Verizon Files New, PUC-Directed Wholesale Rates

HARRISBURG, Pa. - New, below-cost wholesale telecommunications rates ordered by the Pennsylvania Public Utility Commission (PUC) fail to consider the tremendous competition in the commonwealth's telecommunications market, Verizon said today.

These rates continue the subsidy of large competitors, like AT&T and MCI/WorldCom, while hampering investment by Verizon and other companies.

Verizon Pennsylvania calculated and filed these revised wholesale rates as directed by the PUC in a December 2003 order. Verizon's Jan. 26 filing is the latest step in the PUC's two-and-a-half year review of Verizon's wholesale prices known as unbundled network element (UNE) rates.

Verizon charges competitors wholesale rates to use portions of the company's network to provide local telecom services to the competitors' customers. But the PUC actually decides the rate levels.

As one example of these rates, UNE-Platform (UNE-P) allows competitors to resell the entire combination of Verizon's network elements - switching, loop and transport - at rates often significantly below what the services cost Verizon to provide.

In urban areas of the state where telecom services are already hotly competitive, UNE-P rates will decrease by as much as 15 percent. And the commission's directives slash many other wholesale charges to far below their true cost.

"These rates ultimately hurt Pennsylvania consumers and economic development in the state," said James V. O'Rourke, president of Verizon Pennsylvania. "On the one hand, they do nothing to create competition, which is already strong in the state. On the other hand, they destroy incentives to innovate and invest for both Verizon and for our competitors."

The telecommunications landscape has dramatically changed since the PUC initiated its proceeding in August 2001. Technological advances and significant increases in local phone competition have given Pennsylvania consumers unprecedented choices from an array of landline providers and unregulated competitors like wireless, cable and Internet-based phone companies.

MCI is now one of the largest local phone companies in the state. Landline competitors serve more than 20 percent of the lines in Verizon Pennsylvania's service area, and competitors overall serve more than half the communications lines in Verizon's territory. Wireless companies now serve nearly as many lines in Pennsylvania as Verizon's landline companies. Cable companies are competing vigorously for high-speed Internet and phone customers, and AT&T has announced that it will sell Internet-based phone service nationwide in 2004, beginning in the next few weeks.

"We're deeply concerned that the commission has not fully recognized the impact of this widespread competition," said O'Rourke. "Despite this irrefutable evidence, Verizon - the commonwealth's largest investor in telecom infrastructure - is still forced to give well-financed competitors like AT&T a virtual free ride on a network we've spent billions of dollars to build.

"The PUC should set prices for Verizon's wholesales services that fully recognize our costs and comply with federal law. Only through such action will Pennsylvania's telecom market remain healthy and continue to receive its share of investment dollars," said O'Rourke. "This filing shows we still have a long way to go before Pennsylvanians enjoy the benefits of true, sustained competition where all companies operate on a level playing field."

Verizon Communications

A Fortune 10 company, Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services, with approximately $67 billion in revenues. Verizon companies are the largest providers of wireline and wireless communications in the United States, with more than 139 million access line equivalents and 36 million Verizon Wireless customers. Verizon is the third largest long-distance carrier for U.S. consumers, with nearly 16 million long-distance lines. The company is also the largest directory publisher in the world, as measured by directory titles and circulation. Verizon's international presence includes wireline and wireless communications operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.