We’ve spent a few months looking at why cable and internet bills are so confusing, and where all the fees come from. But if there’s one bill in our virtual mailboxes that’s even more bloated and byzantine than pay-TV bills, it’s wireless bills. Hundreds of millions of us get them, but odds are that most of us don’t understand every fee, tax, or surcharge we pay. So now it’s the mobile industry’s turn under our microscope. Up first: Verizon Wireless.
When you sign up a mobile plan — some combination of voice, text, and data — you agree to pay something like $39 or $75 per month for your service. But when you get your actual monthly statement, the price you pay can be more than 50% on top of that advertised rate, thanks to a heap of sometimes confusing charges and fees.
Who’s to blame for these extra costs? Everyone from state and local governments to the wireless provider itself. How can you tell which is which?
The below bill was provided to Consumerist by a real-life Verizon Wireless customer. This subscriber has a shared family plan with two smartphones on it — a pretty common scenario, especially for couples without kids or with kids too young to need or want a phone of their own — for the nominal rate of $45 per month.
However, this customer actually pays $125.77 per month. That means that of their total monthly bill, just over $80 — or 64% — is actually some kind of additional cost, charge, tax, or fee. Some of those are expected; some are not. Here’s how it all breaks down.
A Note: Mobile bills, as pieces of paperwork, tend to be sprawling; this sample from Verizon is nine pages long. To that end, we’ve done some cropping and re-aligning to make the relevant parts easier to read and discuss, and we’ve had to break it all down into multiple images. Aside from redacting consumers’ personal or identifying information, however, the bill’s actual content remains unchanged.
Overview
Verizon provides an overview of billing, and how it’s apportioned to each line, up front, along with a description of the subscription plan.
We haven’t broken it out here, because the line-by-line breakdowns that follow are more descriptive, but this one-shot view of which charges are apportioned to which line does appear here first.
If any line on the account had gone over its allotment of talk minutes, text messages, or data use, overage fees would also appear here in a quick-to-view grid.
Account Charges and Credits
1.) The Verizon Plan Medium 3 GB
This is the quoted price for the service bundle you subscribe to. In this case it’s Verizon’s “Medium” service tier, which includes 3 GB per month of data and unlimited talk and text. The data pool is shared among all devices on the plan.
On its website, Verizon describes the plan like so:
This is the “simplified” plan structure Verizon rolled out in August, 2015. (This subscriber has been a Verizon customer for ten years, but was off-contract for several months at the time of their last phone / plan upgrade in November 2015, and so was rolled into the “new customer” structure.)
This is the price you expect to pay, and the one you sign up for.
2.) 21% Access Discount
This consumer gets a discount from Verizon thanks to an agreement their employer has negotiated with Verizon Wireless. Many large corporate employers provide some similar mobile plan discount as an employee benefit, usually with the wireless provider that the company uses for its own business needs.
However, it’s worth noticing that the employee discount, in this case 21%, only applies to a very thin slice of the total $125 bill: the $45 for the “Medium Plan.” It does not apply to separate charges for smartphone use, for data use, for phone payments, or for anything else.
Not pictured: Any other applicable credits or refunds to your account, for specific service or billing issues, would appear in this general portion of the bill.
Monthly Charges
3.) Smartphone Line Access
Verizon charges you $20 per month, per line, for having and using a smartphone. This is not a charge for data usage, nor is it any kind of device payment plan. It has nothing whatsoever to do with any usage. This subscriber has to pay Verizon $40 a month, on top of their $45 usage subscription plan, simply because the phones on both lines are smartphones.
(This is different from the one-time $20 upgrade fee customers incur when they upgrade their phones, or the one-time $20 activation fee they charge customers when those new phones are turned on. Those charges would appear under a different part of the bill or, more likely, would be charged up front at the point of sale.)
4a.) Device Payment Agreement [number]
4b.) Device Payment Agreement [different number]
When Verizon changed its billing structure in 2015, they did away with the traditional two-year contract and heavily subsidized phone purchase.
So when this customer went to upgrade some months ago, instead of paying $200 each for new smartphones and being locked into a two-year contract with Verizon, they traded in their old phones and pay the balance of the new ones — between $300 and $400 per line, in this case — in monthly installments, over the course of two years.
From a consumer perspective, it works out about the same: you’re locked into a 24-month plan with a large lump sum payment due if you go elsewhere before you’re done. It’s just that now it’s the balance of the phone payment, and not an early termination fee (ETF).
In this subscriber’s case, one of the phones being paid off over time is an iPhone 6S and the other is a Samsung Galaxy S6.
Usage and Purchase Charges
5.) Voice
This is where Verizon lists charges for voice minutes used. Most of its available new plans include unlimited voice, but some plans still meter minutes.
A full breakdown of what numbers each line called or were called by, where those calls originated, when the calls happened, and how long each call lasted appears on subsequent pages of the bill. (We’re leaving those pages out for brevity and for consumer privacy, but they’re pretty self-explanatory.)
6.) Messaging
This is where Verizon lists charges for text (SMS) messages sent and received. Most of its available new plans include unlimited texting, but some plans still meter messages.
7.) Data
This is where Verizon lists how much data each individual line on the account used. If the sum across all phone lines is greater than the monthly plan, you win an overage fee. Both users on this particular account mainly use their phones on WiFi, though, and so their data usage is well within the 3 GB allotment they subscribe to from Verizon.
Not pictured: Other purchase and usage charges, like roaming fees, international calling, international travel plans, or charitable donations or purchases made by text message, appear under this section of the bill when incurred. If you do have charges in this section you don’t remember, double-check them to be sure they’re not from cramming.
Verizon Wireless’ Surcharges+
8.) Fed Universal Service Charge
The FCC’s Universal Service Fund pays for programs like Lifeline that help subsidize and expand phone and internet coverage to rural and/or low-income Americans who would otherwise remain unserved.
The Universal Service Fund is paid into by telecom operators, who are permitted — but not obligated — to recoup that cost from consumers. That said, basically all carriers pass through their USF contributions as line-item fees to their subscribers. This is Verizon’s.
(Many states also have a state-level universal service fund into which phone companies must contribute, but this subscriber’s does not.)
9.) Regulatory Charge
The FCC collects annual fees from telephone and cable operators; that’s part of where the commission budget comes from.
Just like with the USF fee above, the FCC rules permit — but do not require — operators to recover regulatory fees from subscribers in monthly installments. Technically speaking, Verizon doesn’t have to pass this fee through to consumers. (But everyone consistently passes this fee through to customers.)
10.) Administrative Charge
Verizon’s describes this as basically a catch-all fee for recouping costs of things it is required to do.
Verizon uses these charges to pay for costs including property taxes, facility fees, regulatory obligations, and related costs of doing business. The company also says that this is a Verizon fee, not a tax, and that is subject to change.
11.) [State] Gross Receipts Surchg
The state where this subscriber lives levies a gross receipts tax on most large commercial enterprises with revenue exceeding a certain threshold. The state law does not explicitly say whether businesses can or must pass the fee through to consumers as a line item, but it also doesn’t say that they can’t. So Verizon does.
12.) Local BUS Lic Surchg
The municipal area where this subscriber lives imposes a Business License Tax on most commercial enterprises with revenue exceeding a certain threshold. For telecom companies, it’s equivalent to 0.5% of gross revenue (earned in that jurisdiction). The local law, like the state law, does not explicitly say companies can or must pass the fee through to consumers as a line item, but also doesn’t say they can’t.
Taxes, Governmental Surcharges and Fees+
13.) State 911 Fee
The state where this subscriber lives imposes a charge on every phone line — landline and wireless — to contribute to financing the state’s Enhanced 911 services. Two phone lines on one bill means two fees on one bill. The vast majority of states impose some similar kind of fee.
14.) Communication Sales Tax
The state where this subscriber lives imposes a sales tax on all wireless phone service, same as they do on landline, cable, and satellite service.
In this instance, it’s the same flat sales tax rate as on all other purchases. However both the subscriber’s state and municipal jurisdictions levy a sales tax (a scenario like a 5% state tax plus another 1% locally) and Verizon has rolled them together into one flat sales tax charge.
Googling “[state name] communications tax” should be the fastest way to find the voice tax rates in your state. Rates may also vary based on county or municipality.
Verizon Wireless not your mobile phone provider? Fear not! We’re just kicking off this series, and will have bills from AT&T, T-Mobile, and Sprint coming down the pike in the days to come.
by Kate Cox via Consumerist