December 11, 2000

Frances L. Smith, Secretary
Board of Public Utilities
Two Gateway Center
Newark, NJ 07102

Re: I/M/O Application of Bell Atlantic-New Jersey, Inc. for Approval of a Modified Plan for an Alternative Form of Regulation and to Reclassify All Rate Regulated Services 
BPU Docket No. TO99120934

Dear Secretary Smith:

On December 5, 2000 the Division of the Ratepayer Advocate ("Ratepayer Advocate") submitted its initial comments in response to the e-mail notice from Verizon New Jersey, Inc., ("Verizon") asking to withdraw its petition in the above referenced matter and to extend the current Plan for Alternative Regulation (PAR) for an indefinite period into the future. At the Board agenda meeting of December 6, 2000 the Board established a comment cycle for interested parties to submit comments to the Board on the Verizon e-mail. In its initial letter to the Board, the Ratepayer Advocate urged the Board not to permit Verizon to simply withdraw the petition; instead, the Ratepayer Advocate asks the Board to decide our pending motion, and to dismiss the petition with prejudice, which will ensure that a filing presenting the same unmeritorious issues as the present petition will never have to be litigated again by the same parties. The substantial cost of lengthy hearings on a frivolous petition serves no useful purpose. In the interests of judicial economy, finality to litigation and preventing economic burdens on litigants, a court of law would certainly have dismissed this filing with prejudice. The Board should do the same, for all the same reasons.

If the Board decides to permit Verizon to withdraw the petition, the dismissal at the behest of Verizon must be conditioned upon its being withdrawn with prejudice. The mere withdrawal of the petition now without prejudice to its later refiling, would be an abdication of the Board’s role as a quasi-judicial body to orderly manage the prosecution of litigation before it, and an abuse of the Board’s discretion. The petition of Verizon was fully litigated before the Board, and all proofs in support of its approval by the Board were presented in their entirety. The petition is deficient as a matter of law and should not be relitigated ever again.

To ensure that any future expenditure of time, staff and financial resources will be better used, the Ratepayer Advocate would like to offer to the Board, several suggestions for the conduct of future proceedings. The early resolution of discrete issues, and the issuance of timely guidance from the Board on their applicability in future filings, will greatly assist in the proper presentation of evidence addressing these matters, and ensure that requirements of the Board are fulfilled by litigants filing petitions before the Board.

The central issue in the above referenced filing was the assertion by Verizon that the local exchange telecommunications marketplace in New Jersey is sufficiently competitive to permit the complete deregulation of Verizon. The relevant statutory provision addressing the authority of the Board to make determinations of competitiveness, is found in N.J.S.A. 48:2-21.19(b), which states in pertinent part:

The board is authorized to determine, after notice and hearing, whether a telecommunications service is a competitive service. In making such a determination, the board shall develop standards of competitive service, which, at a minimum, shall include evidence of ease of market entry; presence of other competitors; and the availability of like or substitute services in the relevant geographic area. (emphasis supplied).

The clear command of the statute requires the Board to "develop standards of competitive service." To date, the Board has not developed such standards, choosing instead to rely upon the three minimal requirements set forth in the statute. Clearly, the Legislature intended that the Board would develop more detailed and fully comprehensive standards to be the basis for making determinations under the statutory cause of action. The Board has, until now, not invoked its authority under the statute to adopt such standards. The Ratepayer Advocate again urges the Board to convene a rulemaking proceeding to consider and adopt a final set of regulations that will adopt for New Jersey, a comprehensive set of standards, in terms that are unmistakable in their interpretation and application, so that future filings requesting reclassification of services as "competitive" will have a roadmap of what legal test they will be required to meet.

In our briefs in support of the pending motion to dismiss, the Ratepayer Advocate has asked the Board to consider, for inclusion into these standards, the actions of the FCC in deregulating AT&T in the interstate jurisdiction. The FCC’s regulatory approach to promoting competition in the interstate toll market, included cost and pricing constraints on the monopoly carrier so long as AT&T possessed market power, and periodic review of market share analysis, as the most important factor in determining whether AT&T continued to have market power. Though the interstate toll market was declared open to competition in 1984, following the breakup of AT&T, complete regulatory controls over AT&T were not removed until many years later. The FCC lifted all remaining regulatory constraints only in 1995, by which time AT&T had lost 60% of its market share and indicated that the carrier no longer possessed market power. I/M/O Motion for AT&T Corp. to be Reclassified as a Non-Dominant Carrier, FCC 95-427, 11 FCC Rcd 3271 (rel. October 23, 1995). The Ratepayer Advocate urges the Board to follow the example of the FCC in its deregulation of AT&T, as the proper model for New Jersey to consider in future applications by Verizon and other carriers, to be deregulated. The process should be deliberate and exacting, permitting reclassification on a step-by-step basis, of only those services and in those carefully circumscribed geographic areas, where Verizon does not command market power. The Ratepayer Advocate stands ready to contribute to the creation of a comprehensive record analyzing these issues and their implications for competition in New Jersey, and the development of exacting and meaningful guides for the Board and the telecommunications industry in considering future petitions for deregulation of the industry.

In ruling on the pending motion of the Ratepayer Advocate and the issues raised in Verizon’s letter of December 1, 2000, it would also serve the interests of the Board and the regulatory process to confirm the applicability of the standards established by the Board in its 1995 IntraLATA Toll Presubscription Order, Docket No. TX94090388 (December 14, 1995) for all future revenue neutral rate rebalancing proposals filed by incumbent local exchange carriers. In that order, the Board denied the request of Bell Atlantic-New Jersey to rebalance certain rates as the IntraLATA toll market was made fully competitive, and set forth the following guidance for any future applications for revenue neutral rate rebalancing. Such applications must include:

(1) a detailed cost/price relationship study demonstrating the cost for all services as well as the tariffed prices; (2) a study detailing any positive or negative contribution for all major service categories sufficient to balance to the total company records. (This study will be for all major service categories including rate regulated, competitive, plus any other services such that total intrastate costs can be developed); (3) a fully developed rate design detailing each service’s proposed rate change; (4) a showing that the resultant rates are just and reasonable; and (5) a fully developed analysis of any rate change effects on universal service and affordability of rates.

In the current petition, Verizon simply ignored these requirements. It would benefit all parties in future proceedings considering revenue neutral rate rebalancing, for the Board to underscore the continued applicability of these requirements.

The letter of December 1, 2000 from Verizon to the Board, also includes a request for extension of the current Plan for Alternative Regulation (PAR) for an indefinite period of time. This request presents several significant problems, which Verizon neither acknowledges nor addresses. The statute applicable to PARs states that a local exchange carrier may "petition" the Board to be regulated under an alternative form of regulation, and the carrier shall "submit its plan for an alternative form of regulation with its petition." N.J.S.A. 48:2-21.18(a). The two page letter of December 1st includes in its last two paragraphs -- a total of six sentences -- the request for "an extension of the PAR, now scheduled to expire on December 31, 2000, until the [next petition for deregulation] in concluded." The current PAR, implemented by the Board in 1993, expired by its own express terms on December 31, 1999. Re: New Jersey Bell Telephone Co., 143 P.U.R. 4th 297 (N.J.B.P.U. May 6, 1993). The Board, in its order approving the current PAR, made detailed findings of fact that the Plan being approved by the Board would satisfy the standards of the statutory scheme, for the duration of the plan. The Board made no findings, that the Plan would continue to satisfy the statutory standards for any period of time following December 31, 1999. The Board can clearly not approve this request for indefinite extension the current PAR on the basis of this letter.

In order for the Board to extend the current PAR, the Board would be required to "find," as facts, that the Plan will satisfy, in 2001 and perhaps beyond, the eight statutory criteria set forth in N.J.S.A. 48:2-21.18(a). Factual findings can only be made in evidentiary proceedings; indeed, it is for the very purpose of "finding facts" that evidentiary proceedings are held. Any facts that the Board found in 1993 for the support of the original PAR, were limited to the six-and-a half year duration of the Plan that ended on December 31, 1999. Re: New Jersey Bell Telephone Co., 143 P.U.R. 4th 297 (N.J.B.P.U. May 6, 1993). The extensive record developed by the Board during its review of Verizon’s original petition and plan are set forth in detail in the lengthy decision of the Board which summarized the positions of the parties, evaluated the evidence presented into the record, and applied the relevant law to those facts. Today, Verizon would have the Board indefinitely extend that PAR, which expired on December 31, 1999 and regarding which the Board has not made any factual findings respecting its continuing satisfaction of the statutory criteria beyond that date, pending the future filing of a petition at some unknown point in time, and conclusion of hearings on that petition.

Administrative agencies and courts retain broad discretion to impose sanctions on parties that institute "frivolous" proceedings. A filing is generally considered "frivolous" if it is "clearly insufficient on its face", and the continued litigation of an issue is "frivolous" if it is "devoid of merit in that there is little prospect that it can ever succeed." Black’s Law Dictionary (5th Ed.) (definition of frivolous). By sanctioning such conduct, administrative agencies and courts discourage parties from unnecessarily wasting valuable time and resources in resolving proceedings that are without merit and thereby reserve the calenders of the administrative agencies and courts for cases that are more worthy of consideration. See, e.g., Nagle v. Rosen, 8 F.3d 141 (3rd Cir. 1993) (discussing frivolous claims in context of appellate rules).

The Board has heretofore reminded Verizon and other parties of the extraordinary "costs" necessitated by its consideration of matters such as the current proceeding. In fact, the Board specifically rebuked Verizon in numerous proceedings for "wasting" the Board’s time and expending the resources derived from consumers throughout the State of New Jersey in the resolution of matters that were "prematurely" proposed by Verizon or grossly deficient in terms of the evidentiary support proffered by Verizon. See, e.g., Order Approving Presubscription of Rules, I/M/O the Investigation of InterLATA Toll Competition for Telecommunications Services on a Presubscription Basis, Docket No. TX94090388 (Dec. 14, 1995) ("Presubscription Order"); Telecommunications Decision and Order, In re Bell Atlantic-New Jersey, Inc. Docket Nos. TO92030358 & TO98121462 (May 24, 1999) ("1999 Order") (directing Verizon to refine its proposal for an alternative form of regulation and thereby relieve the Board and other parties from expending limited resources to review a premature proposal that poorly reflects the current telecommunications market in New Jersey).

Verizon candidly admits that its filings with this Board in the current proceeding were incomplete in nature. By its own admission throughout the Opposition Brief and throughout this entire proceeding, Verizon instituted a "frivolous" proceeding before this Board in the present matter and utterly failed to present the Board with the necessary evidence to obtain the relief that it seeks. See, e.g., VOB at 19-28. As the Board warned Verizon and Verizon now seems to finally understand, Verizon’s proposed CTP distracted the Board and all other parties from "the work of fully opening up the local exchange market to competition, the crucial task which both the State and federal governments are committed to accomplish." 1999 Order, at 11. Consequently, the Board should impose sanctions on Verizon to deter it from continually repeating similar behavior and thereby forestalling the evolution of competition in New Jersey.

c: Service list (via e-mail and regular mail)

Back | Home