Americans love competition. The intense interest in the Olympic Games only underscores that notion. Whether athletics or business, we largely see competition as a positive and beneficial force that adds immeasurably to our quality of life.

Verizon, formerly Bell Atlantic, has been on record in favor of full and fair competition in all phone markets – local as well as long distance. It is in that spirit that we submitted our Competitive Telecommunications Plan in May for review by the New Jersey Board of Public Utilities (BPU). We believe our plan will help advance the benefits of phone competition here in New Jersey including new choices, convenience and better value.

The Telecommunications Act of 1996 established that a former Bell regional company must irreversibly open its local market to competitors before being allowed to offer long distance service. Among the requirements are three that might be viewed as the legs of a stool. First, Verizon must allow competitors to lease piece parts of its network at rates based on a prescribed cost formula. Second, Verizon must make its operational support systems for functions like ordering, repair, and billing available to competitors. Third, safeguards, in the form of substantial penalties, must be in place to assure that Verizon keeps the local market open and doesn’t backslide on service to its wholesale customers who are also its competitors.

Before the end of the end of the year, the BPU expects to review or address all the federal requirements for opening up the local phone network to competition. Keep in mind, these competitive issues all deal with Verizon’s relationships to its wholesale customers such as AT&T, MCI WorldCom and Sprint.

At the same time, the BPU is reviewing a form of regulation that regulates Verizon’s retail prices. Since our last regulatory plan was adopted in 1993, the competitive telecommunications market in New Jersey has changed completely. There are now 75 Competitive Local Exchange Companies (CLECs) certified to compete with Verizon in New Jersey, including nine who have approved offerings to provide residential service.

Competitors have been allowed to put their equipment in Verizon’s call-routing centers in New Jersey. In fact, there are more than 1,000 such arrangements between Verizon and its competitors in place today, giving competitors direct access to nearly all the lines we serve. They are making substantial investments in fiber optic cable and switching equipment in New Jersey to serve their customers. In fact, competitors accounted for nearly 75 percent of the telecommunications revenues in New Jersey in 1999.

In areas where they have chosen not to invest capital to serve their customers, competitors lease elements of Verizon’s network at cost. Consequently, by using their own facilities or a patchwork of their network and Verizon’s network or relying exclusively on Verizon’s network, competitors are now able to reach 100 percent of our customers with their services.

Based on these competitive changes, modifications are needed to make the regulation of Verizon consistent with this new landscape.

In collaborative sessions, other telecommunications companies, New Jersey’s Ratepayer Advocate, consumer activists and representatives of the New Jersey Legislature looked to states like New York and Texas for models. Both states have implemented full local and long distance competition. In both states packages of local, toll, and long distance are the primary competitive vehicle.

Additionally, our competitors made it clear in our collaborative sessions that at the current low monthly rate of $8.19 for residential basic service on a stand-alone basis, there was no chance that widespread competition would evolve for residential local telephone customers in New Jersey. Simply put, the current rate is unrealistically low because it’s so far below the current costs of at least $20 to provide the service.

Based on the need to reprice basic local service to cover more of its cost, Verizon focused on a way to facilitate competition while providing additional value to residential customers by packaging other features with local service. These factors – meeting the established competitive pattern of CLECs and facilitating competition by adding value – became the driving forces behind Verizon’s proposed New Jersey rate plan.Most importantly for spurring competition, the packaged rates bring prices closer to costs.

At the same time, Verizon remains committed to the Lifeline program that provides highly subsidized telephone services to those who otherwise might not be able to afford them. Whatever the outcome of these deliberations, we will continue to offer the Lifeline option with its current customers paying not a penny more.

The modified regulatory plan we have proposed will not take effect until 2001. By that time, telephone competition in New Jersey will be even more robust. Just look across the river to see what is happening in New York. Since Verizon gained long-distance relief in New York, competitors like AT&T, Sprint and MCI have launched all types of packaged service offerings that include local service.

A recent study conducted by the Telecommunications Research and Action Center (TRAC) found that New York consumers saved over $200 million dollars as a result of increased telephone competition. Perhaps even more telling is that in just seven months over one million customers have switched to Verizon for long distance service while an equal number have switched their local service to one of our competitors. There is no better indicator of the benefits of a truly competitive telephone marketplace.

New Jersey consumers deserve the benefits of full telephone competition in all markets – local and long distance. Moving prices for local phone service closer to costs will be the catalyst to achieve that objective here in New Jersey as well.

Dennis Bone is president of Verizon New Jersey.

                                                                                                                         10/2/2000