BellSouth Corp. has dropped a $2.97 monthly fee it was charging DSL subscribers in lieu of Universal Service Fund (USF) contributions. The FCC late last week opened an investigation into BellSouth and fellow Bell company Verizon Communications Inc. for tacking on the fee even though the carriers no longer pay USF monies from their DSL services.

Once media reports started circulating about the surcharges which were not supposed to be added once DSL no longer was required as of this month to contribute to the USF BellSouth announced it was immediately eliminating the fee. Joe Chandler, director of media relations for BellSouth, said on Monday the company had been getting criticism for imposing the charge and that executives decided to drop it.

We obviously have a pending merger and we did not want this to become too much of a distraction, he explained.

Chandler said BellSouth had instituted the fee in place of USF charges to make up for costs associated with regulatory directives, such as wholesaling DSL and installing systems to meet those requirements.

We still believe that our reasons are justified, he said. He said the company does not plan to add any new line items to make up for the monthly $2.97 loss, but noted, we make pricing changes all the time and we cant sit here today and say pricing [will go] higher or lower.

BellSouth said the fee will be chopped from most customers bills within the week, but that it will make credits dating back to Aug. 16 if necessary.

Verizon spokesman Brian Blevins said the carrier has no plans to drop its USF-replacement fee, which it instituted Aug. 26. The money helps to meet our costs of providing service, Blevins said. He added that particularly applies to the cost of providing standalone DSL.

Verizon sent a letter to customers earlier this month explaining the change. Customers now pay a supplier surcharge of $1.20 a month for Verizon Online DSL with service up to 768kbps, and $2.70 per month for service at higher speeds.

Meanwhile, members of the Competition Coalition, an organization formed to combat RBOC megamergers, decried the Bells decision to replace the eliminated USF fee with one that goes back to the companies. This deceitful exploitation of consumers is exactly what our coalition has been concerned about, said Andrew Schwartzman, president and CEO of the Media Access Project, and a member of the Competition Coalition. After convincing the FCC that elimination of USF fees would lead to lower broadband prices, the Bells simply replaced the government fees with their own sneaky surcharges, padding their pockets at the expense of captive consumers. Although the FCC should be commended for opening this investigation, the real question is whether regulators will stand up to AT&T and prevent the reconstitution of Ma Bell and future abuse of the publics trust.

BellSouth Corp. www.bellsouth.com  

Competition Coalition www.mergermonster.com  

Verizon Communications Inc. www.verizon.com