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I was looking at my Cingular bill tonight, at the various fees. For our most recent bill, we paid $4.75 in “other fees and charges”. The details are:

Regulatory Cost Recovery Fee = $2.50
Federal Universal Services Charge = $1.88
State B and O Surcharge = $0.37

Oh, the government is hitting me with fees and charges.

Well, not really. If you do a little digging, you find out something that is surprising.

Regulatory Cost Recovery Fee. To quote Cingular’s website, “The purpose of the fee is to defray Cingular’s costs associated with payment of fees and compliance with various initiatives imposed by the government.”

In other words, there are government regulations that apply to Cingular, but they don’t want to pay them, so they’re passing them straight to customers and making it look like it comes from the government.

Federal Universal Services Charge. Same deal. The government set up a program that the telcos were supposed to pay into, and they don’t want to, so they make it look like the fee comes from the government.

State B and O surcharge. For this you need to know that Washington has this weird business tax called “Business and Occupancy”, which charges you for running a business, even if you don’t make any profit. Nope, we don’t want to pay that either, so we’ll pass it on to consumers.

Now, obviously, businesses have expenses, and all these expenses are ultimately passed on to consumers. So what’s the problem in this case?

Well, there are really two problems. The first is that the companies are engaging in a “Bait and Switch” tactic, which is illegal. I signed up for service that only costs $60 a month, but they really charge $65 per month. The second is that they attempt to hide their extra charges with names that sound like taxes. I would argue that that is also fradulent.

This obviously makes it hard to compare carriers, when a plan really doesn’t cost what it says it costs.


Comments (26)

  1. Why not switch to VoIP? I signed up with Vonage a while back and love it.

  2. Jerry Pisk says:

    The fact that you do not read the fine print before signing a contract is not called bait and switch.

    Universal service charge is something the government imposes on all telcos, Cingular (and other telcos) do not charge you that, they simply collect the fee for the feds (much like taxes, companies do not charge taxes, they simply collect them for the government). They’re supposed to use it to build telecomunications in places where it is not economically viable (farms in Kansas for example) but as usual the money pays for perks for the rich (just like the internet fund –

    As for the other two charges – you’re right, they’re just additional fees you’re being charged on top of your monthly service fee. This should have been included in the cost of the service, since these are simply business expenses related to providing you the service you pay for. But you did sign a contract that you will pay any fees they chose to add, and there’s not much you can do since everybody is doing it. And now that Cingular bought AT&T there’s even less competition.

  3. Jerry Pisk says:

    John – it’s not mobile. Eric is ranting about cell providers, VoIP, at least for now, is pretty much just fixed lines.

  4. What’s fraudulent is the government taxing the hell out of necessary utilities, a tax that hits the poor and middle class directly and has no bearing on government services (last time I looked, the government wasn’t putting up the poles, and the money, as already mentioned, is used for wasteful pork programs). Regardless of the method, the phone company *will* recover those taxes and fees.

    Which is why I use Packet 8×8. VoIP, $20/month.

  5. Mike says:

    All this started when the politicians found that the public wouldn’t support further tax increases to support their latest pork project. So they decided to tax business instead. Business, which has no money but from what it can get from the consumer began to pass these charges on to the consumer. This raised the ire of the consumer and in effort to strive off the consumer storming its gates; the business began to itemize these expenses on its bill. This might be the wimpy way out but it did redirect the consumer’s ire back to the politicians who then tried to make it illegal for the businesses to itemize these expenses, but that is another story.

    Basically, it doesn’t matter whom the politicians tax to pay for their pork it is we the people who pay for it. Businesses don’t have any money except what it gets from us so any tax it pays it must also get from us. Don’t like all these fees? Well you are in luck! It is that time again when we Americans can express our opinion and elect politicians that will cut pork instead of creating more pork; leave the bacon at home instead of bringing home the bacon. After all, politicians don’t have any money except what they get from us anyway. They are bribing us with our own money. Now finding such a politician could prove to be difficult and is another story.

  6. damien morton says:

    In Australia, all prices quoted must include any taxes. There is no "plus tax"; tax isnt optional or separate – its part of the price.

  7. Jeremy says:

    You could always switch to prepaid. That way you know what you are paying (even if the rate sucks)

  8. Yeah, my wife is a Senior Manager at KPMG and has had to audit a few of these large telecomm companies.

    The sheer amount of obscure and obsurd fees are amazing, and how the telecomms have conveniently spun them into their customers’ bills. Wonderful magic.

    You should see things on the accounting side, as well. Apparently even more of a bird’s nest.

    It definitely makes VOIP a breath of fresh air, IMHO. We’ll see how long (and if) that lasts.

  9. billrob458 says:

    If the companies didn’t charge the consumers for the government imposed business costs ( regulation ), how are the companies going to get the money?

    When you hear people talk about cost of government it includes both direct taxes and regulations.

  10. Vonage, Vonage, Vonage.

    I was ecstatic when I could call my telco (they will remain nameless, but their initials are SBC) and cancel my account.

    I was paying about $80 a month for service all told, when I can get more features and cheaper long distance for only 25 bucks a month from Vonage.

    I’ve had it for about three months now and it’s flawless. The only thing I worry about is power outages…but that’s why I have a UPS on my router and firewall boxen.

  11. damien morton says:

    billrob – companies have costs. Some of those costs are government costs and taxes. The phone companies have chosen to break out tax costs as separate line items. They could just as easily break out all of their costs as separate line items, and youd instead be saying something like "oh my god, 18% of my phone bill is paying executive salaries and perks". Ultimately, you and I pay for all their costs, regardless who they in turn pay.

    Theres only one thing I want to know – how much is it going to cost me. One answer, no bullshit.

  12. jaybaz [MS] says:

    I’d love to switch to VoIP. But I’d still need a net connection, and my choices are telco (screw ’em!) and cable (screw ’em, too!).


  13. Sahil Malik says:

    So cellphone companies are cheats – they overcharge and their phones suck, and they try and tag on weird fees for stuff they shouldn’t (verizon and it’s bluetooth?).

    What never ceases to amaze me is the debt all these companies are under.

    And then how ridiculous CEO/CFO compensations are. Don’t even get me started on that .. urrrghhh !!!

  14. damien morton says:

    Id switch to VOIP, but my net connection (time-warner) is too unreliable, and theres something comforting about a commuication system that has its own power supply. In a black out – all you VOIPers will be screwed.

  15. Anon says:

    >> In Australia, all prices quoted must include any taxes. There is no "plus tax"; tax isnt optional or separate – its part of the price.

    As an Australian, I seriously can’t comprehend why any other country does it any other way. Makes it far easier for consumers. What do I care about the internal taxes and running costs for a business? I want to know the cost *to me*, not the cost *to them*.

  16. Eric, I consider you lucky just to be able to say "to compare carriers"!

    In South Africa we have one (largely government owned) monopoly called Telkom, that also happens to be the most costly telecoms provider on this earth :'(

    If their service was really good one could argue that you get what you pay for, but unfortunately not in our case.

  17. AT says:

    Actually this is common problem all over world.

    For example two biggest cellular (mobile) telecoms in Ukraine provided different pricings in advertisements and all papers – one company provided pricings excluding both VAT (20%) and pension fund (6%), but another excluded only pension tax, but included VAT.

  18. Shital Shah says:

    I think you make a very legitimate case filing to Better Business Beauro ( or even DoJ. Both have a page to file complaints against companies online and takes 10-15 mins to do so.

  19. MBA says:

    Helpful For MBA Fans.