AT&T wireless customers have to dig a little deeper into their pockets starting this month after the carrier implemented a 61-cent “administrative fee.” It’s literally pocket change, so this change is unlikely to break the bank for customers, but it’s the latest manifestation of an annoying trend. Wireless carriers are taking a page from airlines’ playbook when it comes to tacking on extra fees and surcharges. The monthly fee they quote stays the same, so they can still compete on price, but customers wind up paying more.
“The monthly fee of 61 cents per line will help cover certain expenses, such as interconnection and cell site rents and maintenance,” AT&T said in a statement. It defended its action with the “everybody else is doing it” excuse, saying, “For some time some of our competitors have been assessing this type of charge… Until now, AT&T has not charged such a fee, but it will help defray a small portion of certain expenses and we are using a name for the fee that has become common in the industry.”
The 61 cents comes on top of a “regulatory cost recovery charge” of about 50 cents, according to the Wall Street Journal. Verizon Wireless, Sprint, and T-Mobile also charge monthly regulatory fees ranging from 16 cents to $1.61. At $1.61, T-Mobile’s is the most expensive, but it doesn’t charge an administrative fee. Verizon and Sprint charge 90 cents and $1.50, respectively, for their administrative fees.
But wait, there’s more. You’re probably also paying a “federal universal service” fee, and, depending on where you live and your carrier, you may also be stuck paying a “gross receipts” charge. These are both charges the government imposes on companies that they, in turn, pass onto customers.
These so-called “below the line” charges aren’t bundled into the base rate of your plan, and since they’re all lumped in with the regular sales tax you pay and given confusing, vague names, carriers hope you won’t really notice them, or will assume that they’re all taxes that go to government coffers, not their bottom line.
These fees are generally assessed per line as opposed to per plan, so somebody with a multi-device family plan could find themselves paying all these fees multiple times over. Before you know it, you’ve added another $5 or $10 to your monthly bill.
This nickel-and-diming adds up in a big way for cell phone companies. The Journal says AT&T’s new fee could earn it $350 million this year and $518 million next year. “We really feel good about our wireless position. Revenues continue to grow with expanding margins,” AT&T CFO John Stephens told investors on the company’s conference call last month. (This, keep in mind, coming from the same company that says it needs customers to contribute to costs like renting and maintaining its cell towers.)
Unsurprisingly, consumer advocates blast these fees. “Cell companies, like airlines, are unbundling the price of the services you are purchasing,” says Edgar Dworksy, founder of ConsumerWorld.org. “It is out and out unfair and deceptive to promote a particular monthly rate that does not included all mandatory payments, exclusive of taxes. You basically think you are going to pay one price, but wind up paying much more.”
“We certainly think this new fee is a way for them to stealthily increase their prices without admitting they’re raising their prices,” says Matt Wood, policy director at advocacy group Free Press.
Unfortunately, there’s not much you can do about this if you’re a subscriber. A popular rumor floating around on Twitter is that this new fee gives you the right to cancel your contract, based on AT&T’s legal verbiage, which says, “If we increase the price of any of the services to which you subscribe, beyond the limits set forth in your customer service summary… you may terminate this agreement without paying an early termination fee.”
AT&T, though, says the addition of this new fee doesn’t count. “We have not increased the price of one of our services,” a spokesman said via email.
Paul Bland, a senior attorney at Public Justice, calls this claim “phony.” “The price is how much it costs to get the service,” he says. “AT&T’s position that they can add a fee but the fee is not part of their price is completely contrary to how consumers, and, I think, courts would understand the idea of price.”
Unfortunately, if you want to make this argument, you’re going to have to go to court or arbitration. Both can be long, stressful and potentially expensive processes. AT&T banned class-action suits, a move that infuriated consumer advocates but was upheld by the courts, so a consumer’s only option is small claims court or arbitration.
One AT&T customer, Matthew Spaccarelli, did win a small claims suit against AT&T last year, but the company is probably assuming — correctly — that most customers won’t get mad enough over 61 cents a month to try to get out of their contracts and duke it out with the telecom giant in court.