Verizon Receives FCC Approval to Offer Long Distance in New Jersey

On its final day to determine whether the No. 1 local phone company has opened its local network to competitors in New Jersey, the Federal Communications Commission granted Verizon Communications Inc. approval to provide long-distance service in the Garden State.

The FCC cited 610,000 competitive local phone lines in New Jersey as proof that Verizon does have competition. The commission made its decision on the 90th day, which is how much time it is supposed to have to determine applications by the local provider that files to provide interLATA service in its region.

Verizon dominates the local phone market in New Jersey. The company provisions more than 6 million lines including 222,000 lines that competitors resell to local phone service.

“Verizon’s application should have been rejected. Local telephone competition languishes in New Jersey where competitors serve less than two percent of all residential lines,” said Len Cali, AT&T Corp. vice president of Law & Director of Federal Government Affairs, in a statement released following the FCC’s action.

The Telecommunications Act of 1996 requires the Bell operating companies open their local networks to competition before they are allowed to reenter the long-distance market within their local territories. The Baby Bells must meet a 14-point checklist articulated in Section 271 of the Telecom Act.

The FCC said its decision does not mean Verizon can stray from its obligations: “The FCC emphasizes that Verizon must continue to comply with the section 271 checklist requirements, and the commission has a number of enforcement tools at its disposal, including imposing penalties or suspension of approval.”

Verizon anticipates introducing long-distance service to New Jersey residents and businesses within the next several weeks. New Jersey is the eighth state in the densely populated Northeast where the carrier has received FCC approval to offer long-distance service.

The telecommunications giant provides long distance service in 44 states, claiming to be the fourth largest long-distance company behind AT&T, WorldCom Inc. and Sprint Corp.

Verizon’s plans show that it intends to gain an even deeper footprint in the United States. The company affirmed that it will request long-distance approval this year in the former Bell Atlantic states, including Delaware, Maryland, New Hampshire, Virginia and West Virginia as well as the District of Columbia.

Critics say the FCC approved Verizon’s application in New Jersey following disclosures that the Baby Bell disseminated advertising materials to Garden State homes and businesses earlier this month, promoting long-distance service, even though approval had not been granted.

Verizon inserted ad materials in approximately 500,000 New Jersey customer bills promoting lon-distance service. The company also sent similar ad materials to roughly 4,000 businesses.

AT&T filed complaints with the FCC requesting an investigation into whether Verizon’s actions were intentional. The FCC has turned the matter over to its Enforcement Bureau. An FCC spokesman did not immediately return a phone call Tuesday to comment on AT&T’s allegation.

However, in an affidavit, an AT&T executive says he received a telemarketing call June 12 at his home from a woman who promoted bundled services including “local telephone and long-distance service.” Verizon spokesman Bob Bishop said the company provided the FCC a script of the phone conversation in which long-distance service was not mentioned.

AT&T also has complained about the direct mail Verizon sent to some businesses in Virginia, where the carrier hasn’t even filed its Section 271 application.

Bishop said disseminating advertising materials were innocent mistakes and Verizon disclosed the blunders to the FCC. Furthermore Verizon says it let all customers who received the materials know that it was not authorized to provide long-distance service.

In a long-distance market the size of New Jersey, “You have to plan ahead and this material was prepared in preparation for us entering long distance,” Bishop said. “We can’t one day get approval to offer long distance and offer it the next day without a lot of preparatory work and that is what happened.”

AT&T spokeswoman Claudia Jones said her company views Verizon’s actions as a “multichannel effort to … prime the market prior to them having approval to sell the services.”

Separately AT&T and other Verizon competitors have asked the New Jersey Board of Public Utilities to lower UNE-P rates. Critics say Verizon recently lowered some of the UNE rates, including the so-called hot cut rate to physically switch a customer from its network to another service provider. The rate was lowered to $35, from $185, sources say. Verizon lowered the rate after learning the FCC would not approve its long-distance application in New Jersey, Jones said.

Still, AT&T claims the UNE rates are not low enough to effectively compete. There are 40,000 lines provisioned in New Jersey through UNE-P, according to the FCC.

The reduction in the hot cut rate is good for two years. One regulatory source representing a Verizon competitor said she feared the carrier would raise the rate in two years. She said state regulators had not taken the lead in encouraging the rate reduction.

“For some reason Verizon is a lot more arrogant in New Jersey and they seem to have regulators wrapped around their fingers more so than any other of the states,” she said.

Even a participant in the New Jersey proceedings agreed the near rubber stamp approval of Verizon was a bit amiss.

Andrew Isar, president of regulatory consulting firm Miller Isar Inc. and director of state regulatory services for the Association of Communications Enterprises, said, “While we appreciate the effort that has gone into evaluating Verizon’s compliance with the competitive checklist … in New Jersey there were several issues … that the competitive industry felt required further analysis and commitment on behalf of Verizon prior to the New Jersey Board’s endorsement.

“Chief among those issues of concern was Verizon’s commitment to adopt lower unbundled network element rates,” Isar said.

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