Ratepayer Advocate Calls For
Lowering Wholesale Rate Verizon NJ Can Charge Competitors To Use Its Network
Ratepayer Advocate Says Lower Wholesale Rate Will Increase Competition
Among the Carriers, Increase Consumer Choice and Increase Technological Innovation
Ratepayer Advocate Opposes Verizon NJ's Recommended Increase in Cost
of Capital and the Shortening of Depreciation Lives
Ratepayer Advocate Says Verizon NJ's Proposed Adjustments Will Adversely
Affect Local Competition in New Jersey, Decrease Consumer Choice and Impede
January 23, 2004, the Ratepayer Advocate filed testimony on its recommendations
for cost of capital and depreciation in the re-opened UNE proceeding now before
- UNE rates are the wholesale price
that Verizon charges its competitors to use its network.
- The Ratepayer Advocate is recommending,
based on the testimony of expert witnesses and consultants, that the BPU lower
the UNE rate Verizon NJ charges its competitors. The RPA position is based
on the two factors under review: cost of capital and depreciation.
- The RPA is recommending a cost
of capital of 7.1%, compared to Verizon NJ’s recommendation of a cost
of capital of 15.98%. The higher cost of capital translates into higher costs
Verizon would charge its competitors. This, in turn, would mean higher costs
- The RPA recommends longer depreciation
lives, which means that the costs that Verizon can charge its competitors
would be spread out over a longer period, and would therefore be less. This
would result in lower charges passed on to consumers.
- The reduction in interests rates,
low inflation rate, and rule changes by the FCC justify RPA’s position
that the cost of capital figure is less than what Verizon NJ claims and that
the depreciation lives are longer than what Verizon NJ claims.
- The lower interest rates, lower
inflation rate, and the FCC rule changes justify the RPA's position that the
UNE rates Verizon NJ charges its competitors to use its network can be lower
than what the BPU set two years ago.
- Adoption of Verizon NJ’s
recommendations would drastically increase all UNE rates, which would hinder
competition, choice and technological innovation.
- The Ratepayer Advocate’s
recommendations would reduce UNE rates, and therefore increase competition,
choice and technological innovation.
- By way of example, Exhibit SMB-2
shows that recurring rates, the monthly charge, for UNEs as proposed by Verizon
NJ would increase by 39% over current rates. The increase for UNE-P would
be over 57%. Such increases would raise the rates charged to customers and
would frustrate the development of competition in New Jersey.
- The Ratepayer Advocate’s
estimate of Verizon NJ’s cost of capital is lower than the rate set
by the BPU in 2002, and is otherwise consistent with the FCC’s discussion
in the Triennial Review Order. The Ratepayer Advocate’s depreciation
lives are lengthened to be consistent with the FCC’s discussion in the
Triennial Review Order and are longer than those set by the BPU in 2002.
The following links are to the expert
testimony the Ratepayer Advocate submitted to the Board of Public Utilities.
The documents comprise the record that the BPU will use to render a decision.
Direct Testimony of Susan M. Baldwin on Behalf
of the Division of the Ratepayer Advocate.
Direct Testimony of James A. Rothschild
on Behalf of the Division of the Ratepayer Advocate.