STATEMENT OF BLOSSOM A. PERETZ, ESQ.
DIRECTOR, DIVISION OF THE RATEPAYER ADVOCATE

BEFORE THE BOARD OF PUBLIC UTILITIES
EVIDENTIARY HEARING ON VERIZON-NEW JERSEY’S
APPLICATION FOR FCC AUTHORIZATION TO PROVIDE
IN-REGION InterLATA SERVICE IN NEW JERSEY
Newark, New Jersey, November 5, 2001

President Hughes, Commissioner Murphy, Commissioner Butler. My name is Blossom A. Peretz. I am the Director of the Division of the Ratepayer Advocate, which represents all New Jersey ratepayers in proceedings before the Board of Public Utilities. Thank you for this opportunity to make an opening statement in the evidentiary hearing on Verizon New Jersey’s request for Consultative Report to the Board on its prospective application to the Federal Communications Commission under Section 271 of the Telecommunications Act of 1996 to provide in-region inter-LATA service. In short, Verizon is seeking approval to offer long-distance service in New Jersey.

At a recent conference in Virginia, an interesting question was posed by Commissioner Joan Smith, who is a member of the Oregon Public Utility Commission, and who is also the chairperson of the Telecommunications Committee of the National Association of Regulatory Commissioners -- or NARUC. Commissioner Smith suggested that we ask our utility regulators what is the goal for competition in the telecommunication market. Her answer was the same as mine: affordable choice for consumers. While she recognized the need in the future for affordable choice for advanced voice, video and data services, her message for today was to concentrate our efforts on

basic voice services over public switched networks. That translates into let’s make sure that we provide consumers with affordable choice for basic plain old telephone service also known as POTS.

The position of the Ratepayer Advocate is clear. We welcome Verizon New Jersey’s entry into the long-distance market -- when the time is right for consumers. Unfortunately, the time is not ripe now because competition does not yet exist in the local telephone market. Consumers do not have affordable choice -- in fact, they do not have any choice -- for their basic local telephone service.

The Ratepayer Advocate has been accused of sounding like a broken record in stating that there is no competition in New Jersey’s local telephone market. I plead guilty as charged. We are a broken record and we will continue to be until the record is repaired and until there is competition in the local exchange market and consumers have affordable choice for their basic local telephone service.

There can be no doubt that today Verizon monopolizes the local telephone market, particularly for residential services, in New Jersey. By Verizon’s own admission, it has captured 99.99 percent of the local residential telephone customers. From the Delaware Memorial Bridge to the Delaware Water Gap, there are only 280 residential customers who get their local telephone service over non-Verizon facilities. That’s right! Only 280 residential customers out of more than 4 million.

Verizon claims we live in a perfect world where there is competition in the local telephone market and all of these competing carriers are vying to provide us with local service. Which carriers? What competition? When I pick up the phone and try to call an alternative provider to purchase just basic residential service, I get silence. If I call for basic local service, the only one who answers is Verizon. A member of my staff did so just last week. She called the major and the smaller telecommunications companies operating in New Jersey. Not one of them said it offers residential basic local service. Who was called? AT&T, MCI WorldCom, XO Communications, Allegiance Telecom Inc., Adelphia Business Solutions, Connective Communications, RCN, and CoreCom. Not one! The only carrier we could find which offers residential basic local service was Sprint, but not in Verizon’s service territory.

Despite Verizon’s claims, the real world situation we live in is that there is no competition in the local telephone market, and consumers have no choice for basic residential local service. Period!

Let’s consider this scenario: What happens if the Board recommends to the FCC that it grant Verizon 271 authority to provide long-distance service in New Jersey prematurely -- before the market is ready -- before there is competition -- before there is choice for consumers? If Verizon gets long-distance approval from the FCC, with its marketing power and brand-name advantage, with unfettered access to almost every local telephone customer in the state, Verizon will be able to aggressively package its local and long-distance services to price out of the market any long-distance competition, including resellers.

Some may ask, well Ratepayer Advocate Peretz, what is wrong with Verizon’s packaging competitively priced local and long distance services? Shouldn’t you, as the state official who speaks for utility consumers, support that? Yes, I would, if it truly benefits consumers.

The result could be the eventual creation of a giant unregulated telephone monopoly controlling rates in both the local and long-distance market. Why are we in such a hurry to remonopolize the long-distance market -- when Verizon is already the monopoly carrier in the local market? To let Verizon into the long-distance market too soon -- before the market is ready -- is to effectively eliminate consumer choice. Once Verizon becomes the new telephone monopoly, rates could almost certainly increase. Ratepayers will never reap the benefits of a truly competitive marketplace -- lower prices, advanced services, and most importantly, consumer choice.

What will the telecommunications market look like in New Jersey once Verizon adds long-distance to its local monopoly? Imagine if you walked into a telecommunications supermarket and all you can see on the shelves is the Verizon brand. That is not what the FCC or the Telecommunications Act of 1996 envisioned as competition. I am not saying that there is anything wrong with Verizon’s products. I am just saying that as a consumer, I would like to choose what I buy. As Commissioner Joan Smith said, let’s make sure that we provide consumers with affordable choices for their basic telephone service. Only irrevocable competition can ensure that consumers have choice.

The message of the Ratepayer Advocate is very simple. The market for local telephone services in New Jersey has not matured sufficiently to allow the dominant local telephone monopoly to enter the long-distance market. To protect the interests of consumers, the Ratepayer Advocate cannot support Verizon’s request at this time.

While the Ratepayer Advocate speaks for the interests of consumers throughout New Jersey, why not hear from consumers themselves. I am therefore requesting that the Board hold a public hearing -- or hearings -- on Verizon’s 271 application to provide long-distance service. As it is the public who will be most impacted by your decision, perhaps we should hear what they have to say.

Let’s not rush into deregulation. As the Greek scholar Epictetus said, "Nothing great is created suddenly, any more than a bunch of grapes or a fig. If you tell me that you desire a fig, I answer you that there must be time. Let it first blossom, then bear fruit, then ripen."

The winds and the waves are always on the side of the ablest navigators. You - the Commissioner have the task to navigate the tides of 271 to ensure that when we arrive at shore, consumers will have choice in the marketplace of competition. As Abraham Lincoln once said, "I’m a slow walker, but I never walk back." In other words, let’s get it right the first time.

Thank you.

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