BPU Weighs Lifting Phone Service Controls

The Record ( — Friday, February 15, 2008


NEWARK —For two hours Thursday, advocates for consumer and business groups debated the merits of deregulating local telephone service in the state.

On one side were representatives of the state's business community, who supported efforts by the two biggest service providers, Verizon and Embarq, to be freed from oversight by state regulators.

To them, it's a matter of belief that a free-market system is the best way to assure quality and control prices.

"Competition is the best way for consumers to be served," said Jim Kirkos, chief executive of the Meadowlands Chamber of Commerce. "The notion that deregulation would be harmful to consumers is absurd."

To consumer groups, the issue is the lack of adequate competition, and that will lead to increased prices and reduced services for those least able to afford it.

"Premature deregulation results in price gouging of consumers," said Ev Liebman, director of organizing and advocacy for New Jersey Citizen Action.

"We have every reason to believe that Verizon's behavior in New Jersey will mirror their behavior in these other prematurely deregulated states," she said.

Now it's up to the Board of Public Utilities to decide. A decision is likely in the second quarter of the year, said Commissioner Joseph Fiordaliso, who chaired Thursday's hearing at BPU headquarters in Newark.

It was the last of three hearings held around the state this week.

Last summer, Verizon and Embarq (formerly Sprint) requested that the BPU lift its price-control regulations because consumers have other options for phone service. Embarq operates local phone lines in areas of the state not served by Verizon.

Technological advances have given consumers more choices, including cable companies and wireless. However, the BPU still regulates rates for local service as well as Lifeline service for those who qualify.

"The relief sought by Verizon and Embarq raises critical issues that will have serious consequences for New Jersey's telephone customers," said Stefanie Brand, director of the Division of Rate Counsel, who opposed the companies' request.

"Competition has not yet developed to the level to ensure the availability of [basic local telephone] services at just and reasonable rates," Brand said.

"Once deregulation is allowed, it will be difficult to protect consumers against price increases and service changes," she said. She estimated the basic residential phone bill, now about $9 a month, before taxes, will soar to $30 if the BPU lifts regulation.

To Verizon, however, competition is extensive, and wireless prices act as a restraint on its rates.

"The Rate Counsel's Office is truly out of touch if they really believe we'll be able to charge $30 for basic service when our competitors are offering voice services for just a fraction of that," spokesman Rich Young said.

"New Jersey has the lowest basic phone rates in the nation, and even with that, we've lost millions of lines and billions of minutes to competition," Young said. "If we don't offer top-tier services at a competitive price, consumers have options and will go elsewhere," Young said.

Even if it lifts controls, the BPU would retain authority to reverse itself, said Richard Chapkis, Verizon's vice president and general counsel for New Jersey.

"Safeguards remain in place."

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