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Telecom Carriers Use Deceptive Advertising
theodp writes "Regulatory Programs Fee. It sure sounds like a government tax. It isn't. The latest addition to T-Mobile's monthly bill is merely the latest example of telephone companies passing their own cost of doing business to customers with an array of surcharges that one might easily mistake for taxes being collected on behalf of the government. With millions of subscribers at each company, these less-than-forthright fees add billions of dollars per year in extra revenue without raising advertised rates."
Although these tactics could be seen as immoral and lame, it doesn't look like they're actually breaking any laws. From the article, "Actually, T-Mobile's monthly charge of 86 cents is among the more clearly labeled.". As well, "though thankfully there's at least a footnote below owning up to the fees as Nextel's doing."
Like EULAs, they are taking advantage of the fact that nobody reads them.
Vonal Declosion
Telephone companies have been doing this for many years.
One of the companies I worked for even listed the surcharges at the end of the taxes so that when people called the first five or so things they asked about would get an answer of "that's a tax, there's nothing we can do about it," that way they usually stopped asking before getting to the surcharges.
Most companies won't even list them though, they just put "Other taxes and surcharges... $X" on the bill.
Have you tried Linux yet?
ABtolls.com maintains a database of phone rate planes, and does the consumer the favor of computing the true cost of a plan after all the USF and PICC fees are added in. This particular dial-around plan has to go down as one of the worst offenders. While they claim that the first three minutes only costs 5 cents, "regulatory fees" make that three-minute call cost 16.37 cents, more than triple the advertised rate!
Sure, that's only pennies of difference, but nickeling and diming in volume adds up.
Yeah, but Prussia doesn't exist anymore. Coincedence? I think not.
Phone companies have been pulling this crap for years, banks too. Doesn't mean they should or that people like it. Tempted to try this on my next government grant budget, but will probably have an attack of integrity. Deceptive but not illegal is still sucky. And that's the technical term.
Professor of Astronomy, Author of Spider Star & Star Dragon (Tor)
I just signed up with AT&T wireless not a week ago. They were very clear and up front about the fact that it is not a tax, but it is used to cover the expenses of follosing the various regulations. I signed up anyway, knowing full well what they were doing.
They call it a "Regulatory Programs Fee", like Verizon does.
Maybe some other carriers have problems with this - and maybe AT&T has their own problems, I haven't been signed up long enough to know - but I can't at all fault them for this.
In all fairness, the article did not single them
out.
--Russell (not logged in because it's Sat. Night and I'm a lazy f*ck)
So what do you want? If the government mandates things like number portability and location, this makes a change to the company's bottom line. I don't see how this is different than a tax really.
.86. Have you seen what land lines charge per 'service'?
I'd be more likely to call things like this "unfunded mandates". People groan about getting screwed by companies and then groan again when the companies charge them for services that they mandate.
Personally, I'm a little ticked by this way of recovering costs. I'm now paying monthly for other people to have number portability. This seems akin to having a monthly charge on my bank account for other people to use non-network ATMs. I don't like paying for non-network ATMs, so I don't use them. Similarly, I don't like paying to move to a new network, so I don't do it.
But honestly, if services are going to be mandated, we have to expect to pay for them. You can't really complain too much about
+++ ATH0 +++
I would encourage a class action lawsuit, but then l would probably just see this on my bill next month-
Regulatory Consumer Disloyalty Juris Prudence Fee - $14.86
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WARNING:Slashdot karma not redeemable in the afterlife.
Looking at my last Nextel bill: Wife's phone plan charge was $17.59. "Taxes" were $6.66 to bring the total to $24.25. That's 37% in taxes. The * ones ("Fees Nextel elects to collect to recover its costs of funding and complying with Gov't mandates and initiatives") were $3.11, or a grand total of almost 18% of my wife's bill.
.25 for the USF and 0.60 for the Regulatory cost fee.
To break it down, the Federal TRS charge was only 0.073% (0.01). The Univ Serv Assessment was 1.25% (0.27). The Cost program recovery fee was a flat $2.83.
My account plan rate was $47.54. Taxes were $10.98 to bring the total to $58.52. That's 23% in taxes. The * ones were: TRS Charge: 0.073% (0.04), Univ Serv Assessment 1.25% (0.65) and Cost recovery fee ($2.83). Result? $3.52 in these charges, or only 7% of my bill.
What makes me sick is this:
I was paying $65.13 a month to Nextel plus a total of $17.64 in taxes and fees. (A 27% tax rate!!!!).
Take my last Cingular bill (I just switched). My monthly service charges were $47.97. The fees on the account were $6.52 on the line with a $38.98 charge, and $2.71 on the line with the $8.99 charge. That's only 19%! Cingular charged me 17% on one line and 30% on the other (well, the second one is skewed since it only has a $8.99 plan.)
Cingular charged me only $1.07 for the Federal USF, and 0.60 for the "Cost Recovery Fee". The rest was a Federal/State and 911 tax. On the other phone, they charged me
I find it real sneaky how these providers are doing this.....
If you can't get the product (phone service) without paying that extra, then as far as I'm concerned, it's a tax, especially if you really do need the service.
When I add up all those outrageous charges, I calculate that taxes (by my definition) amount to about half the cost - if not more.
Really makes me want to totally disconnect. But then how would I complain on Slashdot?
More to the point, those charges only happen when the politicians allow (or encourage) it. Here in Florida, the politicos passed a bill that allows a 70% increase in basic rates. I'm taking names.
Let's see. If I write more than 5 checks a month, it costs me $5 per. I can pass that on to them. Oh, and don't forget the cost of the stamp. How about all the taxes I pay as a result of me making a living? Gas tax, income tax, sales tax, Social security ... I'll just deduct all that from my payment ...
What? Didn't anyone at the company notice the EULA they accepted by accepting my payment? I included it in the envelope and they accepted it by cashing the check.
There is nothing wrong with what T-Mobile is doing.
And that's entirely what's wrong with the picture.
And while this may indeed be Yet Another Reason to Bitch to Government with some requests for some regulation, keep in mind there WILL always be loopholes for accountants (just as crafty as lawyers, just not as loathed (ever seen an accountant on CNN defending high profile clients?), so all it would amount to is a finger in the dyke.
What you need here is full disclosure... and correct me if I'm wrong, is already mandated THAT IF YOU ASK THEY MUST GIVE. So next time ask the sales rep to outline all the surcharges and taxes BEFORE signing up for service and do the obligatory second opinion from a competing carrier. But chances are they will be roughly the same.
water has been found to be wet.
Federal Excise Tax: $1.29
Federal Universal Service Fund: $0.56
State Gross Receipts Tax: $0.15
State Sales Tax: $1.76
State Telecom Excise: $1.00
County Surcharge: $0.05
County Telecom Excise: $0.79
MCTD Surcharge: $0.24
Local Sales Tax: $1.81
State 911: $1.20
County 911: $0.30
Regulatory Programs Fee: $0.86
Many cell providers advertise "no charge for roaming nationwide." The plan I'm on from Cingular features that. What is not said is, many of the places you could roam from in the days of paid roaming are now blocked from your phone! At home, on my "no charge for roaming nationwide" plan, I often get a full scale signal. But, when I try to make a call I am admonished, "Emergency use only."
My favorite thing at the car dealer is the "conveyance fee" that is pre-printed on the invoice for a car. They say "it's necessary, everyone has to pay it. It's state mandated." Of course none of it is true, but people will pay anyway, because they're not being told the whole truth.
It's not illegal, but its very sneaky. It's something that most people will miss, and when most people dont know they are being ripped off, then the government can take a closer look at it.
http://github.com/gbook/nidb
No one is saying they shouldn't make money.
The gripe is that they are using the old bait and switch tactic, by disguising extra fees as taxes.
So instead of advertising a plan for $50/month + tax...its actually $40/month + tax + B.S. charges.
The complaint is not that we have to pay for them. The complaint is that these fees are not honestly disclosed to the customer until after the customer is already signed up, in many cases to a long term contract.
Without up front disclosure of the amounts of the fees, it is impossible to make an informed choice of telecom company based on what the service really costs. The practice of hidden fees also unfairly penalizes those companies that satisfy the mandates more efficiently and thus can charge lower fees.
In short, nobody minds fees. The problem is the way the telecom companies deceptively advertise their prices without the fees.
It seems that the real issue there is that the charges are named strangely. This is certainly nothing new.
I remember the first AT&T local service bill - charges like 'line charge' and 'access charge'... Why these are itemized on a bill makes no sense to me.
Even worse are medical bills. I got a bill with 25 different charges that looked like LOCKBOX 54345333453345 - $45.55. Why even break it down? It would be nice if there were some kind of 'transparency in billing' law that required bills to make some kind of dang sense.
+++ ATH0 +++
Simple example: What if Starbucks showed the actual cost of making that cup of coffee on the bill seperate from the markup at the register? People already know they're very expensive, but if they "really" saw it things would be different.
Now there is a lot of information you can get if you do some research into the company financial reports, but your average person is not going to do that.
"New York State has collected $440 million since 1991 in special taxes on cellphones. But only about $30 million of that has gone to the program named on most cellphone bills as the purpose of the tax: enhanced 911 service, which can help police, fire and ambulance dispatchers locate a cellphone caller in need of emergency help"
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http://www.nytimes.com/2004/05/10/nyregion/10ph
companies passing their own cost of doing business to customers
You have to be kidding me!
Every company in the entire world since the beginning of time has tried to do this. Even St. Thomas Aquinas thought passing your cost of business on to your customers was OK. And, Thomas was the champion of the idea that a merchant should charge only just enough to cover his labor expenses (sacrifices).
The complaint that "companies pass their cost of business along" is the same as arguing that either (a) the company owes you something, and you should get something for nothing, or (b) the company's charges to you should be totally arbitrary and capricious and have nothing to do with want the service costs to provide. I'll admit that the cost-plus model of pricing is just a starting point, but the cost of goods usually sets the floor as to the price of the good.
From the article:
In truth, many of the surcharges like those imposed this year by DSL and wireless providers reflect real costs related to each company's compliance and payments in support of government-mandated "public goods."
So, these really are costs imposed by the government (i.e. taxes). The telco companies have just made the decision to let the customer know how much the government regulation is adding to the cost of the phone service. I fail to see how this is different from advertising the price of your goods non-inclusive of sales tax.
Is the argument against this that people should not know how much their government charges them in taxes? Granted the "tax included" pricing philosophy is easier to budget for, and I assume that is the "moral outrage" that the price you agreed to isn't what you are charged, but the rest is effectively sales taxes. It is annoying but talk to your government about it.
Several others have posted comments regarding the legality of such fees and the deception surrounding them. Not a lawyer, and I don't understand exactly where the line is drawn, but I can tell you that a lawsuit would hold up. Case in point: Verizon.
I'll be the first to come out against the obesity lawsuits against McDonalds -- Frivolous court-clogging litigation ranks quite highly on my list of pet peeves. By that token, suing your wireless carrier to recoup $2.93 per month to the tune of legal fees, court costs, and simply the time involved would be quite outrageous. However, were I to take up such a matter, it would be not for the money involved, but for the principle. I've no problem with a corporation recovering extra costs due to the imposition of federal fees and standards from consumers assuming such fees are small and reasonable. I do not appreciate being lied to or otherwise misled -- it is one thing to pass costs back onto the customer, but quite another to masquerade a cost as a state or federal mandatory tax.
In any case, Verizon made this mistake. I never had much of a problem with receiving a $40.21 bill for my $36 plan sans overage -- I've more or less accepted that I'm going to get screwed over no matter what. Apparently a few were a little more upset than I; in November, I received notification that I was part of a class-action lawsuit of fellow customers against Verizon and its affiliates dating back to 1993. Due to their engagement in such practices, the company has been ordered to pay these customers something like $20, offer free text messaging, or free wireless web for a period of time. Nothing required to claim it either...apparently it is all automatic.
So, as silly of an idea as a lawsuit may seem, litigation seems to be a viable option, assuming you have an incredible amount of free time on your hands and are bothered by such deceptive practices enough to take the issue upon yourself.
Of course, knowing T-Mobile, I'd be more likely to go after them for their lack of coverage or decent service than slight-overbilling ;-).
-Scott
You laugh, but T-Mobile UK just started charging one pound per month just to send you an itemized paper bill.
That would seem less serious if I hadn't just caught them double-charging me for text messages supposedly included in my monthly allowance, based on the itemized records from previous months' bills.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
1. There is a difference between advertising and billing.
2. All advertisments are lies to one extent or another. Some are smooth and some hit like a sledghammer.
3. 99.9% of prices advertised are before sales tax.
Add the fact that telephone companies (cell or landline) are the worst at this of any industry. Hell, they make electric and cable TV companies look honest, and most of us know better.
Why is this news? It's just business as usual in the good ol US of A.
Professional Politicians are not the solution, they ARE the problem.
What the phone companies are doing is making the costs of service look cheaper than it is. They quote you $50, but in fact are charging you $55. The $5 is not going to an government agency. The $5 is revenue. It is what you pay for the private company for the service, which most of us would consider the real cost of the service.
The problem with this is that limits your ability to compare prices. Many mail order places use this shady tactic to make their inferior products seem less costly. For instance, a music service may list prices for CDs that are, on average, $8. However, after adding the handling fee, a fee that is in fact revenue to the company, the real costs of the CD may be closer to $12. Note that is not the shipping fee that is paid to the carrier, which may be as low as $1.50. By quoting an intentionally deflated price, they deceive consumers. Many of the shady mail order place, like fingerhut, play the same game. I believe UPS paid a fine for doing this with the insurance charge.
As an example, suppose car insurance companies were allowed to add a statutory loss fee that would pay the expected claims of the year. In this way the insurance company could quote you a price that would only cover their administrative costs, which might be 65%-75% of the real quote, and then add the fee onto that. When you compare prices, you would not be able to find the cheapest quote because of this large percentage that was unknown. The companies that were in fact the cheapest would tell you this missing bit. This might make these companies seem more expensive.
In the end there is no reason for a telco not to quote the actual money the customer will have to pay everyone month. It is generally going to be the same for all providersin a region.. In fact, them not doing this is costing the major telcos business. The smaller companies are doing one of two things. Everyone knows how much they pay for the land line every month, but not everyone know how much basic service costs. The small telcos are taking advantage of this. Some telcos are targeting the good customer looking to save a few bucks. These are quoting basic service that is one or two dollars cheaper the the major telco, but are doing it in such a way that it looks like this is all the customer will have to pay, therefore making the service appear much cheaper than it is. Other telcos are targeting the customers that don't always pay their bills. These companies set their basic service charge to the average amount the customer would pay at the major telco, and then add taxes on top of that. They advertise in such a way that it looks like the customer would be paying the same as if they went with the major telco.
Clearly it is deceptive and we should not tolerate it. If Walmart charged a two dollar store use fee on every transaction, fewer people would shop there.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
One thing that blows me away. Sprint does this; I wouldn't be surprised if other carriers do as well, but when I get my statement, I get a list of the phone calls and time used, but I don't get a total. No total of minutes?? WTF is that? It seems like this is an obvious attempt to keep you from looking at whether or not your total monthly usage would make a different plan more economical. Now maybe you can hit some buttons on your phone and get totals, I don't know, but it seems ridiculous for a carrier to list all your calls, yet not sum it all up in a total!
some people have reported that you may be able to use a fee hike to your advantage. since it is a modification to your existing contract, you may be able to reject the fee and have your contract cancelled without paying an early termination fee. YMMV
. SLASHDOT: Home of the vicious nerd.
I used to run a small business. I remember one bizarre conversation that I had with my accountant at our first tax time...
ME: So we don't have to pay a tax on that then?
ACCOUNTANT: Right.
ME: So what's this big fee, payable to the government, that you have calculated?
ACCOUNTANT: That's not a tax. That's a levy.
Oh, it's not a tax, it's a LEVY! I feel so much better... Let me sign the check.
[Your blood pressure just went up.]
I assume I'm not the only one that visited the original article site and was presented with a pop-up ad for NextTel when they left :)
Expect NexTel to be adding two more "taxes":
1. Coercion Misdirection Levy - for ads served to people after reading an article explaining how the company jacks up profits under the guise of "taxation".
2. Geographic Locale Fee - for ads served to people they can't service (I'm in Australia).
Patent litigation: A doctrine of Mutually Assured Destruction... in which everyone seems willing to push the button
"The "transportation fee" only applies if you're stupid enough to pay it."
Actually the transportation fee is not a dealer based fee and represents what the dealer pays to Toyota (or the regional association) to get the car delivered to him.
When you say that you get it "waived", you're merely being naive. Cars are routinely discounted from the sticker price; in fact except for hot cars every car is available for less than sticker, and sometimes considerably less than sticker.
Therefore if a car costs $20K, and transportation is $500, they may say, "Oh Mr. Jason, you're a hard bargainer, we'll sell you the car for $20K and 'waive' the 500 transportation fee", you're really getting ripped off.
Advertising fees are a bit fuzzier in that dealers in certain areas actually pay this fee, but you as a consumer don't know how and why. I always consider them illegitimate because advertising is a cost of doing business; its like GM charging you extra because they had to mow the lawn outside the corporate office.
Other fees are lies, such as "dealer prep". A dealer has to "prep" the car to sell it. Why would you pay extra to get what the dealer is obligated to provide? An old one that used to be a rip off was "undercoating" later became "rustproofing". A common one today is "administrative fee" or "papework fee". In my county, the dealer is limited to $25 for this fee.
All fees to a certain extent are deceptive, the primary difference is transportation fee is right on the Mulroney and is more legitimate, and is an actual cost to the dealer.