Naked City

By Doug Potter

Those gimmicky cell phone ads that proclaim "Talk all you want" make it sound like talk is cheap. But we all know it ain't. Just take a look at your local phone bill, your long distance bill, and your mobile phone bill, and you'll notice that the regular service costs are compounded by a myriad of mysterious fees and taxes with unintelligible names.

You've got your Texas Infrastructure Fund Reimbursement, your Texas Poison Control surcharge, your Municipal Charge, and a host of others that add up to an astounding amount each month. Most people wonder what the heck these charges are for, but most don't bother asking, according to workers at the Public Utility Office in Austin, which monitors all those fees and taxes.

A peek at a set of bills for one Austin resident revealed the following: His $64.98 mobile phone bill included $12.60 in taxes and fees (19% of the total). The $61.19 long-distance bill included taxes and fees of $13.55 (22%), and a $17.50 local phone bill included $7.69 in taxes and fees (a whopping 44%). So overall, the consumer paid about 28% of his total phone bill in taxes and fees. At the same rate for a year, that would total $406.08 -- hardly a shabby sum.

Some of these additions seem to be for worthy causes, some simply have strange labels, and some may be going away soon. To get the lowdown on all these taxes and fees, you can spend hours calling several federal, state, and local agencies, scour the fine print on the bill, or go to the detailed list on the PUC web site at www.puc.state.tx.us/ocp/telephone/phonebill.cfm -- which gives the lowdown on every fee, from its purpose to how the rate is set.

But since the Chronicle did call around for hours, here's some additional insight into typical charges.

The Federal Tax: Let's start with the good news. The U.S. House voted 420-2 Thursday to do away with the federal "talk tax," which charges telephone users 3% of their total bill to fund the Spanish American War. Most Americans realize that this war is indeed over (we started it, we won it), and although it was suspended a few times through the years, the excise tax somehow remained. Eradication of the tax will save the average household about $50 a year and will cost the government about $5 billion in revenue.

State and Local Taxes: Next is the regular old 8.25% sales tax on all phone bills, which is divvied up to different entities, with 6.25% going to the state, 1% to Austin, and 1% to Capital Metro. That takes care of the taxes, which in general amount to 11% of your bill.

Municipal Charge: Sometimes called a municipal fee or right-of-way fee, this charge allows phone companies to recoup the cost of "renting" right of way from cities. Cities charge the phone companies to use their right of way for stringing wire and cable and for costs associated with street repair and maintenance. The amount a city can collect depends on the total number of lines a company maintains for customers and other factors. How much of the cost gets passed on to consumers depends on the amount of data used on their lines, ranging from $1.11 for typical residential lines to as much as $10 for business lines with high data capacity or point-to-point systems. Michael Parks, the city's director of telecommunications and regulatory affairs, notes that cities have long thought the identification of the "municipal charge" was unfair, since it makes it look like the city is tagging on an additional tax to users. "It's a rental of right of way that phone companies have chosen to pass on to the consumers," he says. "We actually believe it should be a cost of doing business." For instance, if you order a pizza from a pizzeria that rents its restaurant space, you don't end up paying $10.99 plus a "facility rental fee" that helps cover their monthly rent. You just pay $11.99 for the pizza.

Universal Service Fund Fees and Infrastructure Fees: Both the federal government and the state charge these fees. They support putting phone service into high-cost rural areas, schools, and libraries. The Texas USF also funds telecommunications services for the hearing impaired and other programs devoted to low-income and elderly users. Companies actually have a choice on how to recoup the USF fees they pay, and costs to the consumer can vary, usually from about 3% to 9% of the bill.

If that weren't enough, all telecommunications companies also get charged 1.25% of their revenue to help pay for the Texas Infrastructure Fund (TIF), which provides money for advanced telecommunications in schools, hospitals and libraries.

Presubscribed Interexchange Carrier Charge: Long-distance companies pay local phone companies for the right to access their network, and the Federal Communication Commission allows those charges to be passed on to you at a set rate, about $1.45 on average for most residential long-distance lines. (Business lines are more.)

Portability Fee: Portability simply means you can take it with you. The Texas Legislature ensured that local phone companies could not prevent customers from keeping their number if they signed up with another service. But it also realized that the phone companies would bear some infrastructure and service costs to set up and run the numbers, so they allowed a portability fee for a total of five years starting in 1999. Southwestern Bell charges 33 cents to each customer.

911 and Poison Control: Telephone companies are required to contribute to the cost of 911 services and regional poison control center hotlines. Both fees are capped at 50 cents per phone line for local and mobile service, and .03% of long-distance fees for long-distance service.

Expanded service area fees: Those rural people are benefiting again. Rural customers may elect to pay a flat fee for calling numbers outside their immediate local service areas. If the cost to provide these services exceeds the revenue from customers (about $3.50 a month for rural residential customers, more for business or those with metropolitan exchanges), the phone company can charge everyone a surcharge to recover losses. Southwestern Bell's surcharge is 16 cents, and GTE charges 73 cents.