Sneaky Fees

Triple-Play Plans Triple the Annoyance

Does your cable bill seem to be inching closer to the stratosphere every month? It isn't your imagination. Advertised low prices seldom stay low, and with more companies locking customers into multiyear contracts with stiff early-termination fees, consumers are getting a raw deal, experts say.

At $69.99, RCN's offer for its cable, Internet, and phone package sounds great. But once you pay for modem and cable-tuner rentals, installation, taxes, and other fees, your bill will be at least $91 a month--more if you have two HDTVs.
Contracts may lock your base price down, but they don't put a cap on extras, says Joel Kelsey, policy analyst with the Consumers Union. According to Kelsey, 25 percent of people who sign up for a combination of TV, Internet, and phone service say additional taxes and fees make their bills much higher than they expected.

I discovered that the hard way. When looking over my monthly bill from RCN, my cable TV, Internet, and telephone service provider, I encountered a field of fee land mines. Eighteen months ago, RCN's triple-play bundle of cable, TV, and phone sounded good to me at $109 a month. Of course, I had to agree to a two-year contract with a $150 early-termination fee. Now I'm paying $130 a month on average, to cover pass-along costs, fees, taxes, and penalties.

Because of the transition to digital TV, if I want more than two television sets in my house, I have to pay an extra $2.95 a month for each digital converter box rental (I have four TVs). On top of that, add $14.30 to my bill for what RCN calls "Taxes, Fees, and Surcharges." Some of that money goes to pay state and federal taxes, naturally, but the bulk of it goes to dues that RCN owes for keeping its service going. For instance, I pay $6.50 for a "Federal Subscriber Line Fee." Despite the name, though, the fee doesn't go to the federal government. In fact, some of it may go directly into RCN's pocket; it's a charge paid to telephone companies to recoup the cost of having a phone line connecting your house to the phone network. The money goes to "local telephone companies such as Verizon, AT&T, and RCN," according to RCN's site.

It's not unreasonable for RCN to pass its cost of doing business on to me. But hiding such costs under the opaque label "Taxes, Fees, and Surcharges" is misleading and makes it impossible for me to accurately compare RCN's costs with those of Comcast or any other competitors. If RCN's "fees and surcharges" are fixed costs, why aren't they part of the advertised monthly price of the service?

RCN spokesperson Lisa Barder says it's impossible to calculate absolute "fee and surcharge" costs because they vary by region. But couldn't RCN, through its Website, quote me a true monthly cost by using my zip code?

"Consumers don't have enough information to make an informed decision," the Consumers Union's Kelsey says. "They shouldn't have to call up their cable company and beg and plead for someone to explain what the true cost of a service is."

Financial Fees

Few sneaky fees are more infuriating than those that leech from our finances via our checking account, our credit card bills, and services such as PayPal. Wes Novack of Phoenix knows this firsthand.

Wes Novack
"I had no idea what was going on [with PayPal] until I paid someone $120 and they called and complained that $3.78 was removed for no apparent reason." --Wes Novack, Phoenix, Arizona
Novack is a PayPal veteran who was happy with the electronic-payment service until July, when PayPal started deducting mysterious fees from his transactions. "I had no idea what was going on until I paid someone $120, and they called up and complained that $3.78 was removed for no apparent reason," says Novack, a Web server administrator. The debits were labeled only as a "fee."

Novack went to the Fees section of PayPal's site and learned that PayPal money transfers labeled as payments for goods or services sent from personal accounts were now subject to a fee of 2.9 percent of the total, plus 30 cents. PayPal says it instituted the fees to discourage users from conducting business transactions on personal accounts.

"This isn't a lot of money, but it steams me that there was no warning," Novack complains. He suspects PayPal intentionally created the sneaky fee, hoping 75 million PayPal customers would give it little attention.

PayPal's Anuj Nayar explains that customers were notified via e-mail of the new fees. But Novack insists that the e-mail Nayar refers to didn't mention the fee.

"If people were confused about this fee, PayPal apologizes," Nayar says. He bristles at the suggestion that PayPal is profiting from applying the fee. The service just wants to make it easier for users to distinguish personal transactions from business-related ones, Nayar says.

Online Travel Fees

Business-travel expert Joe Brancatelli says that airlines, hotels, and car rental agencies, like other industries, have begun breaking out fees for what used to be considered part of doing business, and inventing new ones too. And we aren't just talking $5 minibar tabs.

Budget carrier Spirit Airlines charges $7 to $20 for advance seat assignments. American Airlines announced a $15 fee for checking your first bag. If your bag weighs too much, you might pay another $100. And in a new twist, major air carriers have added a $10 fee for flying on the busiest days.

Brancatelli says you can thank the Internet for these fees. Travel sites such as Orbitz and Travelocity make it easy to find the cheapest airfare, hotel room charge, and car rental rate. "Companies know the only thing people focus on is price," says Brancatelli, so they work to keep their base price as low as possible while piling on extra fees and surcharges that don't show up in your search results. "People are trained to look at only the lowest fare," he says. "People need to be aware that the price you are looking at is not the price you pay."

Sneaky-Fee Future

Companies are getting away with doling out sneaky fees, not because consumers don't care, but because hidden fees have become a way of life. "Sneaky fees just exist, and we give up," says Mike Spinney, senior privacy analyst for the Ponemon Institute. He adds, "There isn't enough time in the day to fight every fee."

Sneaky-fee expert Sullivan is equally pessimistic. He believes that many of the charges buried in bills wouldn't pass legal muster. But the Federal Trade Commission, which has the legal authority to go after companies, is currently too preoccupied and understaffed to tackle the problem, he says.

"The FTC requires companies to be clear and conspicuous with their pricing," Sullivan says. But the bills he has been seeing lately, he notes, have little that is clear or conspicuous. Without more-stringent oversight from state and federal governments, consumers had better watch their own bills like a hawk, he says.

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