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Broadband Bill Autopsy: The Origin and Purpose of Every Single Fee

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Fun fact: Internet and telecom providers paid $1.8 Billion dollars to the government’s “Universal Connectivity Fund” last year. [1]

Where did the cash come from? Take a look at your bill, and you’ll see that much of it came directly from millions of Americans like you — mostly in the form of “Universal Connectivity Charges” tacked onto broadband bills. [2]

Unfortunately, that particular fee is just one of many you’ll find if you squint hard enough at your monthly statement:

In the bills we’ve examined, most customers payed 20–40% above the base rate they signed up for.

Curious why you’re getting charged for “regulatory fees,” “right of way fees,” and dozens of other questionable line items?

…Then read on, because we’ve picked apart hundreds of bills over the years and found some pretty nasty stuff inside. This post covers all the fees we’ve seen across every major Internet, TV, and phone provider in the US, including Comcast Xfinity, Charter, Verizon, Cox, and all the other big names you know and love.

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Phone-Related Fees

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Federal Universal Service Charge (or Universal Connectivity Charge)

This charge is in response to the FCC’s Universal Service Fund that extends telephone (and internet) service into more rural or low income areas. The main purpose behind the fund is to offer affordable service to areas that are underdeveloped in terms of location and infrastructure. [3]

Telecom companies are all required to contribute to the fund based on a percentage of their quarterly revenues. However, most companies simply recoup this charge by passing it on to their customers in their phone (or internet) bills. [4]

Regulatory Recovery Fee (or Regulatory Cost Recovery Charge)

Despite the way it sounds, this is not a fee resulting from a federal or state regulation. Instead, this is yet another way the company can make back the fees they have to pay into the FCC for things like enforcement, policy-making, and other related services to the telecom or ISP. [5]

In other words, this fee helps the company get back the money they owe the FCC, just as the FCC charges companies to recoup their cost for all things licensing-related.

County 911 Service Fee (Also called E911, or Police and Fire Protection Fee)

This fee is based solely on which state you live in, and like most official taxes it’s pretty unavoidable.

The purpose of this fee is to fund and support local 9–1–1 services.

If you see an E911 (Enhanced 911) fee, that pertains to wireless phones and helps fund a service providing the exact location of the wireless caller. [6]

State Universal Service Fund

The state version of the Federal Universal Service Fund above and with the same purpose, but with a budget and administration that’s independent of the larger, federal fund. [7]

Also like the federal version, the state fee is a way for the company to recoup expenses and fees they have to pay the specific state.

County Telecom Surcharge

Dependent on the state and county the consumer lives in, this fee is a locally levied tax meant to cover access services like telephone poles, roads, etc.

State Telecom Surcharge

Exactly the same as the County Telecom Surcharge, but at a State level, and you could see both in your bill depending on which state you live in.

You’ll most often see both in states that have more control over franchises than its smaller counties. [8]

Telecommunications Relay Service

Depending on which state you live in, this fee goes towards a relay system that helps those who are deaf or hearing impaired communicate over the phone.

The relay services helps fund things like internet-based communications through text, voice carry-over, hearing carry-over, and captioned telephone services. [9]

Gross Receipts Tax Surcharge

This is a State tax on the companies’ total revenue and the specific amount varies drastically from state to state. For instance, Rhode Island charges 5%, while New Mexico charges up to 7.75% depending on which city or county you live in. Other states don’t even have them. [10] [11]

This is another fee that companies tend to pass on the consumer as a vague, official-sounding tax, but really it allows them to recoup their costs of doing business

Quick Tip

Promotional Pricing: Customers usually receive a promotional deal when they first sign up for phone, internet, and/or cable package or service. These typically last for the first 12 months before being increased to a standard price.

This temporary discount allows the provider to lure in potential customers with an initial deal while eventually making their money back the next year when they raise the monthly cost.

If this sounds like a “bait and switch” strategy, it’s not a stretch. In fact, companies do rely on a law of averages between the two years in order to break even.

Customers can call before the promotional offer ends and more often than not get an extended promotional offer. Of course, the process of haggling and negotiating through a mechanized customer service system can be a headache (and some providers count on people avoiding this hassle).

Administrative Charge

This fee is pretty vague and only a few services charge them, but they’re meant to cover the cost of things like paper, paying employees to take your call, collecting and processing payments, etc. [12]

In other words, the company charges the consumer an administrative fee to offset their costs of doing business.

Communications Sales Tax

This is an official State tax on landline phones and is similar to the tax on Cable and Satellite television. [13]

This tax varies from state to state, so to get a better idea of how much this is, how it’s administered, and what it goes towards, search “Communication Sales Tax” and your state.

Be Aware: Some companies, like Verizon, lump all their state and local taxes/fees into one billing category. This makes it difficult to see how these fees are broken down and how much goes to the State vs how much goes towards the City or County.

You can, however, usually go to your local and state websites and (with a little work) figure out exactly how much they charge. Granted, this might be more of a puzzle than it’s worth, but it also might be worthwhile to keep an eye on in case there’s a mistake along the way.

Cable TV Fees

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Receiver Fee (Also seen on bills as HD/DVR rental)

This fee charges the consumer for their use of the company’s set-top box (or cable box, HD-enabled box, or DVR-enabled box).

Until recently, the FCC has looked into alternatives to these boxes as a means to open up more competitve options (more recently in the form of an app that provides cable) that would open up viewing options and pass savings on to the consumer. [14]

However, the new FCC chairman, Ajit Pai, has more or less killed the program in an effort to deregulate the cable industry allowing companies to charge the customer for what many see as an outdated “cable box” system.

Cable companies do offer promotional deals that will take off the fee, especially if you get a bundled service.

Quick Tip

Early Termination Fees: ETFs (Also know as Cancellation Fees, Contract Termination Fees, or Something Similar) are fees that are often built into the fine print sections of contracts and can be quickly overlooked by the customer when they sign on for different services.

Basically, if you cancel your service (internet, phone, or cable) before the end of your contract, you could be faced with an ETF. The specific details of the fee does depend on what service provider you go with and their particular policy, so pay attention and ask about them before you sign on to a long contract.

Broadcast TV Fee (Or sometimes Broadcast TV Surcharge, Broadcast Network Fee, or Broadcast Fee)

The Broadcast TV Fee, which does sound official, is a common add-on fee that’s usually tacked on to bundled deals with promotional pricing. This allows the provider to recoup whatever deal they just offered, while still looking like they gave the consumer a deal.

These fees are also meant to off-set the costs that companies have to pay to transmit their signals through an existing network. In other words, the companies are charged a fee to transmit their signal and pass this cost on to the customer as a way to maintain their profits. [15]

Regulatory Video Cost Recovery Charge (Or Regulatory Recovery Fee, or FCC Regulatory Fee)

This is the same fee as the Regulatory Recovery Fee for telephone services, but this one’s specifically for cable operators.

Again, while this does sound like a federally-mandated fee, it’s actually a way the company can make back the money they have to pay into the FCC for things like enforcement, policy-making, and other related services to the telecom or ISP.

Do companies have to charge this? No. Does the FCC allow them to? Yes.

Video Franchise Fee (Or Rights of Way Use Fee, or Local Video Service Franchise Fee)

Franchise fees are charges the providers pay local and/or state governments or municipalities to use the state’s property as a right of way for cable service. In order to operate in particular states, cable providers pay the government a usage fee. This is not a tax, in other words, but a fee local governments charge the provider. [16]

These fees do vary based on where the customer lives, and is usually 5% of the provider’s revenue.

Cable providers aren’t required to charge this to the consumer but do so as a way to make up their costs of doing business locally.

County Sales Tax/ State Sales Tax (or TV Communications Sales Tax)

What can I say about State, County, or Federal taxes that hasn’t already been said? As we all should know by now, these taxes are as unavoidable with cable, internet, and telephone services as they are with everything else taxable in our lives.

It’s important to know that taxes do vary from state to state, county to county, and that some providers do lump all of these into one line on your bill (which might make it difficult to break down and understand).

As I said before, you can (and maybe should) go to your local government’s website to see how much they charge and what that money goes towards.

Regional Sports Network Fee (or Regional Sports Fee)

Whether or not you watch sports channels, if these channels are in your cable package then you will most likely see this fee. Also keep in mind that it’s hard these days to get a cable package that doesn’t include the sports networks.

This fee originally came about to cover the costs of what providers pay programmers to carry specific sports channels. In other words, like the Broadcast Fee, this fee helps the provider to recoup the money they have to spend elsewhere and is just as arbitrary. [17] [18]

Internet-Related Fees

High Speed Internet Equipment Fee (Or Wireless Gateway, or Modem Fee)

You’ll likely only see this fee if you rent a modem directly from your provider. Sometimes, though, this fee is charged by mistake even if you don’t rent one; so it’s still a good idea to keep an eye on it in case a phone call to your provider is necessary.

A good way to get rid of this fee is to go ahead and invest in your own modem and router. This will save you money in the long run and give you more control over things like download speed.

County/State Sales Tax (Or just Sales Tax)

This is currently a “gray area” tax, meaning it’s both legal and sort of illegal. Technically, internet service is not subject to any miscellaneous taxes or fees thanks to the Internet Tax Freedom Act that became a permanent law in 2016. The Act specifically prohibits federal, state, and local taxation on Internet access. [19]

It’s still legal, however, due to a grandfather clause built into the Act allowing any state that charged this tax before 1998 to continue with the same fee. The good news is that the grandfather clause has an expiration date, and all taxes on the internet will be banned by June 30, 2020. [20]

Note that physical things like modems are subject to sales taxes, all of which depend on how much your state usually taxes sale goods. Personally, I suspect these things will be taxed more once June of 2020 rolls around.

Federal Universal Service Fee (Or Universal Connectivity Charge)

This fee is exactly the same as the telephone version above, and it’s charged as a result of efforts to extend internet service into more rural, low income areas that tend to be less equipped with proper infrastructure.

Every provider is required to contribute a specific percentage of their revenue to this fund, and they tend to tack it onto consumers’ bills as a way to make back this money.

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More Hidden Fees are Likely in the Near Future

New regulatory standards entering the FCC as of 2017 will exempt many providers from listing individual fees at all. [21] While such a practice would simplify billing on the customer’s end, critics of the proposal point out that removing disclosure also cuts off consumers from understanding how their money is getting spent on the provider side.

The move towards hidden billing is widely seen as favorable for providers, as many of the big names in Internet service have been working to stamp out the “promo rate” system that allows customers to perpetually call and negotiate discount rates from ISP retention departments.

That said, simplifying disclosure regulation theoretically would make life easier for small ISPs, who have fewer resources to keep up with regulatory burdens.

The net effect is the same for consumers either way — confusion, marketing games, and high prices for the approximately one third of Americans with only one choice for true home broadband service. [22]

3 Comments, Add Yours Below.

Thank you for explaining all these fees in an easy to understand form. I’ve never attempted to learn about them before, but as a consumer I really should pay more attention to who I’m doing business with!

Wow! Great stuff here. On the ETF’s. Do you happen to have any wisdom to help negotiate them away? I believe for residential customers its only $10 per month remaining on the contract (for Comcast anyway). So the fee’s are not astronomical, but still….any thoughts?
Cheers.

I’ve heard of people doing this successfully with some cell companies, but unfortunately with ISPs they’re usually not something you can get out of. You can take them to court if you believe there’s a circumstance that will outweigh your contract. Laws have also been passed recently to prevent companies from charging ETFs to deceased customers, interestingly.

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