FCC 'Very Upset' at New Verizon Fee

UPDATE: BellSouth now says it will drop the fee from customers' bills. The removal of the $2.97 surcharge should show up within a week, but it could take up to six weeks, the company said. Customers charged the fee since August 16 will receive a credit.

The Federal Communications Commission is preparing to launch a formal inquiry into a decision by Verizon and BellSouth to continue charging DSL customers for a Universal Service Fund fee the U.S. government is no longer requiring.

The USF mandates that telecommunications companies, including VoIP and cell phone providers, contribute a portion of monthly subscription fees to the U.S. government. The fund helps subsidize telecommunications services in high-cost regions of the country, and in schools and libraries.

As of August 14, however, DSL service is exempt from the program and customers should have seen their monthly bills drop by $1 or $2. Instead, Verizon has imposed new fees that largely negate any savings, while BellSouth said it will keep the charge as is. Qwest, meanwhile, said it is considering its options.

An FCC official told the Wall Street Journal that FCC Chairman Kevin Martin was "very upset" by the companies' plans to keep the money. The agency is planning to ask how the new fees comply with federal Truth-in-Billing laws, and what infrastructure costs are actually covered by the surcharge.

To its defense, Verizon said the added fees were brought about by "new costs that we've developed over the past year as we've been developing and delivering this standalone DSL service." However, the company did not explain why it didn't simply raise the base price of DSL service.

The FCC also intends to ask why the companies are imposing the surcharge both to customers subscribing to just DSL, as well as those who additionally pay for phone service.