Thursday, January 31, 2013




          The old saw tells us that billionaires didn’t get rich by giving away money. But what about paying their fair share?

          In California today, we see at least two of the well-publicized super-rich trying hard not to pay sums that amount to pittances for them. One is Charles Munger Jr., attempting to get legal fees paid by his opponents in a lawsuit he entered voluntarily. Munger, who got most of his money the old-fashioned way – his daddy gave it to him – didn’t cotton to anyone trying to overturn the “top-two” primary initiative largely funded by him three years ago.

          And now comes the reputed richest man in the world, Mexican tycoon Carlos Slim, who made most of his reported $69 billion to $74 billion fortune via a near-monopoly on telephone service in Mexico. Consumer groups there claim repeatedly that Slim’s land-line and mobile phone companies charge exorbitant rates for substandard service, constantly upping his net worth.

          Slim has plenty of interests in this country, too. One is a large minority stake in the New York Times Co. Another is an offshoot of his Mexican mainstay, cellphone service.

          Quick now, name the company serving and selling the largest number of pre-paid cell phones in America. It’s not AT&T or Verizon or Sprint Nextel or the German-owned T-Mobile. It’s TracFone Wireless, with 22 million pay-as-you-go customers nationwide and about 4 million in California – fully 42 percent of the pre-paid mobile phone market. Slim owns TracFone, based in Miami, which recently took over Irvine-based Simple Mobile, another prepaid cell provider.

          Slim’s U.S. company sells telephones and service mostly to lower-income persons whose credit doesn’t qualify them for monthly service plans that are the mainstay of the better-known companies. Customers typically pay about $20 for a phone and 60 minutes of service.

          State officials maintain that like the full-service companies, TracFone must pay California’s “universal services fee,” a charge that funds telephone and Internet service for the poor, deaf and disabled, plus residents of the lowest-income rural areas.

          Estimates from the state Public Utilities Commission and consumer advocates are that Slim’s company owes somewhere between $13 million and $20 million worth of fees it did not collect from customers but should have in recent years.

          The PUC has not yet set a definite amount and TracFone is now in the state Court of Appeals disputing the commission’s finding that it must collect the fee when it sells prepaid phones, even though current law says the fee must be “transparent” and appear on customers’ monthly bills. It has paid the fees under protest since last February.

          Some may infer from this that Slim is opposed to the kind of “lifeline” services subsidized by the universal services fee. Not so. TracFone collects similar fees in 28 states and has taken nearly $38 million from other states to provide those kinds of services. “We want a new law in California that lets us collect transparently at the point of sale,” says TracFone general counsel Richard Salzman.

          But the company does not want to pay anything for fees it did not collect before last February.

“TracFone has failed to pay its share for programs that make telephone service more affordable for California’s working families and hearing impaired,” Juan Jose Gutierrez, leader of the consumer group Two Countries One Voice, said in a press release. Added Richard Holber, head of the Consumer Federation of California, “We have to make sure that as the market grows, companies like TracFone are not allowed to play by their own rules.”

       Responds Salzman, “Our phones are specifically exempt under the law as it now stands. One reason is that the fee is charged only on in-state calls, not calls to other states and we have no way to know how the minutes we sell in advance will be used.”

          All of which means that no matter how much the utility commission and the courts eventually decide Slim’s company owes, the likelihood is he will resist paying.

          This makes it high time for the state Legislature to step in by passing a new law forcing all prepaid cellphone sellers to assess the fee. That would put TracFone and all such companies on notice they must collect the same fees as ordinary cellphone companies or get out of California. Any such law plainly also ought to require those companies to pay any past fees they’ve refused to collect and remit.

Email Thomas Elias at His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit

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