When buying a cellphone plan, many customers may assume they’re just agreeing to pay that monthly rate advertised in the window.
But then once that first bill shows up, there are all sorts of little charges and fees that can add up to $10 or more, depending on where the customer lives.
What some may call “hidden fees” are actually supporting a number of public programs, so they’re not a gimmick for the carriers to make more money. In fact, some major wireless companies are fighting a bill in the South Carolina Senate that would add about 1.1 percent to their customers’ bills. They say the proposed law would create a “regressive tax” on the 4.5 million cellphone users in the state to pay for a program that wouldn’t benefit them.
Supporters of the legislation say those fees aren’t exactly taxes, and that they would fund a decades-old system that’s in the best interest of everybody in the state.
All customers of any telephone company, whether it’s a wireless phone or a landline, are charged for the Universal Service Fund on their monthly bills. That’s for a program set up in 1997 by the Federal Communications Commission, and it funds subsidies to ensure everybody in the country has equal, affordable access to telecommunications services.
Today, phone users pay 16.8 percent of their total bills to the federal fund, and it supports a number of initiatives like providing broadband Internet access to rural hospitals and public schools.
Landline customers are also charged every month for South Carolina’s Universal Service Fund, which supports additional programs not covered by the federal fund. Essentially, it subsidizes companies to provide telephone access to rural, high-cost areas, and it gives discounts to low-income households that want phone services.
Right now, landline customers pay 2.7 percent of their bills to the fund, and those charges keep increasing as more customers cut the cord and switch to wireless devices, said Dukes Scott, director of the state Office of Regulatory Staff, which represents the public in utility matters.
That’s where Senate Bill 277 comes in: Among a few other changes to the statewide program, it wants cellphone carriers to pay into the state fund the same way traditional phone companies have for decades. If it passes, landline and cellphone users will pay about 1.1 percent of their bills to the fund.
State Sen. Luke Rankin, R-Horry County, a sponsor of the bill, said it isn’t unlike the law passed several years ago that required cellphone companies to help pay for local 911 emergency services. Previously, landline companies paid for that by themselves.
“When you look to what the Universal Service Fund provides, just like the 911 service in South Carolina, everybody is getting the benefit of that, and everybody is required to pay their fair share,” he said.
But many cellphone carriers aren’t happy about adding the proposed fee in South Carolina, even though they’re already paying a version of it in 20 other states with similar programs.
Public affairs representatives from Verizon, Sprint, U.S. Cellular, T-Mobile and Tracfone sent a joint letter to the Senate Judiciary Committee on Wednesday, urging the panel to stop the bill. The companies called the Universal Service Fund an “antiquated subsidy system” that only benefits landline companies.
John Bowen, of the S.C. Telephone Coalition, said that’s not necessarily true. Cellphone towers send signals to each other through landlines, he said.
“Without the landlines, the wireless system doesn’t work,” Bowen said. “We’re talking about a public good here, and that’s why they set the fund up, to enable citizens in the state to call all other citizens in the state.”
Michelle Robinson, a Verizon representative, said while she understood the argument about fairness, she and the other companies opposed the bill because “wireless customers are already paying 16 percent in fees and taxes on their bill, and to us, this is just piling it on without any proof that it’s absolutely necessary.”
The S.C. Taxpayers Association, a civic group that opposes most legislation that levies new taxes, disagreed with that argument.
“We don’t view this one as a tax increase, because if you don’t use a telephone, whether it’s a cellphone or a landline, then you’re not paying for it,” said Don Weaver, president of the organization. “We just don’t think it’s fair that this cost is not being equally distributed among newer cellphone users.”
Reach Abigail Darlington at 937-5906 and follow her on Twitter @A_Big_Gail