January 26, 2005 10:06 AM PST

Net telephone fees have users fuming

John Rolff's latest broadband phone bill contained three words he vowed never to see again: "regulatory recovery fee."

The same charge was the reason he dumped his old phone provider, SBC Communications, in favor of Primus Telecommunications' Lingo, which lets his broadband line double as his phone line. From all appearances, Lingo hadn't been "adding these little nickel and dime charges," he said.

But now, the 38-year-old software engineer--along with 755,000 others--is learning that this had never really been the case. Lingo, Vonage, Time Warner Cable and every other commercial provider of voice over Internet Protocol (VoIP) services have been collecting government fees for years. It's only in recent months that most have been coming clean on their statements--to fend off critics, as the spotlight on Net phone services grows.


What's new:
The line item on unregulated broadband telephone bills saying "regulatory recovery fee."

Bottom line:
VoIP providers say they've been sharing the regulatory burden all along by paying to complete calls on local networks. They're breaking out the regulatory portion to counter demands for direct fees on VoIP, not to get their customers upset.

More stories on VoIP

Some, notably state governments, have called for broadband telephone services to pay the same regulatory fees that the traditional local phone providers--known as the "Baby Bells"--do. The Federal Communications Commission has so far kept regulators' hands off VoIP.

Hoping to counter calls for direct taxation and regulation, many of the Net phone operators now identify a "regulatory recovery fee" line item of 50 cents to $3 as part of their regular monthly service charges. They say they're highlighting the portion of local phone fees the Bells have always charged them for completing calls on local lines.

"A lot of people were raising this concern that we weren't funding telephone projects like the Bells were," said Jeffrey Citron, CEO of VoIP provider Vonage Holdings. "That's a red herring--I say 'malarkey' to it. We already fund part of it, and we wanted to show our customers and everybody else."

Net phone companies insist that the fees are legitimate, merely offsetting the costs of taxes and regulatory fees passed on to them by the local phone companies for completing Net calls, they say. Nevertheless, some critics say the label is at best misleading--and at worst a misrepresentation with potential for abuse.

The line item attempt to soothe angry state regulators seems instead to have riled VoIP customers, many of whom admire the outsider stance of broadband phone services as well as the cheaper rates. Rolff said he no longer views his operator as a lovable underdog with a hot technology trying to topple the Bell Goliaths.

"Lingo was like this outsider trying to take on the big, bad phone industry," he said Tuesday. "But now, they act just like them. Here I thought I'd found the answer, but it seems like they were just

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VONAGE its better thatn the baby bell
I was a customer with the Bell and was very disappointed with the service. first you get marketing call cause they are the once who can overide the "do not call" rule. Secondly I'd rather pay the $3.00 regulatory charge than cough up all the bogus service charges implied by the BELLS.

VONAGE Bills are preety clear and uptodate by the hour and BELLS bills surprise you at the end of the month

Vonage has flexible plans to go with but BELL has fixed rates for the same service and DO I WANT TO PAY for something that i dont need but STILL had to cough up $60 a month for one home line. Now i pay $30 for a land line and a fax line. "BEAT THAT BELL".
Posted by gogots (1 comment )
Reply Link Flag
Fees Suck
they just don't get it: if a customer goes into the local dept store and buys a set of dishes after using the bathroom, he doesn't want his bill to say $455.99 + 34.20 (state and local sales tax) + $7.50 (washroom use, 2 flushes). having a bathroom that customers use is the cost of doing business. having to pay various local fees and taxes is as well. just build it into one final cost so that we can comparison shop in some sensible manner.

mark d.
Posted by markdoiron (1138 comments )
Reply Link Flag
I have a degree from college, but that doesn't mean that I can understand the phone bill that I get every month. It's a total load. And don't get me started on the overcharges from my cell company.
Posted by aabcdefghij987654321 (1721 comments )
Link Flag
I would rather know
I'm all for full disclosure of fees. This way I know they're not ripping me off, and if they are, someone else can catch them and get me a refund. Why should this work differently than sales tax?
Posted by sanenazok (3449 comments )
Link Flag
What do you expect?
Yes, fees are ridiculous, but I think most people don't understand the big picture. If you really have a problem with the fees, you are pointing fingers in the wrong direction. Tell your legislators about it. They are the ones keeping a 100 year law on the books targeted specifically for phone service.
Posted by (1 comment )
Link Flag
Packet8 Regulatory Fees
Please note that this article inaccurately includes Packet8 (Nasdaq: EGHT) in the list of service providers charging "regulatory recovery fees". Packet8 adds Federal Excise Tax (FET), currently 3%, to the total of our customers' bills, period. The addition of FET is based on the current advice of our tax attorneys, and all of this money is remitted bi-monthly to the Federal Treasury. Thus, a $19.95/month Packet8 residential customer who makes no overseas calls (calls to non-Packet8 subscribers outside the United States are billed at an extra per-minute rate which can be found on our website, packet8.net) is charged $20.55 TOTAL after application of FET. No additional charges are added to the bill.

Packet8 does offer a number of additional services that can be added by our subscribers on TOP of any of our basic subscriptions (such as Virtual Numbers, E-911 service, etc.), and we do charge extra for these additional services. Our E-911 service costs subscribers an additional $1.50/month, all of which goes towards paying the direct costs that 8x8 incurs in providing true, replacement E-911 service to our customers, but the choice of whether E-911 service is enabled on each line (and the additional fees collected) lies with the individual customer. We do not charge any of the "recovery" fees described by this article, and we will be contacting Ben Charny directly to correct this error.

For additional information on Packet8, please call us at 1-866-TRY-VOIP.

Bryan Martin
Chairman & CEO, 8x8, Inc. (Nasdaq: EGHT)
Posted by (1 comment )
Reply Link Flag
Charge for 911?
Give me a break. People should have this wether they like it or not as long as they know it may not work in a power or internet outage. Charging them for it is just silly. Put it in as part of the package. Vonage.com does...
Posted by kieranmullen (1070 comments )
Link Flag
Well Sir,
Thats a lie. I just got my bill and what did i see in the "Taxes and Fees" a $12.00 Regulatory Recovery Fee. So since you don't charge for these fees I should be looking for a refund on that line item. Expect an email from me shortly.
Posted by LannyS1 (1 comment )
Link Flag
Thanks for pointing that out.
The story has been corrected.
Posted by the kraut (4 comments )
Reply Link Flag
As a VOIP user...
I joined up with Vonage about two weeks after Circuit City started carrying them. I have the $99 Motorola VOIP adapter sitting on my desk, and have been with them since around January of '04. So far, I can never say i've been dissapointed.

I had BellSouth for about two months, just to get BellSouth DSL. That venture, for two-three months of basic phone and DSL service, ended up costing me around $400. It was completely rediculous! Their phone service was overpriced, and there were way more fees than a Federal Service charge, or whatnot.

I pay for the 500 minute a month 'call anywhere' plan. I pay $16.98 every month for my phone. One that will automatically forward to my cell if my network is down. One that I can easily check voicemail from either phone, or computer. If they need to put a line-item that says 'fees'. Then so be it! I understand that they have to connect to landlines somewhere, and as long as they don't get rediculous (more than 40% regulatory fees), I won't care. Heck, i'm paying $17 a month for a phone service that starts at $30 a month for BellSouth! I'll take that hit!
Posted by Jahntassa (158 comments )
Reply Link Flag
Former BellSouth customer is now a Packet8 customer
The existence of a company such as Packet8 allowed me to drop BellSouth. I had been a faithful customer of BellSouth for ~15 years.

I even ported my home number to Packet8 by exploiting the existing, albeit sluggish, LNP process. Granted, this did take some time, but I now have Packet8 doing everything BellSouth did and soooo much more.

Incidently, I just got my last bill from BellSouth two days ago. They actually sent a bill for $0.63... No wonder the only surge in their stock recently was due to the sale of their Latin American operations.
Posted by (4 comments )
Reply Link Flag
Then what's the point? Switched is more reliable.
VoIP is making promises it can't keep and this is just another one of them. VoIP service costs more than my regular "switched" service through SBC and VoIP depends relies heavily on the latency of the Internet being low. So the next time we have another Internet-wide virus outbreak, good luck to all of you VoIp'ers.
Posted by fred dunn (793 comments )
Reply Link Flag
Doubtful VoIP is more than Local/Intra and Toll calls
Paying a $25/month fee for UNLIMITED local and intra/toll (48 states) is FAR cheaper than Local MaBell incarnate Verizon fees. Even witha $3/month fee to cover regulations, Vonage is cheap solution if you have broadband.
But seeing that Verizon (and other Bells) seem to wait, watch and submission to other technologies (see DSL history), its a matter of time before MaBell takes back her lost revenue by offering DSL/Voice/Video on demand over fiber.
History repeats...as do the monopolies...
Posted by Below Meigh (249 comments )
Link Flag
SBC is cheaper?
So you're paying less than $15 a month? And voice data doesn't take up much bandwidth, btw. I've had cleaner calls with Vonage than I did with BellSouth.
Posted by Jahntassa (158 comments )
Link Flag
VOIP has its goods and bads
I would hate to see fees appearing in my bill. I havent seen any on my Broadvoxdirect bill yet..
Thats one thing I am afraid that they are just after getting new customers these days and as soon as they realize you are comfortable at your seat, they start to squeez you. Sorta like Hotmail and Yahoo did with their free emails. They removed features after they had tons of customers and then tried to sell them (pop3 access, large attachments, etc).

I have enjoyed VOIP for months now. Its been more than satisfactory. The voice quality is the same or better. The features are awesome! Call waiting, call forwarding, caller ID,...The best feature I like is Broadvoxdirect's Follow me and call to call where you can patch any two telephones via the web. Say I am at a hotel or on my cell phone in a cafe. I can log on to my account and I just patch myself (at the current phone) to any phone in US/Canada. Oh and broadvox offers one free virtual number which is cool.
Try getting a virtual number from SBC with a canadian Area Code!!

The downside is that you are at the mercy of your broadband when making calls from home. You may still need the devil SBC for DSL.. which means you have to have your landline to get DSL. Or you have to cough up an average of $50 for cable braodband to cox/time/comcast.
When someday Everyone has internet then it would just be the 19.99 or $25 for VOIP and thats it.
Posted by lavacentral (61 comments )
Reply Link Flag

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