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PIC-C & USF

Both PIC-C & USF charges are fairly new and unfamiliar to consumers. The following is condensed from information provided by the Federal Communications Commission (FCC).

USF
Universal Service Fee is federal tax imposed on interstate and international usage, was set up to provide telecommunications access to school and colleges in rural and low income areas where the likely hood of technology would be slim. The amount imposed varies depending on your state and/or local area because every state has a different level of need.

It is very difficult to give a uniform answer as to where you can locate this charge on your phone bill. All of our services follow the state and local policies when assessing USF Fees.

PIC-C
Presubscribed Interexchange Carrier Charge (pronounced "pick-see") is a specific amount for residential vs commercial accounts. This charge is paid to the Local Exchange Carrier for use and maintenance on the telephone lines. 

The following information about PIC-C and USF fees has been extracted from the FCC's web site. The views expressed here reflect those of the FCC and do not necessarily reflect the views of DLD2000.com or the carriers we represent.

What is the Presubscribed Interexchange Carrier Charge?
The Presubscribed Interexchange Carrier Charge is a charge that long distance companies pay to local telephone companies to help them recover the costs of providing the "local loop."  Local loop is a term that refers to the outside telephone wires, underground conduit, telephone poles, and other facilities that link each telephone customer to the telephone network.

The monthly service fee that consumers pay for local telephone service is not enough to cover all of the costs of the local loop. 

Historically, the local telephone companies have recovered the shortfall through per-minute charges to long distance companies.  Now, however, part of these costs are recovered through flat-rated charges to long distance companies, who use the local networks to complete their long distance calls.  Because the costs of the local loop do not depend on usage, this flat-rated charge better reflects the local telephone company's costs of providing service.

A long distance company pays this charge for each residential and business telephone line presubscribed to that long distance company. If a consumer or business has not selected a long distance company for its telephone lines, the local telephone company may bill the consumer or business for the Presubscribed Interexchange Carrier Charge.

Has the PIC-C Increased?
Yes.  As of July 1, 1999, the Presubscribed Interexchange Carrier Charge went up - but the per minute charge long distance companies pay to local companies for each call made by their customers was reduced by an even greater amount.  Consumers should therefore expect to continue to see reductions in the per-minute rates they pay for long distance calls.

What is the maximum PIC-C for residential telephone lines and single-line business lines?
As of July 1, 1999, the maximum Presubscribed Interexchange Carrier Charge paid by the long distance companies for primary residential lines and single-line business lines is $1.04 per line per month. For non-primary residential lines, the maximum Presubscribed Interexchange Carrier Charge paid by the long distance companies will be $2.53 per line per month. (Local telephone companies treat a line as non-primary when it serves the same address as the primary line, even if the bill is in a different name at the same address.)

It is important to remember that these amounts represent maximum Presubscribed Interexchange Carrier Charge levels. The actual Presubscribed Interexchange Carrier Charge paid by the long distance companies may vary, based on the actual cost of providing local phone service in each area, and may be less than this maximum amount.

What is the maximum Presubscribed Inter-exchange Carrier Charge paid by long distance companies for multi-line business lines?
As of July 1, 1999, the maximum Presubscribed Interexchange Carrier Charge paid by the long distance companies for each multi-line business line is $4.31. Like the residential Presubscribed Interexchange Carrier Charge, this is a maximum; the actual charge may be less than this maximum amount.

Each year, the maximum multi-line business Presubscribed Interexchange Carrier Charge will increase by $1.50, as adjusted by inflation. However, as various phases of the FCC's plan are implemented, it is estimated that the average Presubscribed Interexchange Carrier Charge for multi-line business lines will dip below $1.00 in 2001 and, in most places will eventually be zero.

Did the FCC require long distance companies to bill consumers for Presubscribed Interexchange Carrier Charges?
No. The FCC does not require long distance companies to put the Presubscribed Interexchange Carrier Charge -- or any other charges or surcharges -- on your telephone bill.

Because the long distance market is competitive, the FCC does not directly regulate long distance company charges for service. As a result of this flexibility, long distance companies are taking very different approaches to whether and how they are changing charges to their customers to reflect the Presubscribed Interexchange Carrier Charges they pay. Some long distance companies may not charge any separate fees related to the Presubscribed Interexchange Carrier Charge. Others have added charges to their customers' bills -- such as a "national access fee" -- to recover the Presubscribed Interexchange Carrier Charges they pay to local telephone companies.

The maximum Presubscribed Interexchange Carrier Charge long distance companies pay to local telephone companies is generally lower for primary residential lines than it is for non-primary residential lines. Many long distance companies, however, are charging all of their residential customers the same rate.  Other long distance companies are charging monthly fees that match the Presubscribed Interexchange Carrier Charge they pay to the local companies.

Increases in per-line and other charges paid by the long distance companies, such as the Presubscribed Interexchange Carrier Charge, have been offset by reductions in per-minute charges paid by the long distance companies to local telephone companies.

If I don't have a long distance company, do I have to pay the fees?
A long distance company pays the local phone company a Presubscribed Interexchange Carrier Charge for each residential and business telephone line presubscribed to that long distance company. If a consumer or business has not selected a long distance company for its telephone line, the local telephone company may bill the consumer or business for the Presubscribed Interexchange Carrier Charge.(*see Tips for Lowering Your Long Distance Bill Fact Sheet)

It is important to remember that:

The FCC's Universal Service and Access Reform Decisions

On May 7, 1997, the FCC adopted changes to its system of interstate access charges to make them compatible with the pro-competitive deregulatory framework established by the Telecommunications Act of 1996.  The Commission took a series of actions to reduce long-distance rates and to allow the costs of phone service to be recovered in a more economically-efficient manner.  Included in this package were changes in the rate structure for additional phone lines used by residential customers.  At the same time, the FCC also adopted rules to implement a new system of universal service, as directed by Congress in the 1996 Act. This fact sheet addresses some of the questions that have been raised about what the FCC did -- and did not do.

MYTH:  The FCC is taxing additional residential phone lines.

FACT:  The FCC's order reduces existing "access charge" subsidies for additional phone lines--it does not impose a tax.  Local phone companies recover some of the costs of the phone line connected to your home through a monthly charge on your bill called the "subscriber line charge" (SLC).   Currently, the remaining costs of those lines are recovered through per-minute charges to long distance carriers. The SLC for residential lines is currently capped at $3.50 per month, to ensure that all Americans are able to afford basic phone service. The FCC's decision merely shifts the method by which large (price cap) local phone companies recover these costs, in the context of an overall plan to reduce long-distance phone rates substantially.

MYTH:  Phone rates will go up for the residential user in order to connect schools and libraries to the Internet.

FACT: Under the Telecommunications Act of 1996, Congress mandated that universal service include for the first time support for schools, libraries, and rural health care providers.  Although the discounted services that eligible schools, libraries, and health care providers receive will be paid for by telecommunications providers' contributions to universal service, we anticipate that this new assessment will be offset by other changes resulting from the Act, such as the reductions in access charges that long distance companies will pay.  Although it is too early to determine the precise combined effects of these changes, we do not anticipate that they will result in higher rates.  The goal of universal service is to make telecommunications affordable. 

Among the primary objectives of the FCC has been to ensure that rates do not rise.  All payments into the universal service fund are used to support all of the goals outlined by Congress in the 1996 Act, including affordable rates for rural telephone customers, rural health care providers, schools and libraries.  As directed by Congress in the 1996 Act, the FCC has, through its Universal Service and Access Charge Reform proceedings, adopted a universal service funding mechanism that promotes competition in the telecommunications industry.  Competition ultimately will deliver multiple benefits to consumers, including lower rates, greater choice, and improved service.  The FCC also has taken steps to ensure that expenditures that are made on behalf of eligible schools, libraries and rural health care providers are delivered effectively and efficiently. For example, the FCC has required that contracts for supported services for schools, libraries, and rural health care providers be subject to competitive bidding requirements.  These requirements should help ensure that services to schools, libraries, and rural health care providers are provided at the lowest possible prices.  In addition, consistent with the 1996 Act's mandate, the FCC has imposed reasonable limitations on the types of discounted services that eligible schools, libraries, and rural health care providers may receive and has imposed annual caps on expenditures under these programs.

MYTH:  Businesses are paying an unfair share to support universal service.

FACT:  The FCC has defined the methods for paying into the fund so as to be competitively neutral, shared fairly by providers and users, and so as to maintain local rates at current levels.  No group of users or providers is paying for any one piece of universal service.  The 1996 Telecommunications Act defined which companies should contribute. Under the Telecommunications Act of 1996, all of universal service, including affordable rates for residential consumers in all areas of the country, is supported by a broad based group of telecommunications carriers. All payments into the universal service fund are used to support all of the goals outlined by Congress in the 1996 Act, including affordable rates for rural telephone customers, rural health care providers, schools and libraries.  In the past, the universal service fund was supported almost exclusively by interexchange carriers.  Starting in 1998, this support will be much broader based, as directed by the 1996 Act.

MYTH:  The charge for primary residential lines will increase.

FACT:  The subscriber line charge for primary residential lines remains the same. The FCC's order maintains the existing $3.50 cap on the monthly subscriber line charge for primary residential lines.

MYTH:  Increased charges for additional lines will be significant.

FACT:  These charges represent a fraction of the costs that the average user with additional lines pays for phone service, and an even smaller fraction of what Internet users pay for computers, modems, additional lines, and Internet access.  The maximum subscriber line charge for additional residential lines would increase by $1.50 per month in 1998. On average, an Internet user with a second line spends $19.95 per month for connectivity through an Internet service provider, and $20.00 per month for the second line, for a total of about $40.00 per month.  The $1.50 increase in the line charge represents less than 4% of this total.

The FCC also created a "presubscribed interexchange carrier charge" (PIC-C), which is a flat charge assessed on long-distance companies. For additional residential lines, the maximum PIC-C will be $1.50 per month in 1998.  The caps on these charges will increase gradually in future years, and rates will vary from state to state based on the actual cost of providing local phone service in each area.

MYTH:  Today's system is better for residential users and shouldn't be changed.

FACT:  No.  In fact, residential rates today are subsidized by shifting costs, resulting in higher long-distance rates.   This system of subsidies, therefore, forces everyone to pay higher long-distance rates and stifles competition, because new entrants must compete against a subsidized rate charged by incumbent local phone companies.  Most users with multiple residential lines will be better off under the new system, especially those that make many long-distance calls.

MYTH:  This schools and libraries program duplicates state and local efforts as well as voluntary activities.

FACT:  The FCC's plan complements the effort underway by states and localities to bring the information superhighway to America's classrooms and libraries. According to data collected by U.S. Department of Education last year, only 14% of all public school instructional classrooms are connected to the Internet.  In order to broaden the reach of technology to classrooms and libraries, the Telecommunications Act of 1996 specifically designed assistance for schools and libraries that matches state and local efforts and builds on voluntary efforts.  A 1995 cost study by McKinsey and Co., found that 85% of a school's total costs of connection are allocated to computers, software, training and maintenance, yet none of these components is eligible for universal service discounts under the Act.  While many state, local and voluntary efforts bring wires to schools or put computers in classrooms, schools must still find and pay for the telecommunications services that make technology a uniquely valuable educational tool. Therefore, the FCC's program is designed to make significant discounts available for schools and libraries purchasing these telecommunications services.  In the case of a school, administrators will first negotiate with local carriers the best and most cost-effective package of services, and then apply for a discount of 20 to 90 percent, depending on the school's particular need and location.

MYTH:  The FCC is unfairly forcing wireless providers, including paging companies, to pay in to the universal service fund.  This will increase prices for wireless services.

FACT:  The Telecommunications Act of 1996 requires all interstate telecommunications carriers to contribute to universal service.  Congress contemplated that a broad base of contributors would spread out the cost of universal service, reducing the cost to any one class of service provider. It would not be competitively neutral if certain classes of carriers were exempt from contributing to universal service.  It is also worth keeping in mind that the Commission's interconnection decision reduced the rates, in some areas by as much as 4.5 cents per minute, that wireless carriers pay to wireline carriers for transport and termination.  This decrease, combined with the increasing amount of competition in the wireless industry, should help ensure that prices for these services generally remain the same or continue their downward trend.  In addition, the 1996 Telecommunications Act and the Commission's rules also afford wireless telephony providers the ability to be universal service providers and recipients of universal service payments.

MYTH:  Internet service providers (ISPs) and cable companies are getting a free ride, they can take money from the universal service fund but they don't have to pay in.

FACT:  The Telecommunications Act of 1996 specifies that carriers that provide interstate telecommunications services are required to contribute to universal service support.  The statute also requires that the Commission implement universal service support in a competitively neutral manner.  The Commission has adopted rules that meet these directions.  ISPs do not meet that definition of providers of interstate telecommunications services and therefore do not contribute directly to the fund.  At the same time, contributions to the fund will be based on telecommunications revenues so ISPs will contribute indirectly through their purchase of telecommunications services.  Allowing ISPs and cable companies that provide Internet access to schools and libraries and rural health care providers to receive support meets the goal of competitive neutrality and facilitating their access to advanced services.  Otherwise, ISPs affiliated with telecommunications carriers would be favored over independent ISPs, and schools would have far fewer options and likely have to pay more for the services they need.

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