Re: I/M/O Application of Verizon New Jersey For Approval of Alternative Form of Regulation and to Reclassify Multi-line Business Services as Competitive

Mr. Colton comments on the universal service proposal in Verizon-New Jersey’s ("Verizon’s") new Plan for an Alternative Form of Regulation ("PAR-2"). Due to shortcomings in Verizon’s proposal, the Division of the Ratepayer Advocate ("Ratepayer Advocate") proposes its own Universal Service Plan that provides further consumer benefits in the provision of telephone service.

PART ONE: Review of the current extent of poverty in New Jersey and how Verizon’s analysis of "affordability" of service meets the needs of New Jersey ratepayers.

A significant number of New Jersey households live at income levels far below the average. These low-income households have limited access to basic telephone service because it is simply not affordable. In 1999, more than 630,000 New Jersey residents lived with incomes below the federal Poverty Level. This figure represented 7.8% of all New Jersey residents. A comprehensive examination of the "affordability" of local telephone service should include persons with incomes at or below 175% of Poverty, where the price of telephone service is directly related to their financial ability to receive basic telephone service. PAR-2 fails to meet New Jersey’s explicit statutory criteria to maintain and promote the affordability of local telephone service. Not only has Verizon presented a flawed analysis of what represents "affordability," but the evidence demonstrates that Verizon has failed to maintain affordable telephone service under its existing regulatory regime.

PART TWO: The Ratepayer Advocate recommends three proposals to the New Jersey Board of Public Utilities ("Board") as part of any regulatory approval of PAR-2. Specifically, the Board should:

A. Require Verizon to fund its Lifeline program to allow low-income consumers to gain the full extent of federal assistance for local phone service;

Verizon’s Lifeline program should be extended to allow New Jersey consumers to gain an additional $1.75 federal matching credit, thereby increasing the existing Lifeline credit for Verizon’s low-income customers to the full available Lifeline benefit of $10.50 in reductions on their monthly charges for local telephone service. Eligibility should also be broadened to include all households with annual incomes at or below 175% of the federal Poverty Level, and to permit automatic enrollment for those persons who are categorically eligible for participation in the program based on their participation in certain public benefit programs. The income-based eligibility is particularly important because it ensures that working poor families who do not receive public assistance can still participate in Lifeline programs. Most importantly, the Lifeline program should be made a permanent program.

B. Require Verizon to extend and expand its Access New Jersey ("ANJ") funding for the state’s schools and libraries;

ANJ is designed to link K-12 schools and libraries to the Internet and provides about $130 million in savings over a four year period (1997-2001). ANJ also includes educational discounts for telecommunications services, free customer premises equipment, and network development.

New Jersey’s schools and libraries continue to have a need for financial assistance in helping them connect to the Internet. Unique characteristics that present hardships for New Jersey schools and libraries in obtaining adequate funding for telecommunications services include a large number of older buildings with asbestos contamination, and the high costs of the services themselves. Since existing federal funding known as E-rate, is insufficient to help all New Jersey schools and libraries meet the goal of connecting to the Internet, it is incumbent on Verizon to fill the gap by: (1) extending its commitment to Access New Jersey indefinitely, (2) maintaining educational discounts for services other than ATM, and (3) deepening the discounts provided for ATM service.

In order for all of New Jersey to benefit from competition, it is essential that telecommunications firms do not bypass the high cost areas of the State. The goal of the High Cost Fund is to provide an incentive (in the form of direct support payments) for all service providers to serve high cost areas in the State. The Ratepayer Advocate historically has recommended that for purposes of identifying high cost areas, 50% of the local loop and related non-traffic sensitive costs should be allocated to local exchange service. Accordingly, those carriers serving wire centers with costs that are greater than two times the statewide average price for local exchange service, or $24.08 per line, would be eligible for support from the High Cost Fund. Funding for the High Cost Fund should be obtained from a percentage of revenue assessment on all telecommunications carriers in New Jersey.

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