Bell Atlantic Proposes Plan To Keep New Jersey's Local Telephone Rates Among The Nation's Lowest
September 16, 1997
most affordable in the nation under a plan presented today by Bell
Atlantic to the Board of Public Utilities.
Bell Atlantic's proposal calls for the creation of a universal service
fund that would go into effect only if needed to keep basic
residential telephone rates low.
Telephone companies doing business in New Jersey, including local and
long distance, would pay into the fund only if local carriers' per
line revenues fell below a benchmark set before the state's local
market opened fully to competition.
"Our proposal allows for the benefits of competition in the local
market, and the benefits New Jersey consumers have come to expect -
everyday low prices for local and regional toll service," said Len J.
Lauer, president and CEO of Bell Atlantic-New Jersey.
"Bell Atlantic's plan creates a fund that is only as large as
necessary. If market forces are sufficient to protect affordable
basic telephone service, then market forces will be left to work
The Communications Act of 1934 mandated that telephone companies and
state regulators work to keep basic local telephone service
inexpensive. The goal of this provision of the act, known as
"universal service," was to make certain that every American who wants
basic telephone service can afford it. The Telecommunications Act of
1996 also mandates universal service.
Traditionally, the Board of Public Utilities has encouraged universal
service by permitting local exchange carriers - such as Bell Atlantic,
Sprint United and Warwick - to earn high margins on regional toll and
optional services, such as Caller ID or Call Waiting.
These margins have subsidized losses Bell Atlantic and other telephone
companies have incurred in providing basic local service below cost.
For example, Bell Atlantic's typical residential customers in Northern
New Jersey pay $8.19 per month for local dialtone and unlimited local
calling. But it costs Bell Atlantic more than twice that amount to
provide the service.
When enough customers use Bell Atlantic's regional toll service or buy
optional deluxe services, the company can continue to provide basic
phone service to customers below cost.
In a market where Bell Atlantic is the sole local and regional toll
service provider, the company is certain to maintain low basic service
But the company's ability to offer low basic residential rates is
endangered when competitors target customers who buy high-margin
services. This cream-skimming effect reduces revenues needed by
telephone companies to subsidize basic service.
Today, large long distance companies are doing just that - providing
regional toll service at a high profit, but they're not using those
profits to subsidize basic residential service in New Jersey.
Under Bell Atlantic's proposal, competitive local, regional toll and
long distance carriers would help subsidize local service for
residential customers. They would do so only if they won a portion of
Bell Atlantic's business that was large enough to endanger the
company's ability to maintain local service subsidies.
"At Bell Atlantic, we value our customers," Lauer said. "We want to
preserve their ability to obtain affordable basic telephone service."
The new Bell Atlantic (NYSE: BEL) is at the forefront of the new
communications, information and entertainment industry. With 40
million telephone access lines and 5.5 million wireless customers
worldwide, the corporation - formed through the merger of Bell
Atlantic and NYNEX - is the premier provider of advanced wireline
voice and data services in the eastern United States and a market
leader in wireless services. Bell Atlantic also is the world's
largest provider of directory information and one of the world's
largest investors in high-growth global communications markets, with
operations and investments in 21 countries.