Column: That ‘infrastructure’ fee on some internet bills is just a stealth rate hike
Steve Kunzer recently received an email from his internet service provider, Frontier Communications, informing him that the company had made a mistake.
It wasn’t charging him enough.
“During a recent review, Frontier determined that you are not being charged the Frontier Internet Infrastructure Surcharge, which applied to your service at the expiration of your internet promotion,” the company said.
“We have corrected this error. Effective with your next bill, the $6.99 monthly charge will be applied to your account.”
This is noteworthy for a number of reasons, not least that Frontier is slapping internet customers with a hefty surcharge to cover a routine business cost — maintaining the network required for a service that already costs customers as much as $80 a month.
It’s also imposing this fee with no advance warning that I could find. The Internet Infrastructure Surcharge isn’t disclosed upfront on Frontier’s website. When I asked a service rep if there were any extra fees, she said there were “only taxes.”
The internet surcharge isn’t a tax, nor is it required by any government agency.
It’s just a fee, imposed by Frontier at its own discretion, above and beyond its base rates.
“It seems totally unfair,” Kunzer, 68, told me.
“They get you in as a customer and make you set up all the equipment,” the Hermosa Beach resident said. “And only after that do they tell you that your bill is going to be $7 higher than you thought.”
For many customers, that’s a stealth rate hike of 10% to 15%.
This is yet another example of businesses advertising one price and then tacking on extra charges after you sign up for service or make a purchase — a classic bait and switch.
“It’s a sneaky practice that undermines consumer confidence and trust in companies they do business with,” said Sally Greenberg, executive director of the National Consumers League.
“These random, made-up charges just pad the wallets of companies and make it impossible for consumers to compare prices,” she told me.
Frontier, which took over Verizon’s California landlines in 2016, is by no means alone in trying to trick customers in this way.
When you buy a CD or DVD at Amoeba Music in Hollywood, for example, you’ll see on your receipt a 35-cent charge for “wages & benefits.” It helps cover minimum-wage requirements, paid sick leave and workers’ healthcare.
I support all that. But addressing these business costs with an added fee, instead of slightly higher list prices, is just pulling a fast one on customers.
And Amoeba is hardly the worst offender with its relatively modest 35-cent money grab.
Wireless carriers, airlines, hotels, restaurants — many behave similarly with varying degrees of dishonesty.
In 2018, AT&T more than doubled its monthly “administrative fee” to $1.99 from 76 cents. The company said at the time that the fee “helps cover costs we incur for items like cell site maintenance and interconnection between carriers.”
These are, needless to say, routine costs for anyone operating a wireless network and thus should be included in the company’s base price.
The Tax Foundation estimates that taxes, fees and surcharges now constitute about 23% of the average wireless bill — which means the advertised price is nearly a quarter less than the actual service cost.
A Spectrum spokesman told me the dominant Southern California cable company had no monthly maintenance fee for its internet service.
An AT&T spokesman declined to comment. AT&T says online it collects fees from internet customers “to recover costs AT&T pays in taxes.”
Frontier introduced a monthly $1.99 Internet Infrastructure Surcharge in 2017. It doubled the fee to $3.99 a year later.
In February, the company jacked up the fee by an additional 75%, to $6.99, as many Americans continued to struggle with a pandemic that cost millions of people their jobs.
Frontier emerged from a yearlong bankruptcy last month. It lost more than $400 million in 2020.
Javier Mendoza, a Frontier spokesman, said the company’s internet surcharge “partially recovers the costs of increased network bandwidth consumption and facility and infrastructure relocations mandated by state and/or local governments.”
Note the squirrelly language. That bit about “mandated by state and/or local governments” applies to certain network operations, not recouping costs. There is no official mandate for charging this fee.
Mendoza said the fee was “transparently presented on monthly bills,” but of course you only get billed after signing up for service. The time when you want to know about dubious fees is before you commit.
As I noted above, I could find no such upfront disclosure on Frontier’s site. And when I called as a prospective customer and straight-up asked a service rep if there were any extra fees I should know about, she said no, “only taxes.”
Making Frontier’s internet fee even worse is the fact that the state of Washington sued Frontier several years ago for “failing to adequately disclose its Internet Infrastructure Surcharge” and “misleading consumers” by implying the fee was required by the government.
In a settlement last year, Frontier agreed to pay a $900,000 fine.
Frontier’s Mendoza declined to comment when I asked why the company seemed to be running the same playbook in California that got it into trouble in Washington. He said only that the company sold off its Washington operations last year.
Linda Sherry, a spokeswoman for the advocacy group Consumer Action, said “businesses prey on the confusion” created by fees and surcharges “and are happy to have customers think that these are government-imposed taxes.”
Most of the time, she said, “they are simply cost-of-business pass-throughs” intended to make customers think the company isn’t reaching deeper into their pockets.
This is blatantly deceptive and it needs to stop.
If businesses can’t find the wherewithal to advertise prices honestly and fairly, it’s up to lawmakers to make them do it.
A simple fix: Require list prices for goods and services to include all discretionary charges. Only government-required taxes and fees could be added separately to bills.
Or let’s follow the example of Europe and require that list prices include all fees and taxes, period.
Frontier says two of its goals as a corporation are “to put the customer first” and to “treat one another with respect.”
Its Internet Infrastructure Surcharge fails spectacularly on both counts.