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

BEFORE THE BOARD OF PUBLIC UTILITIES
PUBLIC HEARING ON THE VERIZON ALTERNATE PLAN OF REGULATION
Trenton, NJ
September 25, 2000      5:00 p.m.

Good evening, President Tate and Commissioner Armenti. I appreciate this opportunity to briefly elaborate on certain aspects of the position of the Ratepayer Advocate concerning Verizon-New Jersey’s proposed Modified Plan for an Alternative Form of Regulation and its Proposal to Reclassify all Rate-Regulated Services as Competitive.

The Ratepayer Advocate’s concerns regarding the proposal are many, but basically fall into three broad categories:

1) We believe that one of the most important issues in this case is allowing customers to have a choice of how little or how much telephone service they want. The proposed bundled service offerings deny choice and are anti-competitive. What many members of the public may not know is that Verizon has not shared with us the details of which vertical services will be bundled. Will it be call waiting? Will it be call trace? I am going to circulate a list of residential vertical services for the public to determine which they can identify as services they would value for what Verizon New Jersey designates as "value added service" to basic local service which would be included in the local exchange package for a cost of $17.50. For example, how many of you here tonight would ever want "Sound Dial Plus," "Three Way Calling," "Priority Call" or "Distinctive Ring?"

There are over 30 optional residential phone services, known as vertical services, that are currently available for an additional charge. The problem is that in addition to Verizon requiring customers to purchase these services, customers also will have no choice which three services they must take and pay for. Verizon officials have testified this week that it is unclear which vertical services will be offered. Even if this was a fair proposal, how can the Board make a decision based on an incomplete filing?

The Verizon proposal represents a substantial rate increase for consumers. Verizon continues to say that the current local phone rates are below cost and being subsidized, but they have yet to prove that it is subsidized. Since the last rate case in 1983, the board has made no determination that the $8.19 is not just and reasonable. The telecommunication industry is a declining cost industry, especially in a state like New Jersey which is densely populated.

Moreover, since Verizon is asking for a huge increase in residential rates, it should identify all of the services included in the proposal and its costs of those services. Some vertical services may cost the company nothing to provide. I am here to make a request that Verizon provide the public the entire list of vertical residential services offered together with the cost to provide those services and the cost which it is proposes to charge. That information should be public and not proprietary. When rates are going up, the consumers have the right to know.

2) We believe that customer choice of service providers is another extremely important issue for consumers. That choice does not currently exist for close to 99 percent of Verizon’s customers. How many marketers have offered anyone in this room competitive local service? Verizon’s request to declare all rate-regulated services as competitive is over-broad, premature, and unsubstantiated; and

3) We at the Ratepayer Advocate are very concerned that the public is unaware of the Lifeline discounts available for low income customers. Continuing Lifeline services for low-income residents and making sure the state has automatic enrollment ranks high on our list of priorities. We also want to make sure that support programs benefitting schools and libraries are continued and expanded.

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At the public hearing in Newark, I addressed at some length this office’s concerns about the lack of choice this plan will leave consumers. Tonight, therefore, I am going to focus my remarks on those consumers who could be hurt most by this proposal-- the low-income customers and the many students and residents of New Jersey whose only chance to access the information superhighway of the Internet is through schools and libraries.

We are concerned that the needs of these groups of New Jersey residents are not adequately addressed in Verizon’s filing.

The benefits of competition and advanced technologies must be available and affordable for low income consumers. We believe that can be made possible through the Lifeline program, but we are concerned that the program is underpublicized and underutilized.

Verizon has testified in this case that New Jersey is a wealthy state and residents should be able to afford to pay the increased rates of the $17.50 package. We believe this could not be further from the truth. While a number of New Jersey residents are enjoying some level of prosperity, New Jersey also has a substantial population of low-income consumers, many of whom live at the lowest levels of subsistence. Nearly one million people live with incomes at or below 200 percent of the federal Poverty Level in New Jersey. Of these low-income people, nearly 300,000 live below 50 percent of the federal Poverty Level, while another 290,000 live between 50 and 100 percent of the federal Poverty Level.

The Ratepayer Advocate continues to be a leading proponent of the Lifeline Program for New Jersey. We believe that the number of current participants, approximately 35,806, according to Bell Atlantic’s testimony at the hearings, is minuscule when compared to the hundreds of thousands of people eligible for the program.

One of the problems in New Jersey is that eligible residents are not getting the message that the Lifeline program is available to help them. We have estimated that there may be as many as 400,000 households in New Jersey eligible for Lifeline assistance, but according to Verizon’s report last year to the Board, there were only 15,800 people who received Lifeline benefits, while at the hearings last week, Verizon officials said that there were 35,806 customers enrolled as of July 2000. Numbers of New Jersey’s participants reported by the FCC in December 1999 were even lower, at 6,700. Whichever number is right, we believe there are still hundreds of thousands of New Jersey customers who should benefit from this program, but are not.

We recommend that vigorous outreach initiatives are needed to make sure this program is effective. We believe that all LIHEAP participants should be automatically enrolled in the Lifeline program. We also believe that the New Jersey Department of Human Services could help identify customers who are eligible for the Lifeline program. All community-based organizations that are already assisting low-income residents of the state should be made aware of this Lifeline program and spread the message to its constituents. We also urge the Board to expand the current electric and gas Utility Education Program to require Verizon and indeed all telecommunications providers to educate qualified low-income consumers on both the statewide and grassroots levels of the availability of these funds. This is essential if all New Jersey low-income residents are to receive the benefits of Lifeline.

One of the conditions of the Federal Communications Commission’s approval of the Bell Atlantic/GTE merger was for the company to file a new stand-alone Lifeline plan comparable to the Ohio USA Lifeline plan. Verizon filed a proposal in July of this year as an option to the current lifeline plan and we believe this could be an appropriate resolution to the low-income Lifeline issues, but one significant change is needed. The enrollment process proposed by Verizon does not fully reflect the automatic enrollment provisions adopted in Ohio. The Ohio program automatically enrolls customers who are already participating in other qualifying programs -- such as Medicaid, Food Stamps, Works First, and Disability Assistance--based on data provided by the Department of Human Services. We strongly believe that this is the only valid way for the program to be implemented in New Jersey to ensure that all deserving ratepayers receive the benefits of Lifeline. Automatic enrollment is not slamming--it’s a wake up call for all qualified customers--with the option to decline enrollment.

According to our expert witness in this case, Roger Colton, "Because of the problems with eligibility criteria, I propose that, rather than adopting the ‘currently participating’ eligibility requirement, the Board determine that customers will be eligible for Lifeline assistance if they have participated in any one of the listed programs within the previous 12 months."

All New Jersey consumers-- residential, business and municipal, should have equal and affordable access to telecommunications services that meet their social, business, educational, career, and quality of life needs. I want to applaud Verizon-New Jersey for the accolades received in a recent article in the September 25, 2000 Business Week entitled "Wired Schools: A Technology Revolution is About to Sweep America’s Classrooms," which gives an example of a wonderful public/private partnership:

"In 1989, the schools in Union City, N.J.... were among the nation’s worst. They received failing marks in 44 of the 52 categories New Jersey used to assess schools, and state officials warned they would seize control if Union City didn’t shape up. The threat prompted many changes in Union City, including a technological transformation of its entire educational system. Aided by Bell Atlantic Corp., officials equipped the schools and students’ homes with a network of computers, creating ‘one of the most, if not the most, wired urban school district in the U.S.’... The number of graduates accepted at top institutions such as Yale University and Massachusetts Institute of Technology has jumped from 8 in 1997, the last class taught the old-fashioned way, to 63 in 1999."

Verizon makes no commitment in this proceeding to continue the provisions of customer premises electronics and extension of discounts currently available to schools and libraries for data services and Internet connections under the Access New Jersey program, which is scheduled to expire at the end of 2001. Since existing federal funding may be insufficient to help all schools and libraries meet their needs, the Board should require Verizon to extend its commitment to Access New Jersey for at least an additional four years and expand the discounts on services to be offered through Access New Jersey to our schools and libraries to include technologies like DSL to facilitate high speed Internet access using the latest technological innovations.

In many cases, schools and libraries provide New Jersey residents the only source of information access available to them. As we all know, the Internet has become a most important source of information about jobs and current events. Schools without Internet access are shortchanging students of a wealth of information and research materials.

On this topic, William E. Kennard, Chairman of the Federal Communications Commission, said, "How do we make sure the Information Highway has on-ramps and off-ramps into every neighborhood? How do we avoid creating a country of information haves and have-nots? ... This is what I call the digital divide. If we can’t bridge that digital divide, it will separate Americans when they most need to be brought together." In New Jersey, we are on the right track to end the digital divide, but we can not stop that progress now.

Last week I had the pleasure of visiting the Long Branch Public Library for the celebration of the Libraries-on-Line Program and the installation of new high speed lines that have doubled the speed of the Internet service the library can offer to residents. I applaud that community partnership, sponsored by New Jersey Natural Gas and I also applaud the efforts made by Verizon to provide Internet service to school children in places such as Union City. As important as these partnerships are, they are still isolated instances and we view them as "band-aid" approaches to the issue, instead of continuing an overall state plan of providing discounted Internet service to all New Jersey schools and libraries. We believe that something that could provide much needed help statewide would be a new telephone tariff for schools and libraries. Currently, schools and libraries are charged commercial business rates. Since schools and libraries do not generate profits, it would seem more equitable to charge residential rates to these organizations.

As you can see, my concern that low-income ratepayers have lifeline support and access to advanced technologies in schools and libraries is great. I urge you, President Tate and Commissioner Armenti, not to allow Verizon to go forward with any plan without specific and guaranteed promises to ensure that Lifeline and Access New Jersey services are expanded and continued for the people of New Jersey.

I leave you with a statement made by Governor Whitman this past April. She said that "We’ve seen only the tip of the iceberg in how technology will change our lives. We in New Jersey are determined not to let the revolution march on without us." Thank you.

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