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BPU Reclassifies Basic Phone Service, Paves Way for Verizon Rate Hike

Move could drive up price of residential service to New Jersey’s most vulnerable communities -- seniors , the disabled, and the poor


In a victory for Verizon, a state agency yesterday voted to reclassify basic telephone service, a step that will make it easier for the telecom company to raise rates for those who can least afford it, according to critics.

The unanimous approval by the New Jersey Board of Public Utilities caps a four-year campaign by Verizon to loosen regulations governing traditional landline telephone service. Deployments of the service have declined dramatically in the face of competition from wireless carriers, cable companies, and other competitors.

But approximately half-a-million customers -- seniors, the disabled, and low-income residents -- still rely on the service because it is among the cheapest in the nation, now costing only $16.45 a month for unlimited local calls. The rates would increase $6 over a five-year period and then be unregulated, according to deal approved by the agency.

“We believe this is a bad decision that could harm hundreds of thousands of customers,’’ said Ev Liebman, associate director of AARP in New Jersey. Liebman and others did not rule out challenging the decision in court.

In deciding the case, the BPU said the phone market offers consumers lots of choices beyond the traditional basic service provided by Verizon. “There is competition today,’’ said BPU President Richard Mroz.

In backing up that assertion, an administrative analyst for the agency noted that three in 10 households in New Jersey have “cut the cord’’ on landlines in favor of wireless service, a number that is rising. In a filing, Verizon said the number of basic residential lines has declined by 54 percent in the past three-and-a-half years.

Meanwhile, wireless growth has exploded. Since 1999, wireless subscribers rose from 2.3 million to 8.6 million at the end of 2010.

The so-called stipulation only came to light earlier this month, when the state Division of Rate Counsel, an agency representing consumer interests on utility issues, got a copy of it. The division was not a party to the negotiations, according to Rate Counsel Director Stefanie Brand.

Brand said she was disappointed by the decision, adding that despite what the BPU said, the record does not support lifting oversight over basic telephone service. She, too, did not rule out a court challenge.

“This was a backroom deal with no public comment that Verizon was able to cut,’’ said Ann Vardeman, program director for New Jersey Citizen Action.

But Mroz said the proceeding has been ongoing for several years. “We have an obligation to process these matters and to make these decisions,’’ he said.

Commissioner Joseph Fiordaliso said the BPU will assure customers receive appropriate service. “All I want is for the consumer to get what they pay for,’’ he said. “That is going to continue.’’

Verizon officials defended the deal, arguing that the robust competition in today’s telecom sector will keep prices down and give consumers the leverage to choose the provider that best meets their service needs.

“This settlement approved today by the BPU is a modest step toward regulatory reform that recognizes the competitive nature of these reclassified services and provides additional consumer protections focused on rates and service quality,’’ said Leecia Eve, Verizon vice president of state government affairs.

Besides covering basic residential and single-line business services, the stipulation also deals with nonrecurring installation charges for residential service and residential directory assistance.

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