TC2's David Rohde on Telecom

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The real estate market is booming! (Or so it seems from AT&T surcharges)

By David Rohde Posted April 13, 2011

Exciting news: I come to you today to declare the end of economic doom and gloom. Incontrovertible evidence of a huge economic recovery is provided by the latest in AT&T surcharges.

According to an advance notice on the AT&T Business Service Guide, they’re raising their property tax surcharge from 2.72% of applicable service revenues to 3.53% on May 1. Clearly the value of AT&T properties all around the country is soaring. With the recovery of the national commercial real estate market, an economic boom is under way!

[Pause]

If you’re already chuckling at my joke, consider yourself a sophisticated corporate telecom pro who “gets it.” The big carriers’ property tax surcharges have been a comic target of this blog right from the beginning. That’s because these surcharges are the most preposterous in the entire galaxy of wireline surcharges. Your company presumably has a significant property tax bill, but I’m willing to bet you don’t add a line item for it on your customers’ invoices!

When AT&T raises what it calls its Property Tax Allotment as a percentage of your interstate expenditures for most basic services – and the pending increase to 3.53% is no joke, they really have just announced it – obviously it has nothing to do with the state of real estate market. It has to do with the continuous leapfrog game by which AT&T, Verizon and Sprint pad their revenues via surcharges that go beyond the universal service pass-through.

The so-called Property Tax Allotment is obviously not a telecom tax nor even a telecom-related surcharge, as the USF pass-through can at least claim to be. But it’s cleverly worded to sound like a tax. In other words, it’s the kind of thing you dare not protest because it seems to be somebody else’s fault (like “the government”).

Note that this change is coming in between the usual quarterly changes in the USF pass-through. This kind of budgeting surprise is one of the most annoying aspects of corporate telecom management in an era when everyone’s pressured to control costs because of the actual state of the economy, which remains fluid and uncertain.

Clearly, surcharge reform efforts continue to be a major focus of business user advocacy. That’s both for the specific mechanics of the USF and other surcharges, and as an effort to break the “cost recovery culture” under which carriers ask for their normal expenses of doing business to be separately and completely reimbursed – or over-reimbursed.

Watching all this remains key even as AT&T has generally been avoiding surcharges on its AVPN MPLS service — but not exempting the interstate access lines to get to AVPN. All that could change anyway, and other complications and further developments remain in the transition from circuit-switched to packet-switched voice. Keep watching this space.

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