What’s AT&T’s New Wireless Fee All About?
Is AT&T Inc. (NYSE:T) trying to trick its customers into requiring them to pay “below-the-line” fees? Not according to AT&T, who maintains that its customers were given 30 days notice of the new monthly administration fee that was implemented as of May 1. A spokeswoman from the company stressed that its details are included on every bill and it covers, “certain expenses, such as interconnection and cell-site rents and maintenance,” The Wall Street Journal reported Thursday.
The new monthly administrative fee is 61 cents, which might seem small compared to the overall cost of wireless service. However, it can quickly add up to more than a half-billion dollars in annual revenue when considering AT&T’s huge customer base. These fees, commonly called “below-the-line” fees as they appear at the bottom of the phone bill, help sustain revenue growth for large organizations. According to Citigroup (NYSE:C) the implementation of this fee could bring AT&T as much as $350 million in new revenue for 2013, a perfect solution for the telecom giant who projected a total 2013 revenue growth of at least 2 percent.
But this 61-cent administrative fee is not the only additional charge AT&T solicits from its customers. Starting 10 years ago, it also began charging a “regulatory cost recovery charge” that averages about 50 cents per line at the carrier, and is purposed to cover the expense of complying with government regulations.
The company has been charged by many public interest groups for using “below-the-line” fees to “stealthily increase their prices” because “AT&T’s administrative feeds are no different than the hundreds of other components that go into the cost of doing business,” as explained by the research director of one such interest group, Free Press. Another advocacy group, Public Knowledge, blamed the lack of competition in the telecom market, as well as regulators who failed to keep companies from imposing feeds on customers separate from service fees. While the watchdog recognized that some special fees are justified, it highlighted the new AT&T fee as a “simple price increase.”
However, AT&T should not be the only company under the microscope, as many other carriers, including Verizon Wireless (NYSE:VZ) and Sprint Nextel Corp (NYSE:S), implement similar practices. Verizon not only charges an administrative fee of 90 cents per line, but it also has a regulatory charge of 16 cents. Similarly, Sprint charges a per-line monthly administrative fee of $1.50 and a regulatory recovery fee of 40 cents.
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