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What Are All Those Fees on My Phone Bill?

Federal, state, local charges increase bill by 30 percent

Q. Each month my phone bill includes a $6.50 "federal subscriber line charge." The phone company says it's put there by the FCC, but I thought that tax ended years ago. Do I have to pay it?

A. That item on your bill is regulated and capped (currently at $6.50 per phone line) by the Federal Communications Commission, but it's not a tax. Rather, Uncle Sam allows telephone companies to put it on your bill — most do — and to keep every cent.

See also: Preventing mobile phone fee hikes.

The item also goes by such names as "federal line cost charge," "interstate access charge" and "interstate single line charge." Whatever it's called, you have to pay it if you want your phone service to continue.

The charge originated with the breakup of the Bell telephone system in 1984. For decades, Ma Bell had set high rates for long distance in order to subsidize the cost of local phone service.

After the breakup, independent long-distance companies reduced what they paid to local phone companies, which were allowed to offset the shortfall by collecting the subscriber line charge.

Funding the Spanish-American War

A different (and actual) telephone tax ended five years ago for a portion of your bill. The federal excise tax, originally enacted in 1898 to help fund the Spanish-American War, was designed to tap wealthy Americans back when phone service was a luxury.

For years it was a 3 percent tax on both local and long-distances charges, but in 2006 the Treasury Department stopped collecting it on long distance.

Other bona-fide taxes on phone service include a 911 service fee (also called "emergency telephone users surcharge") imposed by local governments to help fund emergency services. There are also city, county or state taxes variously listed as "utility tax," "sales tax" or "gross receipts tax."

Whatchamacallit charges

Various other charges are allowed by the FCC or state regulators, but it's the individual phone company's decision to charge you or not. Among them:

  • Universal service fund or universal connectivity fee, which offsets the cost of phone service for low-income customers, schools, libraries and rural health care providers.

  • Telecommunications relay services charge, which pays for the center that transmits and translates calls for hearing- and speech-impaired people.

  • Local number portability charge (LNP), which funds programs that allow customers to keep their phone numbers when switching to other providers.

  • State subscriber line charge, also known as "intrastate access fee" or "access recovery charge," which allows telephone companies to recover certain costs from you.

  • Regulatory recovery fee, which some companies charge in lieu of separate line items for such things as 911 service.

All told, these tack-ons can up your monthly bill by 30 percent or more. So when shopping for a land line or wireless carrier, ask about each specific fee — a company's marketing pitch probably won't include them.

I've found that "bundling" telecommunications services — using just one provider for, say, cable TV, Internet and phone — is less expensive than dealing with multiple providers. And depending on which company you go with, you may also see a smaller collection of add-on fees.

Also of interest: Watch those cell phone fees. >>

Sid Kirchheimer writes about consumer and health issues.

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