The Washington Post/Brian Fung: AT&T is raising an obscure fee on customer bills to make an extra $970 million a year analyst says The

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AT&T is raising an obscure fee on customer bills to make an extra $970 million a year, analyst says
by Brian Fung June 29 at 12:27 PM Email the author

President Trump listens to AT&T chief executive Randall Stephenson during the "American Leadership in Emerging Technology" event at the White House on June 22, 2017. (Jabin Botsford/The Washington Post)

AT&T’s wireless customers are expected to pay almost $1 billion in new fees every year to the company after it increased a monthly “administrative fee” this spring in a move that went largely unnoticed, according to an industry analyst.

The analyst, Walt Piecyk of BTIG, initially estimated that AT&T could pocket roughly $800 million more annually from the higher fee, before revising that figure upward to $970 million once he learned that the fee hike also will affect tablets and smartwatches on AT&T’s network, not just cellphones.

“Some people might not get hit till next cycle,” Piecyk said.

The higher fee reflects a 58 percent increase over its previous level of $1.26 per line. The fee is now more than three times what it was when AT&T first introduced it in 2013. It does not apply to prepaid customers but affects the vast majority of AT&T’s roughly 65 million postpaid subscribers, Piecyk said.

“Presumably the Administrative Fee is another way to help AT&T fund its network build and Time Warner acquisition going forward,” wrote Piecyk in his note airing the discovery.

AT&T declined to say whether the fee would be allocated toward defraying its merger costs. The company said in a statement that the fee is a standard practice across the industry, and that it “helps cover costs we incur for items like cell site maintenance and interconnection between carriers.”

A page on AT&T’s website also says that the fee is “not limited” to covering cell site maintenance and interconnection.

Like the country’s other wireless carriers, AT&T is moving aggressively to build out a nationwide successor to its 4G LTE data network, an endeavor that is likely to cost billions. It is also spending $40 billion — and could receive more than $30 billion from the federal government — to construct a new wireless network for first-responders.

AT&T is changing rapidly in other ways. The company this month closed its landmark $85 billion merger with Time Warner, becoming an entertainment and media giant overnight. It is moving quickly to capitalize on the acquisition, renaming Time Warner as WarnerMedia and launching a new streaming video service, WatchTV, that contains some of the programming it now owns. It also acquired AppNexus, a digital advertising firm that could help AT&T monetize WarnerMedia’s video content.

It is unclear whether price hikes could be coming to other AT&T services. Arguing for the deal against the Justice Department in court this year, attorneys for the company claimed that prices for AT&T’s pay-TV service, DirecTV, were likely to go down. But critics of the deal said that the Time Warner merger was likely to increase prices for TV viewers indirectly nationwide.
Brian Fung
Brian Fung covers business and technology for The Washington Post. Before joining The Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic. Follow
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Last Updated:06/29/2018