Pennsylvania PUC reverses stance on Verizon

In an apparent reversal of an order it issued in April, the Pennsylvania Public Utility Commission (PUC) has decided not to force Verizon Communications into functional separation of its retail and wholesale units. Instead, the carrier will have to adhere to a “code of conduct.” The PUC asked for public comments on the decision, which must be submitted within 30 days.

In his motion to accept the proposed rules, Commissioner Terrance Fitzpatrick called functional separation an “intrusive remedy designed to fix a problem that has not been shown to exist.” As evidence, Fitzpatrick cited the FCC’s approval of Verizon’s Section 271 application in the state and the carrier’s agreement to withdraw court appeals of the PUC’s “performance assurance plan” (PAP).

The PAP defines the standards that govern Verizon’s provisioning of services to competitive carriers and the fines the incumbent would pay for failing to meet those standards. According to Fitzpatrick, those fines could reach $183 million each year.

Commissioner Glen Thomas dissented, charging that the reasons for abandoning functional separation as presented by Fitzpatrick in his motion are “not entirely convincing.” While acknowledging that the telecommunications industry is “different from gas or electric,” Thomas expressed concern that Fitzpatrick’s motion represents “ a departure” from functional separation models in place in the other industries.

The code of conduct contained in the proposed rules calls for ILECs in the state to refrain from the following activities:

* Telling customers that their service would have been repaired sooner if they had stayed with the local carrier;

* Sharing with their marketing units proprietary customer information obtained when taking orders for a competitor;

* Making marketing claims that its products and services are better than those of a competitor, unless those claims can be factually supported; and

* Unlawfully using revenues or expenses of its noncompetitive services to subsidize or support its competitive services.

AT&T, which had pushed for full structural separation only to settle for functional separation back in April, expressed bitter disappointment over what appears to be another defeat.

“It is nothing short of naïve for the PUC to think that it can regulate the Verizon monopoly without regulating its organization structure,” said Jim Ginty, president of AT&T-Pennsylvania, in a statement. AT&T indicated it would continue to push for “pro-competitive policy” in Pennsylvania.