Pennsylvania commission to review Verizon’s UNE rates

The Pennsylvania Public Utilities Commission began hearings today to review the rates charged by Verizon Communications to competitors leasing unbundled network elements (UNEs). The matter is currently before an administrative law judge, who is expected to make a recommendation to the commission by the end of April. The PUC is expected to make its final ruling by mid-year.

The review is tied to an order handed down by the PUC nearly a year ago that called for the functional separation of Verizon’s wholesale and retail units in the state. As part of that order, the commission said it would “periodically” review Verizon’s UNE rates. In December, the PUC backed off functional separation, deciding instead to force Verizon’s adherence to a strict code of conduct.

AT&T welcomed the rate review. The carrier recently commissioned a study jointly conducted by two independent consulting firms that said Verizon should be charging, on average, no more than $5.48 per loop, per subscriber in Pennsylvania. The current average in the state, according to AT&T is $14 per loop.

In addition, AT&T accused Verizon of charging exorbitant rates for certain sectors in the state. For instance, Verizon agreed to a rate of $16.75 per loop for rural Bucks County when it submitted its Section 271 application to the commission in April 2002, but proposed a new rate of $43.02 after securing FCC approval to provide in-region long distance service in Pennsylvania last September, according to an AT&T spokeswoman. Pennsylvania is divided into density cells and UNE rates in the state vary from cell to cell.

“This is an absurd jacking of the price,” the spokeswoman said, adding that the AT&T-commissioned study indicated the cost of a loop in Bucks County should be no more than $8.41. “There is no way a competitor can offer service under these rates. This is a blatant attempt by Verizon, after gaining long distance, to close local markets to competitors once and for all.”

Predictably, Verizon countered that AT&T’s allegations are equally absurd and defended the proposed $43 rate for Bucks County. “That’s what it costs us. We don’t make any money on that line. AT&T is proposing a rate that’s less than the cost of a haircut. It boggles the mind,” said a spokesman.

The spokesman added Verizon is hopeful the commission will ultimately revise the rates upward so they reflect actual costs and not “hypothetical” costs. He said that while Verizon is subsidized for providing service in rural areas via the universal service fund, those subsidies have shrunk in recent years.

He added that AT&T unfairly enjoys an advantage not available to Verizon because they are not required to provide lifeline service. This frees them to concentrate on customers that purchase high-margin services such as Caller ID and Call Waiting.

“Ask AT&T who they’re targeting. It’s not going to be basic dial tone. It’s going to be customers that purchase advanced services,” he said. “Revenue from those services and from the subsidies are what make local service in rural areas possible.”

Verizon might have a challenging lobbying effort ahead of it. Earlier this month, the New York State Public Services Commission reviewed the carrier’s UNE rates in the state and ordered Verizon to reduce them by 30%.