The Great E-Rate Mystery- continued

Diminishing returns
Since the e-rate was instituted, the FCC has twice cut the amount of money being collected from carriers. During its first six months the program collected only $625 million, much less than what was allowed under the $2.25 billion cap. Last June libraries and schools requested $2.02 billion more than the fund allowed. The FCC collected only $1.3 billion for the following 12 months of e-rate funding.

This year, the FCC is distributing the maximum e-rate funds allowed by law. But the universal service fees carriers paid into the fund are actually based on 1998 long-distance reporting.

The lagging schedule of payment means that new long-distance carriers get a bye-ball during their first year in service, like Bell Atlantic long-distance service in New York, while customers continue to pay their bills each month.

Conversely, if carriers experience a downtrend in long distance services, like AT&T reported in the first quarter of 2000, their customers actually end up paying on 1999 performance.

Simply translated, this means that fewer AT&T long-distance customers pay an increased portion of the universal service pie, while Bell Atlantic collects e-rate funds for a year, but does not pay into the fund until the following year.

As a result of the e-rate and universal service fund jumble, AT&T changed they way they collect funds from customers in this past April. Originally, the federal charge was $1.38 per customer, regardless of how often they used long-distance services. Now, universal service funds are collected at a rate of 8.6 percent surcharge on long distance services. Because the plan is proportional to use, AT&T says it's a fairer system of taxation.

For the average home consumer with $20 in long distance charges each month, $1.72 would be allocated to universal service fees. It's impossible to determine how much of the $1.72 goes toward e-rate funding because the federal Internet subsidy is not broken out in an individual line item. So we know $2.25 billion is being dished out, but we have no idea how much was actually collected by the carriers.

Clean bill
If Bell Atlantic gets its way with the FCC, consumers could see how much they pay into the e-rate fund as soon as July. Susan Butta at Bell Atlantic said the company does not currently breakout e-rate charges from the rest of its universal service fees. But Bell Atlantic hopes to change that so consumers can see what the e-rate fees cost them on their monthly phone soon.

The East Coast carrier has a comprehensive plan before the FCC that would allow it to post e-rate charges as a separate line item on their phone bills.

"We do not have an average amount for the e-rate split out from the rest of universal service," Butta said. "However, we do have a national estimate for all universal service. In the CALLS proposal that we've filed at the FCC we estimate that the average consumer will pay .35 to .40 cents for all universal service fees, including the high cost fund, Lifeline, Linkup and the e-rate."

Bell Atlantic and other telephone companies that are required to contribute to universal service support want their customers to know that they are being charged to subsidize other people phone use and access to the Internet.

The FCC fears that line-item information contained in customer billing statements, could undermine public support for the concept of universal service and the e-rate.

What's my contribution?
Let's leave the policy politicking aside for a moment, and return to reality with a review of my most recent phone bill from Ameritech. The bill totals $224.23 for services from April 29 through May 28, 2000.

I have to pay $49.11 for my "best value" package of call waiting and caller ID as part of an "enhanced" service bundle. I have to pay $15.42 extra for local calls placed this month, as the company does not offer any other rate in this area. I have two PCs operating on separate dial-up accounts that I tap into each day because I don't have cable or DSL access available to my home office, and I need to keep personal use separated from business use.

Of the $159.70 remaining charges on my phone bill $56.59 accounts for long distance charges. So I spend about $8 more on local services than I do long distance and I haven't even added in my local toll charges of $52.56.

When I do the math, my local services total $117.09 which translates to a rate of .38 cents a minute for my 303 total minutes of local tolls. I spent .29 cents a minute on long distance charges.

My 3 percent federal excise tax totaled $2.63; state and local taxes accounted for $4.39 more and my local, state, and federal surcharge forced me to cough up another 29 cents. Other fees included on my phone bill were, well, "other fees" for $1.46 and of course, the universal service fee for $5.58. So my universal service fee is a little higher than AT&T's proposed 8.5 percent of long distance charges. My surcharge runs at about 9.8 percent. This leaves me wondering what SBC is doing with the other 1.3 percent of the e-rate billing.

The way I look at it, $5 or $6 bucks a month to get DSL service to my part of the rural world - eventually -- is not all that much to pay. After all, I get to watch the squirrels run along my fence line all day as they loot the black walnut tree in my backyard. Who could put a price on that luxury?

Eternal mystery
I do wonder where the money I pay in each month is going when it's not shelled out until next year. Interest rates may not be the best right now, but how much could SBC be making on that 1.3 percent variation between its universal service charges and AT&T's same fees, compounded daily, of course.

But then again, that 1.3 percent difference could be some state or local fund that I have no idea I'm even paying into. That's part of the mystery of universal service, and I'm not alleging that SBC is abusing collection on the fund. I am saying, it makes me marvel at my phone bill, much as I'd gawk at a geek in a traveling side show. Like most people, I'm naturally curious.

It's not the universal service fund, the e-rate, or even the antiquated federal excise tax that make me brace myself before I open the phone bill each month. It's the unrestrained local service charges that make me want to gather up the cans and start laying strings to the people I speak with each day.

If the FCC could get a handle on local charges, we all might have something to cheer about.

Meanwhile, I'll pay my phone bill and my $5.58 to the universal service fund and wonder about how much is going to the e-rate. Because right now the money keeps getting disbursed, but I have no idea how much is being collected from phone bills everywhere.

—End

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