The Board of Public Utilities (BPU, www.bpu.state.nj.us) yesterday set new wholesale rates for competitors that utilize parts of Verizon Communications Inc.'s (www.verizon.com) telephone network to provide local service to New Jersey consumers.
The BPU decision reduces the cost for competitors to lease Verizon facilities that connect customers to the telephone network, also known as the local loop, from $16.21 to $9.52, a reduction of approximately 41 percent.
"The board is extremely pleased with [the] decision to establish dramatically reduced unbundled network element (UNE) rates," said BPU President Connie O. Hughes. "One of the immediate benefits that this decision brings is a pro-competitive environment for local service as well as advanced services such as DSL (digital subscriber line) in the residential market, an area previously lacking it."
The BPU's decision includes: dramatically reduced non-recurring charges to take advantage of modern automated systems and streamline installation procedures; and establishment of pro-competitive practices to encourage the introduction of advanced services such as DSL, used for high-speed Internet access.
The BPU decision will serve as the basis for a long-term strategy that provides CLECs with the incentive to build facilities to serve the local telecommunications market for both basic and advanced telephone services, according to the order.
The decision also establishes an UNE-platform (UNE-P) rate of $13.93, which is 38 percent lower than the existing rate of $22.42. The ILECs makes UNE-P available by combining the loop and switching elements in one package as mandated by an earlier board order.
The regulators note that the availability of UNE-P has taken on additional importance as larger facilities-based carriers have indicated that this will be their primary strategy for entrance into the residential local service market.
"The utilization of UNE-P presents CLECs immediate access to the entire landline customer base of the ILEC, without the need to buy and install separate equipment in every ILEC central office," the board said yesterday in a statement. "The decision sets in motion the framework necessary to effectively jumpstart local competition in the state. It addresses the recurring rates, non-recurring rates, and technical and policy issues associated with the provision of UNEs."
Robert A. Saunders, senior analyst with The Eastern Management Group (www.easternmanagement.com) in Bedminster, N.J., says that the decision flies in the face of FCC (www.fcc.gov) Chairman Michael K. Powell's and the federal agency's new vision of competition that is built on facilities rather than resale.
"The BPU decided to push UNE rates down to bargain basement levels in the Garden State in an effort to promote competition of any stripe," Saunders said. "The actions, though they may promote the entry of a few resellers that differ little from Verizon, will do nothing to promote real competition for New Jersey."
Instead, he said, facilities-based competition, which he said has been proven to be the most viable method to bring value to investors, the industry and the security of the public network, now has taken "a punch to the gut."
"Artificially low UNE rates encourage resale while discouraging investment in new networks," Saunders notes.
The New Jersey proceeding was a review of rates originally set by the board in 1997.
Bruce Cohen, general counsel of Verizon New Jersey, said that the company is studying the board's new decision and its implications for Verizon.
"We are concerned that the UNE rates were set at a level designed to artificially stimulate competition, instead of basing them on the established federal pricing formula," Cohen said.
The real goal of the federal Telecommunications Act is to encourage competitors to build their own networks, he added. "That's why the Act said rates must be just, reasonable and based on cost. The pricing formula currently required by the FCC already fails to account for all Verizon's costs. Rates that fail to meet even the FCC's standards only exacerbate the problem."
Cohen said it's time for AT&T Corp. (www.att.com) and other competitors to become "Competitive Local Service Providers" that add value and build new networks, not just Competitive Local Exchange Carriers that simply resell Verizon's services or use its network.
