Prepaid phones could be charged 911 fee

$1 per month levy goes to help fund operations centers

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HARRISBURG -- With an increasing number of cell phone users now buying "prepaid" phones from Wal-Mart, Target and other large and small retailers, a move is afoot here to have those purchasers help pay for 911 emergency services.

Since 2003, monthly bills that cell phone companies such as AT&T, Sprint Nextel, T-Mobile, US Cellular and Verizon send to their customers have included a $1 surcharge, which generates money for 911 operations around the state. A similar $1 monthly fee also is collected from users of land lines, or traditional telephone service.

But a growing segment of wireless users -- about 20 percent in 2009 -- buys cell phones on a prepaid basis from retail outlets. No lengthy cell phone contract is involved, which some buyers prefer. Under this arrangement, a customer pays in advance for a fixed number of minutes. When those minutes run out, the customer uses a "recharge" card to add a fixed number of additional minutes.

TracFone is one of many companies that provide pay-as-you-go service for cell phones.

In most states, including Pennsylvania, prepaid phone customers don't have to contribute toward the costs of 911 emergency service. But officials who oversee their community's 911 systems argue that the present arrangement isn't fair.

"TracFone users get same service as somebody who has a calling plan," said Kevin Joy, deputy director of Beaver County Emergency Services. "So why shouldn't they have to help pay for it, too?"

Some large wireless firms and their trade organization, the national Cellular Telecommunications and Internet Association, are urging the Legislature to level the playing field by enacting House Bill 1789, which would force prepaid cell phone buyers as well to contribute toward the cost and maintenance of 911 operations. Prepaid customers would pay $1 when they purchase their cell phones and $1 each time they add minutes to the device through a recharge card.

The money would be collected at the retail level and sent to the state, which would distribute it among 911 services. State officials said they think the change would raise about $11 million annually, which would help reduce the gap between what is collected in 911 surcharges and what it costs to run the systems.

The bill has passed the House and now is being considered in the Senate.

In recent testimony before a Senate committee, CTIA economist Scott Mackey said that for the past two years, prepaid wireless service "has been the fastest-growing segment of the fast-growing wireless industry. The growth in the prepaid marketplace makes it very important that states adopt legislation to ensure that prepaid wireless 911 subscribers contribute to the 911 system."

Prepaid cell phone users now make up more than 19 percent of all wireless phone users in the United States -- up from 15 percent in 2007. There are now more than 53 million prepaid wireless subscribers, with an increase of 5 million subscribers just from December 2008 to June 2009.

He said that prepaid wireless service now is growing by 10 percent to 15 percent a year, considerably more than the 5 percent growth in traditional cell phone service where users get a monthly bill.

As the number of customers with traditional land lines continues to drop and the number of customers with prepaid service rises, the monthly surcharge soon could put an even more unfair burden on cell phone users with calling plans, Mr. Mackey said in an interview last week.

"Safety is one of the important reasons why people carry a cell phone," he said. "The industry has come up with a way where all customers who have the ability to dial 911 are paying a little bit toward its maintenance."

In Butler County, it costs about $2.5 million to provide 911 service, according to Frank Matis, the county's emergency services director. Current revenues from monthly fees on customers with land lines and cell phone plans total about $1.2 million. The rest of the money has to come from general county revenues, he said.

He estimated that about 68 percent of emergency calls come from cell phone users.

"There is a great need for a bill like this," he said of the proposal to extend the 911 surcharge to prepaid phones. "Any plan that would help reduce the county's general fund subsidy we'll support."

In Beaver County, Mr. Joy has watched surcharge revenues drop each year. In 2006, the county collected $1.3 million from land line customers, he said. That number dropped to about $921,000 in 2009. Wireless revenues from customers with calling plans also have declined, from $3.3 million in 2008 to $2.6 million in 2009. The county is hoping its allocation for 2010 from wireless surcharges will at least break $2 million, he said.

"We need to make up that revenue gap that has been growing as people switch to prepaid plans," Mr. Joy said.

But officials with retail store groups are fighting back against the $1 surcharge plan.

For one thing, they say, it would be unfair to lower-income phone buyers and senior citizens, who tend to buy less-expensive phones with fewer minutes. That means they would be charged the $1 surcharge every time they buy a phone or recharge card, which can cost as little as $10 and have as few as 10 minutes of phone time on it.

People who are better off would pay the $1 surcharge much less often, retail groups say, because they buy prepaid phones with large blocks of minutes.

Kevin Shivers of the National Federation of Independent Business said the new measure would put a burden on thousands of smaller grocery and 5-and-dime stores by requiring them to collect the $1 surcharge and forward it to the state. He said it makes more sense to have about 10 large wireless providers collect the fee, rather than make thousands of small stores do it.

"It would be another administrative hassle," agreed Kara Gundel of the Pennsylvania Retailers Association, which represents thousands of stores, from "big box" retail outlets to smaller grocery, hardware and jewelry stores.

"It would be a financial burden on smaller stores that sell only a few hundred phones or cards a month," she said.

Tom Barnes: tbarnes or 1-717-787-4254; Len Barcousky: or 412-263-1159.


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