PUC's Artificially Low Wholesale Phone Rates Would Harm Local Phone Competition in Pennsylvania

BACKGROUND - In a motion adopted today, the Pennsylvania Public Utility Commission (PUC) directed Verizon to recalculate a number of wholesale rates competitors pay to use portions of Verizon's network to provide local telephone service to their customers. The recalculations will reflect changes directed by the commission. A PUC administrative law judge will oversee this recalculation and issue a recommendation to the commission. The PUC then will issue a final decision in its review of Verizon's wholesale rates. The following statement should be attributed to Ronald F. Weigel, director-government relations for Verizon Pennsylvania:

"The PUC's actions today are bad news for Pennsylvania consumers and the state's economy.

"It's critical for the long-term health of Pennsylvania's telecommunications industry that wholesale rates be properly set. Verizon's cost studies in this case present compelling evidence that the current wholesale rates competitors pay us in Pennsylvania do not cover our forward-looking costs of actually providing the services and don't comply with the law.

"Artificially low wholesale rates present an illusion of competition, but such competition is short-term and is not sustainable in the long run. Companies that are forced to offer their network facilities at rates far less than their cost cannot attract the capital required to grow and modernize those very facilities. That could lead to a downward spiral affecting service quality, innovation, jobs and economic development.

"And competitors who build their own networks would have no incentive to continue that strategy as they find themselves competing with companies that use Verizon's network at wholesale rates far below cost.

"This regulatory extortion essentially pads the pockets of companies such as AT&T, whose business plans center on freeloading on Verizon's network while avoiding any investment in Pennsylvania's telecommunications infrastructure. Such a strategy, which runs counter to the intent of the Telecommunications Act of 1996, benefits only these hangers-on, chills network investment and ultimately harms Pennsylvanians."