Verizon Drops DSL Fee Plan

Never mind: Verizon Communications Inc. on Wednesday scrapped plans for a surcharge on high-speed Internet access that would have replaced a federal fee abolished this month.

The New York-based telephone giant notified its DSL customers nearly two weeks ago that it would impose a “supplier surcharge” of $1.20 to $1.70 a month to cover added costs of offering Internet access to those who don’t buy Verizon’s phone service.

That hike nearly equaled the Universal Service Fund fees of $1.25 to $1.83 a month that the Federal Communications Commission eliminated on digital-subscriber-line service. USF fees, still charged for phone lines, help defray the cost of phone service in rural and poor areas.

Consumer advocacy groups complained that Verizon, California’s second-largest provider of phone service, planned to pocket the new fees rather than pass savings on to customers. Last week the FCC threatened to look into the charges, prompting BellSouth Corp. to drop a similar fee it had planned to impose.

“We have listened to our customers and are eliminating this charge in response to their concerns,” said Bob Ingalls, Verizon’s chief marketing officer.

Consumers Union and other groups said the attempts to push through de facto rate hikes by Verizon and BellSouth undermined the contention by big phone companies and some lawmakers that increased competition acts as a check on prices.

“If there were any meaningful competition in the market for these services, these companies would have jumped at the chance to pass savings on to subscribers,” said Jeannine Kenney of Consumers Union.

The FCC’s inquiry would have asked the companies how the new surcharges were consistent with federal “truth-in-billing” rules that prohibit misleading charges on customer bills and what underlying costs supported the need for the new fees.

Verizon spokesman Eric W. Rabe declined to comment on the threatened FCC action, but FCC Chairman Kevin J. Martin said he was “pleased that both Verizon and BellSouth have eliminated fees recently imposed on their DSL customers. Consumers should receive the benefits of the commission’s action ... to remove regulations imposed on DSL service.”

Verizon’s surcharge would have brought in as much as $5 million initially from DSL customers who aren’t under contract -- nearly half its 6.1 million high-speed customers. The fee would have then applied to others as their contracts expired.

Rabe said the company would not institute the fee later, after the current ruckus died down.

“I’m not saying we’ll never have a price increase for DSL,” he said. “But the reality has been that DSL prices have been falling for several years.”