NJ Spotlight

State Quietly Cuts Deal To Let Verizon Deregulate Basic Telephone Service

Critics contend move could lead to 36 percent price jump in price for residential service relied on by low-income residents, seniors, disabled

NJ Spotlight — Thursday, May 14, 2015

By Tom Johnson

The state has quietly negotiated a deal that would allow Verizon New Jersey to deregulate traditional phone service — a move consumer advocates say will lead to higher costs for lower-income residents and seniors, as well as a decline in service quality.

In a stipulated agreement reached last week, the state Board of Public Utilities essentially gave the telecom company most of what it had sought for the past few years unsuccessfully in the Legislature and before regulatory officials. The deal, not subject to any public hearings, could be approved by the agency as early as Tuesday at its monthly meeting.

Left out of the negotiations and only aware of it when the stipulation was signed was the New Jersey Division of Rate Counsel, which has repeatedly opposed efforts to eliminate regulation of the so-called traditional copper line service.

Rate Counsel Stefanie Brand said the stipulation came "as a big shock to us'' when her office received the proposed stipulation last week during a call yesterday with members of New Jersey AARP, who are trying to block the agreement.

"The BPU is just saying to Verizon, 'Go ahead and do whatever you want,'" she said. "They're not going to look into service quality. They're not going to invest in the system. They're going to walk away from the copper landline system that ratepayers paid for.''

Verizon generates the bulk of its profits from its wireless business and fiber-optic system, which delivers TV programming and phone service to customers, although the service is not available in all parts of the state, especially in rural areas in southern New Jersey.

Its traditional phone lines contribute much less to the corporate coffers, leading many to conclude the company wants to get out of that business. New Jersey has one of the cheapest basic residential phone rates in the country — unlimited local calls for $16.95 a month. Those rates would rise by a little more than $6.00 over a five-year period and then be unregulated, according to the stipulation. Approximately a half-million New Jersey residents rely on Verizon for their basic phone service, according to officials.

"The endgame is Verizon always wants to get out of the landline service,'' said Piscataway Mayor Brian Wahler. "We have a lot of areas, particularly in South Jersey, where officials are complaining about service quality issues.''

After Hurricane Sandy devastated parts of the Jersey Shore, Verizon declined to restore its traditional copper line service, instead offering customers a new wireless system.

Verizon disputed many of the allegations made by critics of the stipulation, saying the deregulation of these services would not affect consumers because there are competitive alternatives in the marketplace that will keep prices down.

"Nothing in this proceeding would alter any of the existing board regulations governing service quality, duty to furnish service, or customer-service standards,'' said Lee Giercynski, a spokesman for Verizon.

Verizon is not eliminating basic telephone services over traditional lines — merely reclassifying them as competitive for regulatory purposes, he said.

Ev Liebman, associate director of AARP New Jersey, claimed the stipulation, if approved, could lead to a 36 percent increase in residential service rates.

Dena Mottola Jaborska, director of organizing for New Jersey Citizen Action, agreed. "Consumers will be really hard hit, especially seniors, the disabled and the poor,'' she said.

Legislators also were unhappy with the proposed settlement.

"To put it simply, the timing of this smells,'' said Assemblyman Dan Benson (D-Mercer). We have seen reports of service declines. We don't need further deregulation.''

Sen. Bob Smith (D-Middlesex) also criticized the tentative deal. "This is just another example of this administration doing everything in the dark,'' he said, comparing it to the recent proposed Exxon Mobil settlement involving restoration of pollution problems at facilities it once operated. The proposed settlement of $225 million is a fraction of the $8.9 billion the state had once sought.

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