Verizon raises DSL prices to cover tax costs

Verizon Online's DSL customers will be getting a heftier bill beginning next month.

The nation's largest phone company will charge subscribers of its digital subscriber line service a "tax recovery fee" that could bump up monthly bills by as much as 11 percent. The fee will last for about nine months, until the new Internet Tax Nondiscrimination Act goes into effect in November.

Why the price increase? A Verizon spokesman said the company's DSL business has been paying state and local taxes for each of its lines, and the growing number of customers has made it too great a cost to sustain without increasing the cost to the consumer. At the end of September, Verizon reported 3.3 million DSL customers, many of them paying $29.95 a month for service.

"Every dollar in taxes that the company doesn't collect, it's being paid by our shareholders, and that's something that's not sustainable as the DSL product matures," said company spokesman John Vincenzo.

The new charges were first reported by Broadbandreports.com.

Verizon's decision to raise prices for consumers and cite tax recovery is not unique. Other ISPs have taken steps to offset local and state tax fees. In 2003, EarthLink implemented a similar policy for its dial-up and DSL customers that varied by state, ranging from a few cents to more than $5.

More controversial is the practice of charging "regulatory fees." Regional phone giants Verizon, SBC Communications and BellSouth recently began tacking on additional charges for offsetting Universal Service Fund fees, which underwrite network construction in lower income areas. They also blamed the new fees on federal regulations that require them to share their lines with competitors, something not imposed on their cable rivals.

Analysts and consumer groups criticized the new fees as a rate increase in disguise.