New York PUC tells Verizon to lower UNE costs

In a ruling that could impact the financial viability of competitive carriers, New York’s PUC this week decided Verizon Communications must reduce the price it charges competitors to use its lines by almost 30%.

Even before the decision, Verizon and other Bell companies have argued that the pricing formula for determining these charges is unfair because it does not let incumbents recoup their network investments. At the New York state commission’s new rate of $19.14, Verizon would only receive “50 cents on the dollar” in selling access to customers, a Verizon spokesman said.

With this in mind, the RBOC may seek legal action to block the commission’s ruling.

“We’re looking at all our various options, including possible litigation,” the spokesman said.

Competitive carriers were elated by the ruling. A year ago, AT&T Chairman Michael Armstrong threatened to halt the carrier’s local service offering in New York because fees paid to Verizon were so high that they prevented competitors from being profitable. The new rates change that, according to an AT&T spokesman.

“It definitely appears we will be able to stay in New York, compete and be profitable,” the spokesman said.

Many observers believe the New York rate case will be moot if the Supreme Court rules against the FCC’s pricing formula for unbundled network elements in a case that is expected to be decided soon. But the AT&T spokesman disagreed, noting that the New York commission adopted a more “forward-looking” approach than was used in the case before the Supreme Court.

“The methodology in that case [before the Supreme Court] is very different than the one here,” the AT&T spokesman said. “We believe the New York PUC’s ruling probably would stand on its own, regardless of the Supreme Court ruling.”

Although each state determines UNE rates separately, many observers believe other state commissions will note the New York decision. Massachusetts, another Verizon state, is scheduled to revisit rates charged to competitors by the middle of the year.