Verizon Wireless plans to charge subscribers more than $173 million per year in extra fees for costs related to new rules that allow customers take their phone numbers to a new service provider — more than double what the nation’s largest cellular carrier had said it expected to charge.
Also Tuesday, a company serving as the intermediary among most of the major wireless providers in transferring phone numbers said it received about 80,000 requests on Monday, the first day of the new rules. The company, TSI Telecommunications Services, had been bracing for a million or more requests on Monday.
Verizon’s additional fee of 40 cents per month will be charged to all of its 36 million wireless subscribers starting early next year, the company confirmed Tuesday. The calculation of $173 million does not take into account additional collections from millions of new subscribers that Verizon expects to add over the next year.
The decision by Verizon Wireless leaves T-Mobile as the only national wireless carrier not charging such a fee. The fees are generally charged to all subscribers regardless of whether they plan to change to a new wireless provider.
Since June, Verizon Wireless had repeatedly indicated it “might” charge 10 or 15 cents extra per month — or possibly nothing at all to gain a competitive edge against rivals who had already started charging fees ranging from 32 cents to $1.75 a month for costs related to “phone number portability” and other government regulations.
“Back in June, that’s what our business planning folks thought it was going to take to pay for the ongoing costs of the number portability mandate. Our current projection is in fact higher,” said Jeffrey Nelson, a spokesman for Verizon Wireless.
Even before the new rules went into effect, the nation’s biggest cell phone companies had collected hundreds of millions of dollars for “regulatory cost recovery.”
Such fees are permitted by the Federal Communications Commission and state utility commissions to help companies defray expenses incurred in complying with various regulatory mandates, including requirements to help emergency operators pinpoint the location of any cell phone used to make a 911 call.
Beyond a general requirement under federal law that such fees be “just and reasonable,” there is no specific cap. Because the FCC does not monitor the fees or require the companies to report their actual expenses, it is difficult to determine how the companies calculate their costs.
According to federal filings by wireless carriers during their years-long battle to block the new rules, the costs being recovered include huge marketing expenditures designed to keep old customers and lure new ones from rivals.
Other major costs have included installation of software systems to handle number transfers and retaining firms like TSI to serve as intermediaries and troubleshooters. They also include training and hiring staff to process requests — as well as handle queries from “at risk” subscribers and potential new customers. Verizon and T-Mobile opened new call centers staffed by hundreds of new hires to serve as hubs for their number portability activities.
In addition to arguing that the money being collected exceeds the actual costs, critics complain the companies are being deceptive in describing the fees on bills with terms such as “cost recovery for federally mandated programs.” Such terms, they contend, enable the companies to generate stealth profits in the guise of what might appear to be a collection by or on behalf of the government.
The companies “shouldn’t be allowed to call it a ‘federal mandate recovery fee’ because the government isn’t requiring them to collect the fee and federal government probably wouldn’t be pleased that they’re recovering marketing costs,” said Morgan Jindrich, a researcher at the Washington-based Center for Public Integrity who wrote a report on the fees published last month.
Jindrich also questioned the government’s decision to not monitor the fees and leave it to customers to comparison shop. “Nobody will take the time to do these calculations, to go to six cell phone companies and figure out which will be the best deal and how much they’re paying for certain costs.”
Although the fees are generally less than $1 per month, the amounts add up quickly when multiplied across the millions of subscribers each carrier serves.
Sprint, for example, has been charging about 18 million customers an extra 63 cents per month since July, for a total of more than $65 million collected through November.
It is harder to calculate the exact collections by other carriers because their charges for portability were rolled into a new multi-purpose fee: $1.55 a month at Nextel, $1.75 a month at AT&T Wireless and between 32 cents and $1.25 at Cingular Wireless.