News

MAINE PUC APPROVES VERIZON-MCI MERGER WITH FEWER CONDITIONS THAN WE HAD SOUGHT

The Maine PUC recently approved the Verizon-MCI merger with some conditions. The FCC and the U.S. Department of Justice also approved the merger with limited conditions prior to the Maine PUC's decision. One of the conditions imposed by the FCC is a requirement that Verizon provide stand-alone DSL for 2 years. "Stand Alone" DSL means customers may obtain DSL broadband service from incumbent local exchange carriers (ILECs) like Verizon without also having to purchase traditional voice telephone service the same company. (For more about Verizon's stand-alone DSL offerings in Maine, see Verizon Now Offers Stand-Alone DSL article below).

In the Maine proceeding, the Public Advocate had pushed for stand-alone DSL as a condition to the merger. We argued that the practice of tying DSL to the company's voice service harms competition by discouraging consumers from using alternative voice carriers, including Voice Over Internet Protocal (VOIP) which requires a high speed Internet (broadband) connection.

The Maine PUC found that Maine consumers will face fewer choices as a result of the merger and it rejected Verizon's argument that this reduction in customer choice was sufficiently ameliorated by the presence of "intermodal competition" - that is competition from cable, wireless, satellite and VOIP. The Public Advocate and competitive local exchange carriers (CLECs) had put forth evidence as to the limited extent of competition from these other sources in Maine. The Maine PUC concluded that cable telephony has only a small market share in Maine, wireless is not an adequate substitute for wireline service at this time, and VOIP is not a viable alternative for consumers who don't have access to high speed broadband. Today, cable broadband is far from ubiquitously available in Maine, and DSL is not universally available in many areas of the state.

As a result, the Maine PUC found that following the merger intermodal competition is not likely to reduce the harm to consumers that will occur in the near term. The Maine PUC, therefore, imposed three conditions on its approval of the merger to protect ratepayers: 1) a reporting requirement to track Verizon's compliance with the FCC's stand-alone DSL requirement in Maine; 2) a condition to freeze intrastate special access rates in Maine, which tracks another one of the FCC's conditions; and 3) a condition requiring Verizon to track merger savings in Maine.

The Public Advocate has pressed for a number of tougher conditions -- among them, price controls on the stand-alone DSL, ensuring some of the cost savings from the merger would benefit ratepayers through reduced rates, and a requirement for broader deployment of DSL in Maine. The Maine PUC chose not to adopt these proposals, however.

PUBLIC ADVOCATE RECOMMENDS THAT PUC REDUCE VERIZON LOCAL RATES BY $8 PER MONTH

In the revenue investigation now before the Maine Public Utilities Commission, the Public Advocate has recommended that the Commission reduce the annual revenues of Verizon-Maine by $46.2 million annually. If adopted by the PUC, the rate reduction recommended by the Public Advocate would result in a savings of $8 per month, or $100 per year for each Verizon residential customer who subscribes to Verizon's premium local service. Another party to the same rate proceeding -- the American Assopciation for Retired Persons (AARP) -- is recommending additional reductions in Verizon's rates.

The Public Utilities Commission is reviewing Verizon's rates as the result of an order issued last January by the Maine Supreme Court. The rate investigation is taking place after an extended period during which Verizon-Maine has operated under an alternative form of regulation (AFOR). Last winter, the Maine Supreme Court ordered the MPUC to demonstrate that Verizon's AFOR rates were no higher under the current AFOR than they would have been under "rate base-rate of return regulation."

The Public Advocate's finding that Verizon-Maine has a $46.2 million revenue surplus reflects the extent to which the Company has been able to achieve cost savings due to efficiency gains. Our recommendation is based on an extensive review of Verizon-Maine's revenues, expenses and investment devoted to providing service within Maine. It also reflects the removal of expenses that should be recovered from ratepayers. The testimony of five expert witnesses shows that Verizon's customers deserve to see an immediate reduction in Verizon's rate for local service. Furthermore, the revenue surplus identified by our witnesses does not include certain adjustments that reflect Yellow Pages revenues and the effects of other transactions between Verizon-Maine and its affiliates proposed by the American Association of Retired Persons (AARP). Those adjustments, if accepted by the MPUC, would result in an even larger revenue reduction.

LEGISLATURE TO CONSIDER MAJOR INITIATIVES FOR EXPANDING ACCESS TO HIGH-SPEED INTERNET AND WIRELESS TELEPHONE SERVICES

Since last spring the Public Advocate has worked with other members of the Baldacci Administration on recommendations for enabling Mainers in un-served portions of the State to receive affordable broadband service and use wireless telephone calls without disruption. This effort, known as ConnectME, resulted from Governor Baldacci's announcement in the State of the State address in January 2005 that for too long Maine has suffered from inadequate service both from broadband and cell phone providers. In particular, the Governor pledged to achieve universal and affordable access throughout Maine's populated areas for braodband and wireless service by 2010 and 2008 respectively.

Following that announcement the Governor appointed three task forces whose memberships reflected the varied interests of rural Maine, telecommunications, business and government leaders. Public Advocate Ward chaired the Service Availability Sub-Group of the Wireless Telecommunications Task Force and also service on the Broadband Access Infrastructure Board. A summary of the ConnectME efforts can be found at the Maine PUC's website at www.maine.gov/mpuc/broadband/index.html.

By January 2006 the efforts in these areas had progressed to a point where there was broad consensus among stakeholders that Maine needed to devote financial resources to ensure that new broadband investments (in DSL, cable TV, wireless infrasturcture) are made in this state and that new cell towers are deployed in order to boost wireless coverage - particularly on the State's major highways and in service center communities. The ConnectME Task Force estimates that 86% of Maine's population has access to broadband infrastructure, leaving 14% unserved by high-speed Internet technologies. In the case of wireless telephone service, the ConnectME group estimated that an investment of $55 million (from both public and private sources) will be necessary to provide cell phone service in all service center communities and along all major arterial highways, at a minimal level of -95 decibel signal strength.

On January 17th the Governor's Legal Counsel, Tom Federle, addressed the Utilities Committee of the Maine Legislature and described the general outlines of the Governor's legislation that will be submitted in the 122nd Legislature to address these deficiencies and fulfill the Governor's pledge to achieve universal wireless and broadband coverage. This certainly will be a major undertaking and will be covered in future Ratewatcher Telecom Guide issues.

VERIZON NOW OFFER STAND-ALONE DSL

Verizon and other incumbent local exchange carriers have generally offered DSL service only to customers who also subscribe to the company's traditional voice service. However, Verizon has recently begun offering "stand-alone" DSL to customers in Maine. This is good news for customers because it means consumers no longer will be required to buy local voice service as a condition of purchasing DSL. That will free customers up to try different voice providers, including VOIP. It also means consumers who have "cut the cord" - those that exclusively use wireless phones - can get DSL without having to pay for wireline voice service that they do not want.

Prices vary depending, among other things, on the connectiong speed and whether the customers makes a 1 year commitment or opts to subscribe for the service on a month to month basis. The fastest speed is up to 3 Mbps/768 Kpbs and the slower speed is up to 768 Kpbs/128 Kpbs (which is still many times faster than dialup). Generally speaking, the prices for stand-alone DSL for residential customers (business prices vary) are:

Speed Commitment Price

Up to 3 Mbps/768 Kpbs 1 year commitment $34.95/month

Up to 3 Mpbs/768 Kpbs month to month $42.95/month

Up to 768 Kpbs/128 Kpbs 1 year commitment $19.95/month

Up to 768 Kpbs/128 Kpbs month to month $42.95/month

Customers should also be aware that there is a $19.95 set-up fee and an early termination fee of $79.99 for customers who make a 1-year commitment but do not fulfill that commitment. Prices may also vary as a result of promotions that may be available so customers should ask about these options. Verizon has also dropped its DSL price for customers who have Verizon voice service. Generally speaking, customers receive a $5.00 discount on their DSL if they are also Verizon voice customers. The DSL prices, which would be added to the customer's monthly price for voice service, are as follows:

Speed	Commitment	Price
Up to 3 Mbps/768 Kpbs	1 year commitment	$29.95/month
Up to 3 Mpbs/768 Kpbs	month to month	$37.95/month
Up to 768 Kpbs/128 Kpbs	1 year commitment	$14.95/month
Up to 768 Kpbs/128 Kpbs	month to month	$37.95/month

You can check whether Verizon DSL is available in your area by goin to www.verizon.com and entering your telephone number or your address (if you are not a Verizon voice customer); however, the Public Advocate recommends calling Verizon at 1-800-870-9999 and talking to a Verizon representative about whether DSL is available at your specific location.

Electronic Version of Ratewatcher Now Available

If you have internet access and would like to recieve the Ratewatcher electronically, we can send you an email containing the pdf file and a link to the web version of the guide. We will also notify you of any major updates between issues. To opt for an electronic subscription, please call 287-2445 and provide your email address. This will help us to save on printing costs which have grown with the popularity of the guide.

UNIVERSAL SERVICE FUND UPDATE

The USF fee is 10.2% through March 31, 2006. The surcharge is applied only to intersate services on telephone and wireless bills. The USF pays for affordable rural phone service, school and library Internet and telecommunications service, low-income telephone service discounts, and rural telemedicine service discounts.

Ex parte on USF contribution mechanism (pdf file 100 KB)