NEW YORK - Verizon said today's New York Public Service Commission order sharply lowering wholesale rates compels the company to sell well below its costs and is likely to create barriers to investment by all telecommunications companies in the state. Verizon is assessing all options including potential legal action.
"Instead of encouraging real competition and investment in diverse telecommunications networks in the state, the commission chose to force Verizon to sell its service to competitors at rates substantially below cost," said Paul A. Crotty, president of Verizon New York. "Why would a Verizon competitor invest in building its own network in New York when it can simply buy Verizon's network at a deep discount and resell it for a significant profit under its own brand?"
Crotty said that the rates Verizon is permitted to charge already don't cover the real costs of building and operating the network that competitors use to serve their customers. This order would reduce those rates another 30 percent from current rates, which are already below Verizon's costs.
Crotty said the PSC decision also is misguided because it is based on Federal Communication Commission rules that have been challenged in the U.S. Supreme Court. A ruling on that challenge is imminent. "It makes more sense to wait for a decision from the Supreme Court rather than setting rates that may be overturned," he said.
"This decision is bad for consumers and for our state's economy," Crotty said. "While it appears to foster competition, it actually creates artificial competitors by subsidizing large companies such as AT&T and WorldCom, while Verizon shareholders pick up the tab. Furthermore, it creates barriers to future investment both by Verizon and by other carriers in building new networks since companies will not invest in facilities when they have no chance of recovering their costs, let alone making a return on the investment.
"With the deeply subsidized wholesale rates that the PSC has ordered today, New York will not see the benefits of facilities-based competition that other states like Massachusetts and Rhode Island are experiencing. Investment in this critical industry will simply dry up.
"Unless this order is promptly corrected, Verizon will have to decrease our capital investments in New York in order to meet our own financial commitments. Ultimately, this also could lead to a loss of jobs in this state."
Crotty said today's order highlights the need to promptly conclude a separate regulatory proceeding covering retail rates.
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 128.5 million access line equivalents and 28.7 million wireless customers. Verizon is also the largest directory publisher in the world. A Fortune 10 company with 256,000 employees and approximately $65 billion in annual revenues, 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.