31 March, 2015
The 411 on E911 Fees
In the United States (and Canada), the number for emergency services is 911 (the equivalent of 112 in the European Union, 110 in Japan or a variety of other 0--, 1-- or 9-- numbers around the world). The 911 service began on the wired telephone network in the United States in the late 1960s and expanded rapidly. The Enhanced 911 system (E911) provides caller identification and location to the emergency responders via database lookup. A similar E911 system is at work for wireless callers. The identity is provided by data lookup while the location information (the wireless phone is, after all, mobile) by either GPS data or radio signal strength and direction information from the carrying tower.
E911 services are invaluable in a community, and these services have largely been financed via E911 fees on telephone subscribers. While the term used for this is "fee," it is really just a more pleasant name for a tax. For wireline and postpaid mobile phone subscribers, who receive a monthly bill for services rendered, the fee appears on the monthly statement (or is rolled into the bill so that the monthly total ends in zero, five or nine and no cents). Collection there is straight forward with the fee passing from the customer to the state (or county in some cases) government through the wireless service provider. For the prepaid wireless customer the collection method varies by state, and as is usually the case, the prepaid customer has a bit more choice in how these fees are paid—depending on the state in which you reside.
Fee Collection Methods for Prepaid Wireless Customers
Considering the classic pay as you go prepaid wireless account in which a balance is established and each use of service results in a small deduction, the classic approach was to collect the E911 fee on a recurring monthly basis from the customer's account. This style was favored prior to 2009 and an industry shift toward prepaid monthly service. Beginning in 2009 and continuing to the present (March, 2015), many states have either shifted their collection methods to point of sale collection, collecting the E911 fees (the fee structures are state dependent, more details below) through retailers, not wireless service providers, or have begun collecting E911 fees using these methods. It is easy to see the steady increase in point of sale collection methods for retail transactions as plotted in Figure 1 below.
Figure 1 The total number of states (red circles) collecting E911 via point of sale fees and the number of states enacting retail point of sale E911 fees (black bars) by year. The trend began in the State of Wisconsin and has quickly been gaining traction in other states as they change their collection methods or introduce E911 fees for prepaid wireless customers.
Monthly Balance Deductions
There are three states (and Puerto Rico) in which E911 fees are still collected as a withdrawl from a subscribers account on a monthly basis, either on a set day of the month or on the activation anniversary. This model is a holdover from when pay as you go was the dominant model in prepaid wireless service. Customers would fund their accounts and use the service until their account was drained, or very low, in value. The extra fee deduction just lowers the balance along with each use of service and is not particularly problematic.
However, for monthly prepaid accounts in which a fixed fee provides a defined amount of service on a recurring monthly basis, customers are never required to keep a positive balance in their accounts. The customer can add the exact value needed to their account just before their activation anniversary and have monthly service with a balance of zero. These states, however, require subscribers to maintain a small balance to pay this fee each month. This effectively forces customers to add value solely for the purpose of paying the E911 fee. Since adding value of less than fifteen dollars is typically impossible when using retail transactions to purchase refill cards, more than an entire year of E911 fees must be purchased at one time by residents of these states. In these states there is little option with regard to how the E911 fees are paid.
Point of Sale Fee
Most states which levee E911 fees choose the more universally applicable approach of collecting the fee at the point of sale. The point of sale transaction might be hardware (handset or SIM card) or service (purchase of a prepaid card, PIN or direct addition of value to the account). This style of collection bypasses the prepaid wireless account entirely and is simpler for all parties involved (service provider and customer definitely, a bit more responsibility is placed on the retailer to pass these fees along, but they are collecting, in many states, sales tax as well so it isn't a novel burden).
While most states collecting E911 fees take this approach, there are two distinct designs for the fee structure—percentage of the transaction or flat fee. The flat fee is more slightly popular (20 states) than the percentage fee (15 states), but we'll take the percentage fee first.
Point of Sale Fee—Percentage of Retail Transaction
These states collect E911 fees as a percentage of each retail transaction for prepaid wireless goods and services. The percentage is small, just a little over 1% on average (unless you live in the city of Chicago, see note on the Illinois rate below), and collected uniformly on all transactions. In a state with this style E911 fee, there is little option to optimize your costs short of making your retail prepaid wireless purchases in another state, which is a reasonable option only for those living near the border of a state with lesser fees.
District of Columbia
† 9% in the city of Chicago.
Point of Sale Fee—Flat Fee
These states collect a flat E911 fee for all prepaid wireless purchases (hardware and service). The fee ranges from less than fifty cents to almost two dollars depending on the state.
† $0.25 fee for the state, $0.75 fee for the county, $0.95 is the net fee.
In a state with a flat fee per prepaid wireless transaction, the consumer has more freedom over how E911 fees are paid for wireless goods and service. To illustrate, let's consider a prepaid wireless customer living in Mississippi (a convenient state to consider not only because the E911 fee is exactly $1.00, making the mathematics easy, but also because the state of Mississippi was number two in food insecurity in 2013, making saving on utilities a practical issue (1)). Our customer has select a basic GoPhone from AT&T because she enjoys staying in touch with her family and her friends by voice calls, she can get unlimited calling for $30 monthly ($5 less than similar unlimited prepaid calling plans on Sprint, T-Mobile or Verizon) and refill cards for AT&T are available at the retail counters where she normally shops. With the $30 monthly plan, she will be spending $360 annually for her service. The amount she spends on E911 fees depends on her purchasing habits.
If she purchases one $30 refill card each month as a normal part of her shopping, she is making twelve retail transactions each year. Each one of those retail transactions costs her one dollar in E911 fees.
12 refills cards x $30 dollars/card = $360
12 retail transactions x $1 E911 fee/transaction = $12 E911 fees
For one year of service, she is paying $12 in E911 fees. If, however, she chooses to invest twice the dollar amount at each retail transaction, she is able reduce her E911 fees by fifty percent.
6 refills cards x $60 dollars/card = $360
6 retail transactions x $1 E911 fee/transaction = $6 E911 fees
With a easy change of shopping habits, she has been able to reduce her E911 fees by fifty percent. The savings can be even greater by purchasing three $100 refills and one $60 refill.
The advice is identical for pay-as-you-go prepaid wireless. In these states, add as much value as you can afford with each transaction to minimize E911 fees.
There are several caveats to this purchasing style. The first is that more spending is upfront in this approach. At least one month of service is paid for two months in advance, not just in time. To be able to do this, it is necessary to have the funds budgeted for the larger, less frequent expenditures.
Also, as you invest more money in one wireless service provider, your freedom to switch service providers is limited. Having paid well in advance for service, you aren't free to switch your number to another provider until you have worked through your balance; competition isn't often good enough in this space to write off a month, or more, of service you've already paid for and still expect to come out ahead.
The final consideration is that wireless refills tend to top out at $100 dollars per transaction. If you are paying for a monthly plan of $60 ($720 annually), your number of retail transactions will necessarily be larger than those illustrated in the example above. As a result, your savings will be smaller.
No E911 Fee
There are states which have yet to enact legislation to collect E911 fees from prepaid wireless consumers. In these states there is, currently, no need to be concerned about paying these fees. If it is practical, shopping across the state line is an option. However, watch legislative agendas in these states as E911 fees are likely to be at least discussed for prepaid wireless customers in the near future—the trend of red circles in Figure 1 is likely continue upward over the next few years (not likely to all fifty states, but to the vast majority of states. Ok, that's not really a prediction, we are already there---see Figure 1).
For telecommunication customers, E911 fees are part of the game. For wireline and wireless accounts, the fees are included (whether they are obvious or not). The prepaid wireless customer, however, has a bit more freedom, depending on the state in which they live. For residents of states collecting an account deduction or a percentage of retail transactions, there isn't much option (other than to maybe leave the city of Chicago and make those retail transactions elsewhere in Illinois). For residents of states with fixed retail transaction fees, altering consumer behavior to reduce the number of retail transactions can reduce the burden of E911 fees.
(1). Coleman-Jensen A, Gregory C and Singh A. (2014) Household Food Security in the United States in 2013. ERR-173, 41pp.