion
Verizon Introduces New Charge-You-At-Whim Plan
August 21, 2006
(via DSLR)

 

Related article:
	[Aug. 23, 2006]	Editorial: Verizon's Fee Error is an ISP Opportunity

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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