New Jersey commission lowers wholesale rates

The New Jersey Board of Public Utilities (BPU) today announced it would lower certain wholesale rates for network facilities provided to competitive carriers by Verizon Communications.

While the cost of leasing the local loop will remain at $9.52, changes in the switching rate will reduce the overall rate for the unbundled network element platform (UNE-P) to $12.62 from the previous $12.89, based on average usage. The BPU has lowered UNE-P rates by more than 43% since November 2001.

The BPU also reduced two one-time service order charges from $7.71 to $0.83 to reflect automated order processing, and adopted Verizon’s proposed $35 rate for executing cutovers.

“Redesigning wholesale rates for phone companies is part of the Board’s long-term strategy to provide competitive local exchange carriers with incentives to serve the local residential market for basic and advance telephone services,” said BPU President Jeanne Fox, in a statement.

AT&T wasted no time in announcing it would enter the residential local service market in New Jersey later this summer. In fact, the carrier had its announcement press release out before the BPU had a chance to make its announcement about the rate change. AT&T New Jersey President Jim McGreevey said in a statement the UNE-P rate reduction positions New Jersey as a leader in recognizing the value of competition among local service providers.

“We are confident the BPU will continue to hold the line on pricing issues that are crucial to support local competition,” McGreevey said.

Verizon New Jersey General Counsel Bruce Cohen said the decision was not only bad news for Verizon, but for the industry as a whole. Cohen said the BPU had lowered an already “unrealistically low” rate, an action that is counterintuitive to the goals of the Telecom Act.

“The TELRIC (total element long-range incremental cost) formula was designed to establish a rate based on the hypothetical cost a CLEC would occur if they were to build the network themselves,” Cohen said. “If you set UNE-P prices at that rate, you encourage investment in facilities. But when you set an artificially low rate, you end up subsidizing the competition, which is what our company and its shareholders are facing in New Jersey.”

Cohen also accused the BPU of setting UNE-P rates based on the rates Verizon charges its retail customers, an approach he said the DC Circuit forbade in its recent decision that set aside the FCC’s local competition and line sharing orders.

“The DC Circuit said basing wholesale rates on a company’s retail rates is the same as comparing apples to oranges,” Cohen said.

Last week the FCC filed a petition asking the DC Circuit to rehear this decision because it “is in tension with” the recent Supreme Court decision that affirmed the TELRIC pricing formula for UNEs. Specifically, the FCC said the court’s decision “runs afoul” of the higher court’s opinion that reviewing courts “have a properly limited role … especially in a case like this one involving disputed economic arguments and a complex technical and regulatory background.”

– Glenn Bischoff, senior news writer