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Firms call Verizon plan anti-competitive
(Pittsburgh Post-Gazette (KRT) Via Thomson Dialog NewsEdge) Aug. 12--Next month, the Federal Communications Commission might decide whether Verizon would be able to increase the fees it charges for competitors to access its networks in Pittsburgh and five other eastern U.S. markets.
But the competitors that pay to use Verizon Communications Corp. infrastructure -- mostly smaller phone and telecom companies -- say fee increases would dampen what competition there is in Pittsburgh. Consumer advocates agree, claiming that FCC chairman Kevin Martin would be re-monopolizing the industry in granting the waiver.
"Rates would go up, and alternative providers would be fewer," said Jerry James, acting chief executive officer of COMPTEL, the country's largest trade group representing smaller telecommunications companies.
The thinking goes that higher costs for the smaller phone carriers means they'd have to either pass the costs on to consumers, or cede the region to Verizon. If so, the reduction in competition could leave Verizon without marketplace checks and balances, free to raise its rates.
Verizon defends its moves, saying it needs to test what the market will pay as telecommunications gets more competitive.
"Open up the white pages, [and] there's a listing of 16 local phone providers who operate in this market," said Lee Gierczynski, a Verizon spokesman. On top of those local carriers are Internet and wireless competitors such as T-Mobile AT&T, Alltel, Cellular One and Vonage.
Almost a year ago, Verizon petitioned the FCC for an exemption to current regulations, in effect asking permission to charge network lessees market rates. The FCC would have to rule before Sept. 6 to meet a one-year deadline, but it could grant itself a 90-day extension to further consider the competitive atmosphere in the six cities.
As part of 1996 package of new telecom laws, the FCC requires Verizon and other fragments of MaBell to lease parts of the system to competitors at capped rates. To foster competition, competitors are allowed to use the parts of the infrastructure that connect copper lines to individual business and home customers.
That way, the competitors don't have to build redundant, and expensive, networks.
Verizon says competition has been sufficiently nurtured, but competitors say Verizon's erosion in landline business and residential customers is largely attributable not to competitive forces, but to its own dominant cellular firm, Verizon Wireless.
Greensburg-based Remi Communications, which competes with Verizon in both the Pittsburgh and Philadelphia markets, could end up being charged more to access the delivery lines than it would if it signed up for Verizon's services as a regular customer, said David Malfara, company CEO. "That's above retail rates," he said.
Higher prices would reduce not only competition, but also, possibly, the incentive and money available for improving broadband access. That's because companies that rent the copper lines from Verizon provide not just telephone service, but they also soup up the lines with their own equipment in order to offer broadband Internet and video services.
There is precedence for the exemptions. Verizon requested, and received, FCC "forbearance" relief from state and federal laws regulating high-capacity voice and data services. (That ruling was challenged by competitors in the U.S. Court of Appeals.) After that 2006 decision, AT&T, Qwest Communications and BellSouth Corp. filed for similar relief -- lifting regional, market-specific price caps.
COMPTEL says the Qwest experience in Omaha, Neb., has been a bad one, with access rates jumping by 30 percent or more for the competitor companies after the FCC granted the waiver.
The six cities where Verizon is petitioning for FCC relief also include Philadelphia; Boston; New York; Virginia Beach, Va.; and Providence, R.I., meaning the relaxed regulations would apply in major markets from New England to North Carolina.
The six markets include about 35 million Americans, or 13 million households. Smaller carriers such as Remi, however, generally focus less on the residential market and more on serving business clients, which is more lucrative.
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Copyright (c) 2007, Pittsburgh Post-Gazette
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