COMPETITORS CITE HIGH VERIZON RATES FOR HOT CUTS, UNES IN N.J.
Competitors urged FCC to turn down Verizon’s request for Sec. 271 entry in N.J., saying company’s high rates for hot cuts and unbundled network elements (UNEs) had deterred competition. In comments filed late Mon., several competitors reminded agency that U.S. Appeals Court, D.C., recently remanded part of FCC’s decision permitting SBC entry in Kan. and Okla. on ground that Commission hadn’t properly considered such “price squeeze” issues (CD Dec 31 p2). Court “made clear” that FCC “must carefully consider whether the applicant’s UNE rates create an anticompetitive price squeeze that prevents local competition [and] that is precisely the case in New Jersey,” WorldCom said. Several competitors said high wholesale prices had stopped them from entering residential market in N.J.
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Complaints came from both facilities-based competitors and those that use UNE platforms. Cavalier Telephone said nonrecurring charges (NRCs) levied by Verizon for hot cuts were “massively inflated and create a price squeeze that precludes local entry by facilities-based providers like Cavalier. Cavalier has its own network and switches but has to lease loops from ILECs for final connection to customers. Hot cuts are needed to connect those ILEC loops to Cavalier’s facilities.” Assn. of Communications Enterprises (ASCENT) raised similar concerns about price of hot cuts, saying high NRCs impeded migration of competitors from UNE platform to their own facilities, particularly for switching.
UNE rates are too high to begin with, WorldCom said: “What is certain is that UNE rates, particularly for switch usage, are far too high. While not as outrageous as Verizon’s pending application in Rhode Island, the switching rates alone are sufficiently high to erect barriers that prevent residential competition in New Jersey.” WorldCom said D.C. Circuit remand suggested that “it makes no sense to approve UNE rates at the high end of the TELRIC [total element long-run incremental cost] range found reasonable by the Commission if that presents a price squeeze which blocks local competition.” WorldCom said excessive UNE rates prevented it from offering local competition to residential consumers in N.J.
Z-Tel Communications said wholesale UNE-P rates paid by competitors were higher than retail rates Verizon charged consumers, meaning there was no way UNE-P based company could offer residential service without losing money. “Given the recent mandate of the D.C. Circuit… the Commission must consider the impact this price squeeze has on competition in the residential market.” At minimum, FCC should require Verizon to lower its wholesale rates “to the lowest point within the TELRIC ‘zone of reasonableness’ to mitigate the impact of the price squeeze,” Z-Tel said. Court had noted that while FCC had “zone of reasonableness” in which rates were considered cost-based, it didn’t help that rates fell in that area if there still was price squeeze.
Metropolitan Telecom, small UNE-P based competitor, complained about malfunctioning operations support systems (OSS), causing billing problems: “A significant percentage of the data that Verizon’s systems in New Jersey generate and transmit is inaccurate.” XO Communications said Commission should require Verizon to refile its Sec. 271 application because it submitted petition before N.J. Board of Public Utilities had chance to complete its evaluation of Sec. 271 compliance in state. XO also said Verizon had “constructed artificial barriers” that impeded customer migration from one CLEC to another: “Verizon requires CLECs to conform to a process that adds 7 to 10 extra business days in order to accomplish a simple migration. If the New Jersey market is to become competitive, CLEC-to-CLEC migrations must be accomplished efficiently.”
Several organizations countered competitors’ arguments, saying Verizon long distance entry would stimulate competition and lower prices. Telecom Research & Action Center (TRAC) said consumers had benefitted in every market where FCC had given Bell company interLATA entry. TRAC estimated N.J. residential consumers could save $22-$167 million on long distance costs after one year of such increased competition. It also said it was important to remember that N.J. BPU, after “extensive” study, recently ruled that Verizon was in compliance with Sec. 271. Alliance for Public Technology (APT), which promotes wider access to broadband facilities, said allowing Verizon into long distance market in N.J. would bolster deployment of broadband services. Sec. 271’s interLATA prohibitions “constrain the widespread deployment of advanced telecommunications infrastructure and therefore undermine Sec. 706 [of Telecom Act] which seeks to promote investment in ubiquitous high- speed networks,” APT said.
N.J. Board of Public Utilities (BPU) told FCC it should permit Verizon to provide interLATA long distance service if carrier demonstrated its compliance with Dec. BPU order to reduce unbundled network element (UNE) rates by up to 40%. Assuming compliance with UNE rate order, BPU said Verizon’s local exchange market would be fully and irreversibly open to competition as Telecom Act required, company would have satisfied all 14 points of Telecom Act’s checklist and its long distance entry would be in public interest. BPU wasn’t able to verify compliance with new UNE rates because Verizon filed its Sec. 271 petition at FCC in Dec., before state agency voted on recommendation.