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Commerce Department Opens Investigation into Long Distance Service Fees and Surcharges

Statewide inquiry aims to ensure elimination of “Intrastate Surcharges”

December 13, 2012

For Immediate Release:

SAINT PAUL, MN – Monthly or per-minute rates? Minnesota consumers shopping for long-distance providers often base their decision on the advertised monthly or per-minute rate to get the best deal for their budget. Many consumers are not aware of discretionary surcharges that could be added to their monthly bills.  These fees can exceed two dollars a month per customer, and since the fees are not incorporated into the basic service rate, customers may be misled and competing long distance providers may be at a disadvantage. 

“Telephone bills are confusing to consumers and ambiguous fees and surcharges can be deceptive, as well as detrimental to fair competition in the marketplace,” said Commerce Commissioner Mike Rothman. “That is why the Minnesota Department of Commerce recently opened an investigation into the use of surcharges and fees by long-distance carriers.” 
Generally speaking, long-distance companies pay local telephone companies to originate and terminate long distance calls. Historically, long-distance companies have typically paid a higher rate for intrastate calls than interstate calls. To address the difference in rates, some long-distance companies have recovered the higher intrastate rates by adding a fee or surcharge to Minnesota customers’ bills. These fees are not incorporated into the basic service rate advertised to customers, which may be misleading to consumers and negatively impact the ability of other long-distance providers to compete in the marketplace.

The Federal Communications Commission (FCC) issued an Order on November 18, 2011, requiring local telephone companies to reduce, and ultimately eliminate, the higher rates charged to terminate intrastate long-distance calls. To comply with the Order, local telephone companies were required to reduce their terminating rates by 50 percent of the difference between interstate and intrastate access charges by July 3, 2012 and eliminate the difference by July 1, 2013. Related surcharges on consumers’ long-distance bills should be reduced to reflect this change, and consumers that have been charged the intrastate surcharges should see a reduction in their monthly statement.  To ensure that long-distance companies are in compliance with the FCC Order the Commerce Department opened the review.

“This is an opportunity for Minnesota long-distance companies to help make telephone bills more transparent and easy to understand, and consistent with truth-in-billing rules,” stated Commissioner Rothman. “This investigation is meant to ensure a fair and competitive marketplace in Minnesota and simpler, more consumer-friendly long-distance billing. Minnesotans need to have all of the necessary information to select their long-distance provider and to easily understand what they are being charged for the services they receive.”

The effort by the Commerce Department to eliminate the long-distance fees and surcharges, that will soon be phased out completely, helps protect both Minnesota consumers and competing long distance providers. The Commerce Department notes that a new charge called “Access Recovery Charge” (or ARC) is authorized by the FCC for local service, and therefore does not pose a concern.  The Department’s investigation addresses charges that may have a similar description, but are being assessed by long distance companies.