FCC Lowers Payphone Surcharge
February 12, 1999
Citing “more up-to-date information” regarding the cost of providing payphone service, the Federal Communications Commission has lowered the surcharge on toll-free calls from 28.4 cents per call to 24 cents per call.
The surcharge is the result of 1996 federal legislation calling for rules to make payphone services more competitive. Among other things, that law directed the FCC to find a way to compensate payphone owners for all calls made from their phones. Until then, payphone owners were required to provide access to all users, but received little or no revenue from toll free or so-called “dial around” calls.
The FCC originally chose 35 cents as a “fair” surcharge, basing their decision on a typical charge for a local coin call. It later reduced that to 28.4 cents per call, explaining that it actually cost payphone owners 6.6 cents less to handle a dial around call than to handle a coin call. But this “top down” method of calculation, pegged on going rates for local coin calls, meant that payphone providers could raise the surcharge by raising the rate for local calls.
A coalition including several trucking groups challenged the surcharge and, last year, a U.S. Court of Appeals ordered the FCC to provide a better explanation of its compensation plan.
The FCC instead went back to the drawing board, coming back with a “bottom up” calculation method based on the cost of providing payphone service. This not only lowered the rate, but also effectively freezes it at 24 cents. The FCC encouraged long-distance phone companies to refund the 4.4-cent difference, but it did not order them to do so.
The new surcharge is subject to appeal and won’t be effective until 30 days after a notice of the change is published in the Federal Register. The full text of the FCC decision (CC Docket 96-128) can be found on the Internet at http://www.fcc.gov.