BellSouth Blinks on DSL Fee

Updated from Aug. 25

BellSouth (BLS Quote) blinked Friday as a broadband-pricing battle with regulators loomed. But rival Verizon (VZ Quote) indicated it won't follow suit.

Atlanta-based BellSouth said Friday afternoon it would eliminate a surcharge it briefly assessed on its digital subscriber line, or DSL, Internet service.

BellSouth and Verizon drew criticism this week by socking DSL users with new fees after a government surcharge tied to the federal Universal Service Fund was phased out.

The demise of the so-called USF fee should have saved the companies' broadband subscribers as much as $2.83 a month. But Verizon said last week it would charge customers up to $2.70 a month, and BellSouth said it would charge up to $2.97, in company surcharges aimed at recovering costs.

On Friday, The Wall Street Journal reported that Federal Communications Commission Chairman Kevin Martin was "very upset" by the companies' decision to stick it to consumers. Regulators have yet to sign off on BellSouth's pending merger with AT&T (T Quote).

The agency was preparing a list of questions for Verizon and BellSouth, according to media reports.

On Friday, BellSouth backed down. The company said it would roll back the fee and credit any payments charged in the last week.

"As described on BellSouth's Web site, the broadband fee was designed to recover a number of costs remaining from previous regulatory obligations and other network expenses that increase the cost of the Internet services we provide to consumers," BellSouth said. "Since the FCC eliminated the continuing applicability of many of these regulations, BellSouth has been able to provide a greater variety of Internet services to consumers, to which consumers have responded enthusiastically, and has signed over 300 contracts to provide independent Internet service providers with wholesale DSL services."

Verizon spokeswoman Bobbi Henson confirmed Friday that Verizon has received a list of questions from the FCC. She said the company plans to respond in due course with "thoughtful answers."

But she said there is "a big difference" between BellSouth's actions and Verizon's. Henson said Verizon aims to recover operational costs tied to providing DSL service -- as opposed to the regulatory costs BellSouth mentioned.

As for consumers who feel that a fee is a fee, Henson said, "We have been crystal clear about our plans."

She said Verizon has incurred costs in building and maintaining its broadband services and that it must recoup those costs some time. "There is no impact on the bottom line of the bill," she stressed. Henson added that many Verizon DSL customers are on annual contracts and therefore won't have to pay the new surcharge immediately.