Reach out and tax someone
By Peter Blake, Special to the Rocky
Rocky Mountain News
Thursday, March 27, 2008
Alcohol, tobacco and -- telephone service?
Dialing a friend may not be a sin, but it's taxed like one.
Just check the small print of your Qwest bill. Basic
service is $14.88 a month, but "taxes, fees and surcharges" add
another $11.22, or 75 percent -- give or take a few pennies
depending on where you live.
The category includes the federal excise tax, state sales tax,
county sales tax, city sales tax, special district tax, city
occupation tax, Local 911 service, Federal Universal Service
Fund, Colorado Universal Service Charge, Federal Relocation Cost
Recovery Fee TREX (!), Colorado Telecommunications Relay Service
Fund and, saving the most for last, the $6.50 Federal Access
Most of these fees are flat or are identified as a percentage of
the total. And most of them can't be raised without a vote
-- by Congress at the federal level, by the people at the state
or local level.
But there is one notable exception: the aforementioned
state universal service charge. It's not listed as a
percentage, but that's what it is. Just a year ago, it was
1.6 percent of the basic service fee, but it jumped to 2.7
percent in the second quarter of 2007. It is expected to
rise again, to 3.4 percent, later this year.
That's rapid growth.
The fee, based on demand for subsidies, is computed periodically
by staffers at the Public Utilities Commission, then ratified
routinely by the three commissioners.
Unless the rules are changed, the fee will continue to climb.
The proceeds go to the Colorado High Cost Support Mechanism
Fund, successor to a similar fund established in 1990.
It's supposed to provide subsidies to the phone companies that
serve high-cost rural areas. Many of them are tiny, but by
far the largest collector of the funds -- and largest recipient
-- is Qwest itself.
Indeed it received 95 percent of the proceeds in 2007 and is on
line to get at least 80 percent this year.
The distributions are expected to hit more than $72 million in
2008, roughly a 20 percent increase over the slightly less than
$60 million distributed last year.
"It's a transfer of wealth from the urban to the rural
constituent,' notes Jim Greenwood, director of the state's
Office of Consumer Counsel. "We've been in opposition to
virtually every one of the applications . . . It's a continuing
subsidy that we don't think is wholly justified."
The fund has been growing faster because the PUC recently
decided to streamline the application procedure that companies
use to avail themselves of the money. They no longer have
to provide all the documentation they once did to justify the
subsidy, and renewing it each year is a snap.
There's some irony in the fact that several of the smaller rural
phone companies that use the high-cost subsidy fund charge their
own residential customers considerably less than Qwest does.
One charges as little as $10.50 a month; another, $12.
"As part of our opposition, we've been trying to nudge companies
with lower rates than the average to increase their residential
rates," says Greenwood.
Meanwhile, there are fears that the largest rural operator
outside of Qwest -- CenturyTel, with 90,000 lines -- might apply
for funds for the first time and bust the projections wide open.
At a February meeting, the PUC commissioners discussed the
possibility of re-examining the rural subsidy program because of
But oddly enough, the PUC is also under pressure to expand the
program instead of reduce it. Last fall, Gov. Bill Ritter
created an "Innovation Council" whose job it is to bring more
broadband to rural Colorado. The
existing telephone companies would be happy to participate, and
many are casting covetous eyes at the high-cost fund for
But the PUC should not unilaterally expand the fund for such a
purpose. Authorization should come from the legislature.
Indeed, lawmakers should be required to vote on every fee
increase instead of letting the PUC do it more or less under
Peter Blake is a former
Mountain News political
columnist. He can be reached at