As Ratepayer Advocate, I am not in favor of any rate increase.

As you know, in this matter, we believed that the record we established demonstrated that the UNE rate that Verizon can charge its competition to lease its network should be lowered. Our position remains that lower wholesale rates will increase competition among the carriers, increase consumer choice and increase technological innovation.

However, the commissioners of the Board of Public Utilities are charged with the responsibility of balancing the interests of consumers against those of the utilities.

I feel that the $1.81 increase the BPU unanimously granted Verizon, which raises the UNE wholesale rates charged to competitors from $12.62 per line per month to $14.43 is fair and reasonable.

I don’t believe that this increase in the wholesale rate should adversely affect competition in the local telephone market in New Jersey. If it does, we will ask the Board to revisit this rate.

I do not believe that this increase should be automatically passed through to customers in the form of higher retail rates. The local telephone market is elastic and Verizon’s competitors should be able to absorb this increase in wholesale rates. I am hopeful that the competing carriers will remain in New Jersey because consumers benefit when competition is vibrant.

This increase should satisfy Verizon’s claims that it needs to be better compensated for its network.

Now that Verizon has been awarded an increase in the UNE rate, I am hopeful that Verizon will continue to make investing in New Jersey’s telecommunications infrastructure a priority. This will benefit New Jersey’s economy by providing technological innovation and spur business expansion and job creation.

Background:

• UNE-P Unbundled Network Elements Platform- the goal of UNE rates is to set the price of renting the Verizon system components the CLEC’s need to use to reach individual customers. It’s a wholesale rate.
  
  
• RPA filed testimony that the UNE rate should be decreased based on the RPA’s analysis of the two cost components the BPU examined- the cost of capital and the depreciation rate.
  
  
  
  
  • RPA cost of capital recommendation was 7.1% v. Verizon cost of capital request of 15.98%.
    
  • RPA recommended using longer depreciation lives to reflect the actual market conditions for purchase and deployment of telco equipment.
    
    
• The BPU’s increase of the UNE rate from the current $12.62 to $14.43 really represents a larger bottom line increase to Verizon, since our experts showed that the two cost components the BPU examined hould have been reduced.
  
  
  
  
  • This increase should satisfy Verizon’s claims that it needs to be better compensated for its network.
    
  • The BPU’s action today shows that Verizon’s investments in NJ have been and will be rewarded, and we expect Verizon to continue to make investing in NJ’s telco infrastructure a priority.
    
    
• We feel the UNE rate should be set appropriately to continue NJ’s progress to a robust competitive market for local telephone service.
  
  
• AT&T, MCI and other CLEC’s have been attracted to NJ in part by the UNE rate currently offered, and consumers have benefited from the variety of service offerings. The effects of this rate change will need to be monitored to ensure residential and small business competition will continue.
  
  
• When comparing NJ’s UNE rate to other states, keep in mind that in NJ the CLEC’s offer local calling on a statewide basis; in other states, it is often concentrated on high-density urban centers and affluent residential markets ONLY. Need to compare apples to apples.
  
  
  
  
  • NJ is the most densely populated state in the country, and has a relatively high median household income. These two factors make NJ a good target for local telephone service competition.
    
    
• Bottom line is that appropriately set UNE rates keep competitors in the state, and encourages them to invest in their growing businesses.
  
  
• The BPU has done an excellent job balancing the need to spur competition with the need to fairly compensate Verizon for its investments.
  
  
• The Ratepayer Advocate awaits a complete review by the BPU of all the UNE inputs, after conclusion of the FCC’s TELRIC proceeding.

The Division of the Ratepayer Advocate is an independent state agency that represents the interests of utility consumers and serves as an active participant in every case where New Jersey utilities seek changes in their rates or services. The Ratepayer Advocate also gives consumers a voice in setting long-range energy, water, and telecommunications policy that will affect the delivery of utility services well into the future.

Additional information on this and other matters can be found at the Division of Ratepayer Advocate’s website at http://www.rpa.state.nj.us

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