Conn. Regulator Poised to Deny Competitive Reclassification for Verizon

Possible harm to the public interest outweighs the presence of competition in a Connecticut market where Verizon seeks deregulation, the state’s Public Utilities Regulatory Authority (PURA) said in a proposed decision released Thursday. PURA plans to vote Oct. 16 on the draft, which would deny Verizon’s petition to reclassify its remaining services as competitive and retire the company’s alternative form of regulation plan.

PURA proposed denying Verizon’s petition after the company faced tough cross-examination from consumer advocates during a hearing last month (see 240913002). Verizon argued that it remains subject to strict, outdated rules even though many others offer competitive services in the Greenwich, Connecticut, market. But the Connecticut Office of Consumer Counsel (OCC) questioned whether Verizon competitors offer services that are the functional equivalent of landlines. Hanging over PURA’s review of the petition is Verizon’s plan to acquire Frontier Communications (see 2409050010).

"The Authority heavily weighs the impact reclassification would have on the public interest, particularly how the loss of certain consumer protections may impact customers,” said the draft (docket 24-06-15). PURA also “assigns considerable weight to the impact reclassification may have on competition and the barriers to entry” in the service area, including due to Verizon’s proposed acquisition of Frontier, it said. “Such factors outweigh [Verizon’s] demonstration that functionally equivalent services in the relevant geographic area are present and are being offered at competitive rates and terms and conditions.” The authority asked for written exceptions by Oct. 10.

The state’s top consumer advocate is “grateful" PURA "heavily considered the negative impact that reclassifying Verizon’s services would have on consumers, particularly our state’s most vulnerable and elderly populations,” said Connecticut Consumer Counsel Claire Coleman: Verizon “provides critical communications services to the public and my office will always fight against any attempt to lessen oversight and limit critical protections in place for the public’s best interests.” Verizon didn’t comment Wednesday.

PURA detected competition but couldn’t measure it conclusively, the proposed decision said. Verizon conceded no traditional CLECs sell plain old telephone services (POTS) in the area but noted 106 certified telecom providers with local exchange service and about 160 VoIP providers across the state, said the draft: But it’s “unclear as to the actual number, size, and geographic location of such providers in the Service Area.”

PURA agreed "that a variety of functionally equivalent services are available" in Verizon's area, with a decline in the company’s local exchange business indicating that those services have competitive rates, terms and conditions, the draft said. The agency considered VoIP, cable TV companies' phone services and internet applications as potential functionally equivalent services. And it’s “reasonable to deduce that a vast majority of residents” switched from POTS to alternative technologies like VoIP and wireless, it said.

However, it’s hard to say what barriers to entry remain, said PURA’s draft. While Verizon’s declining market share shows some have entered, it’s “unclear precisely how many other networks have been built and what capital requirements were necessary to establish such networks in the Service Area.”

Moreover, "important regulatory statutes governing public safety and, most concerningly, consumer protections, particularly for the most vulnerable of Connecticut’s citizens, would no longer be applicable to the Company and would negatively impact the public interest,” said the PURA draft. Approving the petition would mean giving up oversight of safety issues, it said. “Most concerning, applicable statutes and regulations governing termination of service would no longer apply to the Company.”

While Verizon said it would continue offering Lifeline discounts and telecom relay services, "such programs, while helpful tools for vulnerable customers, do not fill the regulatory gap that affords protection to Connecticut’s most vulnerable consumers,” said the PURA draft: Besides, older people “rely on POTS and may be disproportionately impacted by the loss of certain consumer protection measures.”

Leading Democrats in Connecticut’s state Senate urged PURA to deny Verizon’s petition in a Sept. 17 letter. “The reason for our opposition is based on Verizon’s claim that it is subject to competition in western Greenwich when it is the only wireline provider that offers [POTS], which senior citizens rely on due to its reliability during routine and major power outages,” wrote Senate President Pro Tempore Martin Looney and Majority Leader Bob Duff. “Reclassification will relieve Verizon from telephone specific consumer protections involving shut-offs in the event of illness and other related termination of service and customer responsiveness requirements.”

Another reason to deny relates to Verizon’s pending acquisition of Frontier, said Duff and Looney. “If Verizon’s petition is granted and it is no longer a telephone company, it could limit the Authority’s scope of review under the change of control statute.” PURA must review the deal to force Verizon to show that buying Frontier will improve services, they said.

The senators, Verizon wrote to PURA Sept. 20, echo consumer advocate “misperceptions” about the company's petition. Verizon stressed that it doesn’t seek to withdraw POTS service. Additionally, “Verizon voluntarily commits that if the requested reclassification relief is granted, it will continue to be subject to the consumer protections related to termination of residential utility service raised by the” consumer counsel and Senate leaders.

“Although it would be premature to comment on the specifics of any application related to the Frontier transaction, the relevant law clearly states that a telephone company must seek Authority approval to transfer control to another corporation,” added Verizon. “Frontier is a telephone company under state law, so its transfer to another corporation will require review and approval by the Authority. Verizon’s provider status is not relevant to the review or jurisdiction over it.”