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HARRISBURG, Pa. - Telecommunications competition in Pennsylvania continues to grow significantly across Verizon's service area, but wrong-headed pricing policies could retard sustainable competition, Verizon's top Pennsylvania executive told state legislators today.
"The level of competition in Pennsylvania is substantial, robust and growing in all market segments and in all geographic areas," said Daniel J. Whelan, president of Verizon Pennsylvania. "Not just in Philadelphia and Pittsburgh, but also in Punxsutawney and Philipsburg."
Whelan and the heads of several telecommunications competitors testified today in Harrisburg before the state Senate Consumer Protection and Licensure Committee, which is examining local telephone competition in Pennsylvania.
Verizon Pennsylvania now faces at least one "wireline" competing local exchange carrier (CLEC) in each of the 339 local telephone exchange it serves across Pennsylvania. With at least 1.5 million lines, these CLECs control about 20 percent of the total wired phone lines in Verizon Pennsylvania's service area. And, when the formidable competition from wireless companies' 4.8 million lines in the state is factored in, Verizon Pennsylvania actually serves only about half the total phone lines in the market.
"Clearly, all customers - whether consumers or large, medium-sized or small businesses - have choices," said Whelan. "And their range of choices continues to grow."
Competitors Pressure PUC To Slash Wholesale Rates Far below Verizon's Cost
In spite of those facts, however, some competitors are crying for drastic reductions in the wholesale rates they pay Verizon to lease portions of its network known as unbundled network elements, or "UNEs," complaining that they cannot compete under current UNE rates.
Once again, the facts undercut competitors' claims. "The Federal Communications Commission found that current UNE rates in Pennsylvania permit CLECs to earn a 30-percent margin or more when they serve the average residential customer," said Whelan. "Just think what they're making on their above-average customers - the ones who make lots of long-distance calls and have optional calling features," such as Caller ID or Call Waiting.
"Wall Street analysts agree and have concluded that it is possible for CLECs to make at least a 40-percent margin in the residential market in Verizon's territory," he said.
Analysts also have found that in Pennsylvania current UNE rates do not even cover Verizon's costs for wages, benefits and other cash expenses incurred in providing wholesale services - let alone the total, forward-looking costs required by law.
"CLECs' ludicrous proposals to extort UNE rates far below cost endanger the commonwealth," said Whelan. "Below-cost wholesale rates destroy the incentive to invest by either Verizon or other companies who have built their own networks.
"In the end, subsidized prices can't work in a competitive marketplace," he said. "Phony accounting comes home to haunt us all. It doesn't matter if it's WorldCom or Global Crossing, or Adelphia or Enron, or policy makers who accept CLECs' self-serving arguments.
"Competition in the telecommunications marketplace is here, it's irreversible," said Whelan. "And the nature of this marketplace is changing daily. Sound public policy must recognize and reflect those realities."
Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 135.1 million access line equivalents and 30.3 million Verizon Wireless customers. Verizon is also the largest directory publisher in the world. With more than $67 billion in annual revenues and approximately 241,000 employees, Verizon's global presence extends to more than 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.