Newark, N.J.— The Public Advocate’s Division of Rate Counsel Director Stefanie A. Brand today gave testimony to the Board of Public Utilities that it should reject Verizon NJ and EMBARQ Corp.’s request to deregulate basic telephone service because it would mean higher rates in the future and cause harm to all New Jersey ratepayers, especially senior and low-income consumers.

“Verizon and EMBARQ’s request will have serious consequences for New Jersey’s telephone customers,” Brand told the Board. “The greatest damage will likely befall seniors, families on fixed incomes, and low-income residents, but any residential customer who seeks to purchase local telephone service at affordable rates will be affected.”

Brand gave her testimony at a public hearing held by the Board on a request by Verizon and EMBARQ (also known as United Telephone) to reclassify basic local telephone services and declare them competitive. Under state law, the Board can deregulate a service if it finds sufficient competition in the market. Rate Counsel has disputed the claim by Verizon that consumers have a real choice with respect to basic phone service, noting that these companies serve 83 percent of that market.

Brand told the Board:

Brand cautioned the Board that if it relinquishes all regulatory controls over local telephone service, there will be no means to examine or stop rate increases or changes in service.  “Insufficient competition exists to ensure affordable rates. Deregulation would allow changes in rates and service without any government oversight. The Board should not abandon New Jersey’s consumers in this way.”

Brand said Rate Counsel’s analysis of the impact on consumers shows that continued regulation of basic service is needed.  “Our history in New Jersey and the experience in other states tell us that as a company deregulates, rates go up and not down,” said Brand. “The potential for rate shock is clear.  When consumers’ budgets are already facing the impact of rising electricity prices, high gasoline prices, and declining housing values, higher rates for local telephone service will add to the already heavy burden on consumers.”

In her testimony, Brand raised the following concerns about deregulation’s affect particularly on seniors and low-income families:

• Basic service includes the ability to make local and toll calls and the ordering, installation and restoration of “landline“ telephone service.  They are the basic services sought by the least sophisticated telecommunications consumers.

• Other telecommunications providers do not compete for affordable stand-alone basic local telephone service. Consumers lack like or substitute services in relevant geographic markets.

• Verizon and Embarq currently serve most of the New Jersey consumers who buy stand-alone local telephone service. Other carriers offer bundled services, which combine local and long distance service in a package. The proliferation of bundles does not represent competition for stand alone services, but instead creates pressure on the companies to raise rates for stand-alone services in order to encourage customers to migrate to bundled offerings.

• Rate Counsel’s expert has estimated that the total cost to residential and business customers if basic service and directory assistance are deregulated could be up to one half billion dollars, if the companies raise basic rates to just below the cost of  bundled services.

• Other telecommunications providers do not offer comparable Directory Assistance services.  If residential Directory Assistance were deemed competitive, Verizon NJ would likely raise Directory Assistance rates and eliminate the monthly four free Directory Assistance calls that many consumers rely on currently.

For the full testimony of Stefanie A. Brand, go to:
http://www.state.nj.us/rpa/case/telecom/
casematter_verizon_communications.html 

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The Division of Rate Counsel is a division within the Department of the Public Advocate and represents the interests of consumers of electric, natural gas, water/sewer and telecommunications and cable TV service. Additional information on this and other utility matters can be found at the Division’s website at www.state.nj.us/publicadvocate/utility. The Department of the Public Advocate website is http://www.njpublicadvocate.gov.