ORAL MOTION TO DISMISS VERIZON’S PETITION
BY BLOSSOM PERETZ, ESQ., RATEPAYER ADVOCATE
Board of Public Utilities
October 30, 2000
SUMMARY OF VERIZON’S PROPOSAL:
On December 12, 1999, Bell Atlantic-New Jersey, now Verizon-New Jersey ("Verizon") filed a petition and supporting documents comprising its Modified Plan for Alternative Regulation called the Competitive Telecommunications Plan ("CTP"). On May 18, 2000 Verizon submitted a supplemental filing pursuant to the Board’s Order requesting further support of its proposal.
In its petition, Verizon contends that all of its remaining rate regulated services now satisfy the statutory criteria under the New Jersey Telecommunications Act of 1992 ("NJ Act") for competitive classification. Accordingly, Verizon has requested that the Board reclassify all of its remaining rate regulated services as competitive and approve its CTP. The CTP includes an initial revenue-neutral rate restructuring for Residential Basic Exchange Services ("RBES"). Verizon’s proposed rate restructuring consists of packaged services which include Touch-Tone and three vertical services, plus 25 minutes of regional toll calling. To date, Verizon has not set forth which of its vertical services will be included in the package. The package permits customers to choose a package based on use low usage at $15.00, moderate usage at $16:00, and unlimited usage at $17.50. The proposed packages will be priced three times higher than the current price of low use measured service, and more than twice the price of residential flat rate service. The sheer magnitude of the requested rate increases without the kind of supporting documentation required in rate cases, should alone cause the Board to view this proposal will extreme concern, as the effects of these huge rate increases upon the captive residential consumer would be enormous, as the public hearings held in this matter have so compellingly shown.
LEGAL STANDARD FOR MOTION TO DISMISS
The legal standards for a motion to dismiss are found in N.J.A.C. 1:1- 1.1(a) which states in relevant part that "[s]ubject to any superseding Federal or State law, this chapter shall govern the procedural aspects pertaining to transmission, the conduct of the hearing and the rendering of the initial and final decisions in all contested cases...", and in N.J.A.C. 1:1- 12.1 which sets out the procedures for filing a motion. As the Administrative Code does not contain standards specific to the filing of a motion to dismiss, the applicable standards are set forth in Civil Practice Rule 4:37-2 (b) which governs involuntary dismissal. The rule states that following the conclusion of presentation of evidence on all matters by the petitioner, a motion may be made for dismissal of the action or of any claim on grounds that upon the facts and the law, the petitioner has shown no grounds for relief.
As described below, at the conclusion of its case, Verizon has failed to meet the statutory standards for the relief that it seeks, namely approval of its CTP. Accordingly, Verizon’s Application in this proceeding should be dismissed by the Board. The Ratepayer Advocate, pursuant to Rule 4.37-2(b), does not hereby waive any of its rights to offer evidence in the event that this motion is not granted.
The Ratepayer Advocate respectfully submits that Verizon did not present any evidence upon which approval of its petition may be granted under N.J.S.A. 48:2-21.18, and 48:2-21.19(b). Additionally, the time for this motion is ripe as Verizon has had a full and complete opportunity to present evidence in support of its application. Pursuant to Rule 4:37-2(b), the standard of review for dismissal is stated clearly, that the reviewing court (here the Board) must examine the evidence, together with legitimate inferences which can be drawn therefrom, and determine whether the evidence could have sustained a judgment in favor of the party who opposed the motion.
Thus even if the evidence presented is taken in the light most favorable to Verizon, the company has failed to support a cause of action upon which relief can be granted. As described below, Verizon has not presented any evidence that supports the requirements set forth in N.J.S.A. 48:2-21.18, which sets out the criteria an alternative regulation petition must meet to be approved, and N.J.S.A. 48:2-21.19, which governs the reclassification of rate regulated services as competitive. Accordingly, and for the reasons set forth herein, the Ratepayer Advocate moves the Board to dismiss Verizon’s petition in its entirety.
The petition filed by Verizon in this matter, confuses the regulatory boundaries between regulated and unregulated services. The company asks the Board to impose a regulatory impossibility -- the continuation of a Plan of Alternative Regulation (PAR), after all remaining rate regulated services are declared to be competitive. The New Jersey Telecommunications Act of 1992 clearly states that once a service is declared "competitive," the Board shall no longer regulate the prices, terms and conditions under which that service is offered. Regulation would, upon approval of the petition as filed, cease to exist and be an empty promise, and there would no longer be any "protected services." What would remain is an unregulated monopoly with limited, if any, opportunities or incentives for competitive carriers to compete.
We are now at the juncture of the case where all the evidence, all the proofs, all the facts that Verizon has at its command to support its petition, are fully in the record. Looking at those proofs, even in the light most favorable to Verizon, it is abundantly clear that there is no factual basis for the sweeping relief which Verizon is requesting, and no legal basis for the Board to approve this request. It must be dismissed now.
Verizon’s Verified Petition asks this Board to "modify the present Plan for an Alternative Form of Regulation . . . by reclassifying all remaining rate regulated services as competitive." The asserted basis for this request is Verizon’s contention that the company’s "remaining rate regulated services now satisfy the statutory criteria of the [NJ Telecommunications Act of 1992] for competitive classification." The two-and-a- half page Petition concludes with the prayer: "Wherefore, [Verizon NJ] respectfully requests that the Board conduct a prompt and thorough review of the issues raised by this Petition ...". Thorough review has now been concluded of all Verizon’s proofs, and it is painfully clear that the company has not met its burden of proof and is not entitled to the relief requested.
The request to have this Board declare competitive all remaining rate regulated services, including "protected services" such as residential exchange service, simply fails to meet the minimal standards set forth in New Jersey law. The statute, N.J.S.A. 48:2-21.19 states that, in making decisions to deregulate services, "the board shall develop standards of competitive service which, at a minimum, shall include evidence of [1] ease of market entry; [2] presence of other competitors; and [3] the availability of like or substitute services in the relevant geographic area." It is clear that Verizon has failed to meet this test.
The statute speaks in the present tense about "ease of market entry," "presence of competitors" and "availability of like and substitute services." The proofs offered by Verizon in this record assert, time and again, witness after witness, that as soon as Verizon obtains Section 271 authority, there will be competition throughout the state. The entire focus of Verizon’s argument is its prognostication for the future -- the level of competition evident today is, even from the mouths of Verizon’s own witnesses, virtually nonexistent. Commissioner Armenti and Commissioner Butler may recall the graph put forth by Verizon’s CEO Dennis Bone with the so-called "hockey stick" effect that the company asserts occurred in New York, and contends will likewise manifest itself in New Jersey following Section 271 authority in New Jersey. The company’s support for this assertion in nothing but naked conjecture.
We are simply stating to the Board that the plain meaning of the statute does not permit deregulation of protected and rate regulated services on the basis of the record in this case -- a record of events which have not yet occurred and may not occur. If there is no presence of competitive carriers, which would be manifested by a vigorous competitive marketplace in New Jersey today, the Board must dismiss Verizon’s pending petition to deregulate. If ease of market entry has not been proven by a vigorous competitive marketplace in New Jersey today, the Board must dismiss Verizon’s pending petition to deregulate. If there is no availability of like and comparable service for all consumers who seek alternative suppliers in the marketplace today, the Board must dismiss Verizon’s pending petition to deregulate.
The statute does not permit, and certainly never contemplated, that deregulation of essential telephone services would be based on the selfserving projections of future events by the monopoly carrier. Yet that is the entire foundation for the relief which Verizon asks of this Board in the present proceeding. As the Ratepayer Advocate has been alleging since the start of the Collaborative Proceeding, competition requires competitors who are offering services to New Jersey residential and business customers at rates that are fair and equitable -- for both consumers and competition.
If the Board dismisses the CTP, which is the foundation of the current petition, that leaves the open question of what happens with the current Plan for Alternative Regulation (PAR), which Verizon has asked the Board to modify and extend. The company has grafted its PAR so integrally with CTP, that the dismissal of CTP leaves a complete void in this record regarding the continuation of any PAR. Dismissing the CTP from this filing reveals that, Verizon has utterly failed to submit any sort of PAR. The company has offered no evidence that a PAR stripped of the CTP will
(1) ensure the affordability of protected telephone service
(2) produce just and reasonable rates for telecommunications services
(3) not unduly or unreasonably prejudice or disadvantage a customer class of providers of competitive services
(4) reduce regulatory delay and costs
(5) produce a plan that is in the public interest
(6) enhance economic development in the State while maintaining affordable rates
(7) include a comprehensive program of service quality standards, with procedures for Board monitoring and review, and
(8) identify the benefits to be derived from a PAR.
It warrants reemphasis, to note that Verizon bears the entire burden of proof on all these issues. The lack of proofs on these statutory standards is a fatal defect to any PAR which Verizon would have this Board continue, devoid of the CTP.
In light of the foregoing reasons, it is clear that Verizon’s petition should be dismissed in its entirety. This is because, as I have previously stated, Verizon’s CTP is in fact a modified Alternative Regulatory plan that, if approved, would be contrary to the legislative intent inherent in the alternative regulation portion of the statute, namely that there be something left for the Board to regulate. Moreover, Verizon predicates its entire rate rebalancing structure and subsequent rate freeze on reclassification of its rate regulated services as competitive, illustrating that all of the portions of its proposal are interdependent, and fail to meet the statutory criteria required for approval.
The CTP filed by Verizon also suffers from the fatal defect of the company tying together the purchase of a competitive service -- intraLATA toll -- with a monopoly service -- residential exchange service. It is a patent violation of antitrust law and will certainly be reversed by the courts. If there is one shining success in the introduction of competition in New Jersey, it is the intraLATA toll market, where a great many carriers compete on an equal footing, with consumers enjoying all the benefits -- greatly enhanced choice, many plans and rate structures to choose among, and prices being driven down toward their incremental cost. The CTP proposal of Verizon would turn the clock back on all the competitive gains New Jersey has for its consumers, and cut the legs out from under all the CLECs competing in this market. Moreover, it is abundantly clear, that the proposal violates the FCC’s toll dialing parity standards. If this plan were implemented by the Board, there will most certainly be legal challenges in a variety of legal forums, and the introduction of meaningful competition will be further delayed.
In conclusion, the arrival of competition in the telecommunications industry has led to furious investment and innovation -- helping to give rise to the digital revolution. Our goal is to bring opportunity for investment, innovation and new economic ventures to all residents and businesses in New Jersey. These changes may bring stress on both the regulatory process and the players - but regulatory oversight must continue to be vigilant to insure that we reach our goals. Our common goal is the implementation of the Federal Telecommunications Act of 1996 -- here in New Jersey -- with an open vigorous competitive marketplace, offering advanced telecommunications technologies which are available and affordable to all classes of ratepayers. Clearly, as stated above and as will be supported by our brief to this motion, Verizon’s petition, as filed, and supporting testimony offered in this record not only fail to meet statutory muster and should be dismissed, but are also in direct contravention to our goals for the development of competition in New Jersey.
President Tate, Commissioner Armenti and Commissioner Butler, I leave you with these guides of wisdom from great statesmen and philosophers of the 20th century.
Said Charles DeGaulle:
"It so happens that the world is undergoing a transformation to which no change that has yet occurred can be compared, either in scope or in rapidity"
Alongside the admonitions of Alfred North Whitehead who said:
"The art of progress is to preserve order amid change, and to preserve change amid order."
Thank you.