TCS Daily

Pennsylvania To Verizon: Functionally Separate Or Face Break Up

By Duane D. Freese - March 22, 2001 12:00 AM

In a harshly worded rebuke to Verizon Corp., the Pennsylvania Utility Commission on Thursday ordered the merged BellAtlantic-GTE-Nynex phone conglomerate to functionally separate its wholesale and retail operations or risk a full break up.

The order didn't go as far as to order full structural separation of those services as recommended by utility commission staff and requested by some competitors of the Atlantic Coast local telephone giant. But it was not because of any faith the commission had in Verizon's veracity and openness. It was a concern, rather, that a physical structural division would result in "endless litigation and regulatory micromanagement which even competitors do not view as a successful formula for bringing local telephone competition."

Instead, the commission hopes that a functional/structural separation can open the local loop to fair competition without legal delays. At the core of the commission's proposal is a code of conduct for Verizon such as one proposed by the ACER group, made up of the Association of Local Telecommunications Services, Covad Communications, ACSI Local Switched Services, d/b/a e.spire and Rhythms Links. Verizon also would have to meet requirements for service suggested by MCI Worldcom and AT&T Communications of Pennsylvania.

The aim of the conduct code and other requirements is to assure Verizon competitors non-discriminatory access to the local phone system. Failure to meet the standards would result in fines, which the commission increased by $1,000 for each violation. If Verizon accepts the PUC proposal, it will have to submit a monthly performance report including penalties it has paid for the month.

Verizon has until April 20 to accept the PUC's settlement offer. But commissioners made clear their next option if Verizon does not is to seek Verizon's break up into two separate companies.

Verizon's troubles don't end there. Commission Chairman John M. Quain and Commissioner Nora Mead Brownell both said they were "appalled" by Verizon's public campaign threatening, in Quain's words, "the citizens and businesses of the Commonwealth with negative consequences and outcomes ... far beyond the foreseeable scope of the proceeding."

Both commissioners have requested the commission's prosecutorial staff to issue a show cause order on possible sanctions against Verizon for obstruction of the commission's proceedings on structural separation and a "systematic campaign of misinformation." Competitors to the former regional Bell phone monopolies and GTE believe the PUC decision will encourage other states to take similar action to open the local loop to competition.

Sue Ashdown , executive director of the American Internet Service Providers Association, in an opinion page article in USA Today this week, noted that five years after enactment of the Telecommunications Act of 1996 more than 90 percent of local phone service remains in the hands of the four regional Bell operating companies.


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