Evaluation Of The United States Department Of Justice

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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of

Application by Verizon New Jersey
Inc., Bell Atlantic Communications,
Inc. (d/b/a Verizon Long Distance),
NYNEX Long Distance Company
(d/b/a Verizon Enterprise Solutions),          
Verizon Global Networks Inc., and
Verizon Select Services Inc., for
Authorization to Provide In-Region,
InterLATA Services in New Jersey

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CC Docket No. 01-347

_______________________________________________________

EVALUATION OF THE
UNITED STATES DEPARTMENT OF JUSTICE
_______________________________________________________

Charles A. James
Assistant Attorney General
Antitrust Division

Margaret A. Ward
Counsel to the Assistant Attorney General

R. Hewitt Pate
Deputy Assistant Attorney General

Michael L. Katz
Deputy Assistant Attorney General

Communications with respect to this document should be addressed to:


W. Robert Majure
Assistant Chief

John Henly
Jeffrey Prisbrey
Economists
Economic Regulatory Section

January 28, 2002

Nancy M. Goodman
Chief

Laury E. Bobbish
Assistant Chief

John M. Lynch
Katherine E. Brown
J. Parker Erkmann

Attorneys
Telecommunications and Media
Enforcement Section


Table of Contents

Table of Contents

Index of Full Citations

Introduction and Summary

I. New Jersey Board of Public Utilities Review

II. The Department's Evaluation

III. Conclusion


INDEX OF FULL CITATIONS

Short Citation

Full Citation

DOJ Evaluations and Related Materials
DOJ Georgia/Louisiana Evaluation Evaluation of the U.S. Department of Justice, In re: Joint Application by BellSouth Corporation, BellSouth Telecommunications, Inc., and BellSouth Long Distance, Inc. for Provision of In-Region InterLATA Services in Georgia and Louisiana, FCC CC Docket No. 01-277 (Nov. 6, 2001), available at .
DOJ Kansas/Oklahoma Evaluation Evaluation of the U.S. Department of Justice, In re: Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Kansas and Oklahoma, FCC CC Docket No. 00-217 (Dec. 4, 2001), available at .
DOJ Massachusetts I Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon New England, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Massachusetts, FCC CC Docket No. 00-176 (Oct. 27, 2000), available at .
DOJ Missouri I Evaluation Evaluation of the U.S. Department of Justice, In re: Application of SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Missouri, FCC CC Docket No. 01-88 (May 9, 2001), available at .
DOJ Pennsylvania Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Pennsylvania, FCC CC Docket No. 01-138 (July 26, 2001), available at .
DOJ Rhode Island Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon Pennsylvania Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Rhode Island, FCC CC Docket No. 01-324 (Jan. 4, 2002), available at .
FCC Orders, Reports, and Related Materials
FCC Connecticut Order Memorandum Opinion and Order, In re: Application of Verizon New York Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services, Inc., for Authorization to Provide In-Region, InterLATA Services in Connecticut, 16 FCC Rcd 14,147 (July 20, 2001), available at .
FCC Kansas/Oklahoma Order Memorandum Opinion and Order, In re: Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region, InterLATA Services in Kansas and Oklahoma, 16 FCC Rcd 6237 (Jan. 19, 2001), available at , remanded in part, Sprint Communications Co. v. FCC, 274 F.3d 549(D.C. Cir. 2001).
FCC Massachusetts Order Memorandum Opinion and Order, In re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Massachusetts, 16 FCC Rcd 8988 (Apr. 16, 2001), available at .
FCC New York Order Memorandum Opinion and Order, In re: Application by Bell Atlantic New York for Authorization Under Section 271 of the Communications Act To Provide In-Region, InterLATA Services in the State of New York, 15 FCC Rcd 75 (Dec. 22, 1999), aff'd, AT&T Corp. v. FCC, 220 F.3d 607 (D.C. Cir. 2000), available at .
FCC Pennsylvania Order Memorandum Opinion and Order, In re: Application of Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services, Inc., for Authorization to Provide In-Region, InterLATA Services in Pennsylvania, 16 FCC Rcd 17,419 (Sept. 19, 2001), available at .
State Commission Orders and Related Materials
New Jersey BPU Revised C2C Guidelines Order Order Approving Revised Guidelines, In re: Investigation Regarding Local Exchange Competition for Telecommunications Services, New Jersey BPU Docket No. TX95120631, et al. (Nov. 9, 2001), attached to VZ Br. App. E as Tab 14.
New Jersey BPU Consultative Report Consultative Report of the New Jersey Board of Public Utilities, In re: Consultative Report on the Application of Verizon New Jersey, Inc. for FCC Authorization to Provide In-Region, InterLATA Service in New Jersey, New Jersey BPU Docket No. TO01090541, FCC CC Docket No. 01-347 (Jan. 14, 2002).
New Jersey BPU Incentive Plan Order Order Approving Incentive Plan, In re: Investigation Regarding Local Exchange Competition for Telecommunications Services, NJ BPU Docket No. TX95120631, et al. (Jan. 10, 2002), available at .
New Jersey BPU Pricing Order Press Release New Jersey Board of Public Utilities, NJBPU Announces Decision to Spur Competition in New Jersey's Local Telephone Market, Press Release #27-01 (Nov. 20, 2001), available at .
New Jersey BPU Section 271 Approval Press Release New Jersey Board of Public Utilities, Board OKs Verizon Request to Enter Long-Distance Market, Press Release #02-02 (Jan. 9, 2002), available at .
New Jersey BPU Section 271 Approval Tr. Transcript of New Jersey Board of Public Utilities Meeting, In re: Consultative Report on the Application of Verizon New Jersey, Inc. for FCC Authorization to Provide In-Region, InterLATA Service in New Jersey, New Jersey BPU Docket No. TO01090541 (Jan. 9, 2002), attached to Verizon Communications, Inc., New Jersey BPU Meeting Transcript, Verizon Ex Parte Submission, FCC CC Docket No. 01-347 (Jan. 10,2002).
New Jersey BPU Section 271 Compliance Letter Letter from Henry M. Ogden, Acting Secretary, New Jersey BPU, to Bruce D. Cohen, Verizon New Jersey, Inc., (Jan. 9 2002), attached to New Jersey CTA Comments as Ex. C.
New Jersey BPU Summary UNE Pricing Order Summary Order of Approval, In re: The Board's Review of Unbundled Network Elements Rates, Terms and Conditions of Bell Atlantic New Jersey, Inc., NJ BPU Docket No. TO00060356 (Dec. 17, 2001), available at .
New York PSC UNE Pricing Press Release New York Public Service Commission, Commission Votes to Reduce Verizon's Wholesale Rates, Press Release 02007/98C1357 (Jan. 23, 2002), available at .
Verizon's Application and Related Filings
KPMG Final Report KPMG Consulting, State of New Jersey Board of Public Utilities Verizon New Jersey, Inc. OSS Evaluation Project Final Report (Oct. 12, 2001), attached to Verizon Br. App. C as Tabs 4-5.
Verizon Br. Application by Verizon New Jersey for Authorization to Provide In-Region, InterLATA Services in New Jersey, In re: Application by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Dec. 20, 2001).
Verizon Garzillo/Prosini Decl. Declaration of Patrick A. Garzillo and Marsha S. Prosini, attached to Verizon Br. App. A as Tab D.
Verizon Line Counts Ex Parte Verizon Communications, Verizon Business and Residential Line Counts as of November 2001, Verizon Ex Parte Submission, FCC CC Docket No. 01-347 (Jan. 11,2002).
Verizon McLean/Wierzbicki/Webster Decl.   Declaration of Kathleen McLean, Raymond Wierzbicki, and Catherine T. Webster, attached to Verizon Br. App. A as Tab B.
Verizon Taylor Decl. Declaration of William E. Taylor, attached to Verizon Br. App. A as Tab F.
Verizon UNE Pricing Letter Letter from Bruce D. Cohen, Verizon New Jersey, Inc., to Henry Ogden, Acting Secretary, New Jersey BPU, In re: Consultative Report on the Application of Verizon New Jersey, Inc. for FCC Authorization to Provide In-Region, InterLATA Service in New Jersey, New Jersey BPU Docket No. TO01090541 (Jan. 10, 2002), attached to Comments on Behalf of the New Jersey Division of the Ratepayer Advocate in Opposition to the Application of Verizon New Jersey for Authorization to Provide In-Region, InterLATA Services in New Jersey, In re: Application by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002), as Tab 19.
Third-Party Comments and Affidavits/Declarations
AT&T Comments Comments of AT&T Corp., In re: Application of Verizon New Jersey, Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).
AT&T Huels Decl. Declaration of Stephen G. Huels on Behalf of AT&T Corp., attached to AT&T Comments as Tab A.
AT&T Kirchberger/Nurse/Kamal Decl. Declaration of Robert J. Kirchberger, E. Christopher Nurse, and Mohammed K. Kamal on Behalf of AT&T Corp., attached to AT&T Comments as Tab C.
AT&T Sczepanski Decl Declaration of John Sczepanski on Behalf of AT&T Corp., attached to AT&T Comments as Tab B.
Cavalier Comments Comments of Cavalier Telephone Mid-Atlantic, L.L.C., In re: Application of Verizon New Jersey, Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).
Cavalier Snyder Decl. Declaration of Jeffrey C. Snyder on Behalf of Cavalier Telephone Mid-Atlantic, L.L.C., attached to Cavalier Comments as Ex. D.
Conversent Comments Comments of Conversent Communications of New Jersey, LLC, In re: Application by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).
New Jersey CTA Comments Comments of the New Jersey Cable Telecommunications Association to the Application of Verizon New Jersey, Inc. (Verizon NJ) for Approval to Provide In-Region Long Distance Services, In re: Application by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).
WorldCom Comments Comments of WorldCom, Inc. on the Application by Verizon for Authorization to Provide In-Region, InterLATA Services in New Jersey, In re: Application by Verizon for Authorization Under Section 271 of the Communications Act to Provide In-Region, InterLATA Services in the State of New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).
WorldCom Huffman Decl. Declaration of Vijetha Huffman on Behalf of WorldCom, Inc., attached to WorldCom Comments as Tab A.
XO Comments Comments of XO Communications, Inc., In re: Application by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC CC Docket No. 01-347 (Jan. 14, 2002).

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554


In the Matter of

Application by Verizon New Jersey
Inc., Bell Atlantic Communications,
Inc. (d/b/a Verizon Long Distance),
NYNEX Long Distance Company
(d/b/a Verizon Enterprise Solutions),          
Verizon Global Networks Inc., and
Verizon Select Services Inc., for
Authorization to Provide In-Region,
InterLATA Services in New Jersey

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CC Docket No. 01-347

_______________________________________________________

EVALUATION OF THE
UNITED STATES DEPARTMENT OF JUSTICE
_______________________________________________________

Introduction and Summary

The United States Department of Justice ("the Department"), pursuant to Section 271(d)(2)(A) of the Telecommunications Act of 1996(1) ("the 1996 Act"), submits this evaluation of the application filed by Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions),Verizon Global Networks Inc., and Verizon Select Services Inc., on December 20, 2001, to provide in-region, interLATA services in New Jersey.

This application to the Federal Communications Commission ("FCC" or "Commission") is Verizon's first for the state of New Jersey, and follows its successful applications for long distance entry in Pennsylvania, Connecticut, Massachusetts, and New York.(2) Verizon also has filed an application for Section 271 authority in Rhode Island, which the Department recommended that the FCC approve, as well as an application for such authority in Vermont, which the Department is now evaluating.(3) The record in this matter suggests that Verizon has succeeded in opening its local markets in New Jersey to competition in most respects. Subject to the Commission satisfying itself as to the pricing issues discussed below, the Department recommends approval of Verizon's application for Section 271 authority in New Jersey.

I. New Jersey Board of Public Utilities Review

For the most part, conditions in the New Jersey local telecommunications markets appear favorable to fostering competition. The New Jersey Board of Public Utilities ("BPU") has facilitated the development of these conditions by establishing carrier-to-carrier wholesale performance measurements, which incorporate regional improvements from New York and Pennsylvania(4);conducting extended pricing proceedings that resulted in the establishment of wholesale rates, including recently revised recurring and non-recurring charges for unbundled network elements ("UNEs")(5); and adopting a Performance Incentive Plan intended to ensure that an appropriate level of wholesale performance is maintained once Verizon's Section 271 application is approved.(6) The New Jersey BPU's review of Verizon's state Section 271 filing included a comprehensive, independent third-party test by KPMG Consulting "of the readiness of Verizon NJ's OSS [operations support systems], interfaces, documentation, and processes to support local market entry."(7) Verizon achieved a perfect score on the test, which evaluated more than 500 aspects of its systems.(8) On January 9, the New Jersey BPU voted to recommend that the FCC approve Verizon's state Section 271 application.(9)

II. The Department's Evaluation

In assessing whether the local markets in a state are fully and irreversibly open to competition, the Department looks first to the actual entry in a market.(10) But the Department does not broadly presume that all three entry tracks -- facilities-based, unbundled network elements, and resale -- may be open on the basis of an aggregate level of entry alone.(11)

Together, Verizon and CLECs serve a total of approximately 7.2 million lines in Verizon's New Jersey service area.(12) Of the total lines in Verizon's service area, 40 percent, or approximately 2.9 million, serve businesses, and 60 percent, or approximately 4.3 million, serve residential customers.(13) For business and residential customers combined, on the basis of data provided by Verizon, CLECs using all modes of entry serve approximately 564,000, lines, or nearly 7.8 percent, of all lines in Verizon's service area.(14)

Competitors have made progressin penetrating the business market in New Jersey. CLECs serve approximately 17.4 percent of all business lines in Verizon's service area in the state.(15) CLECs serve approximately 12.4 percent of all business lines using primarily their own fiber optic networks that are either connected directly to the customer premises or connected through loops leased from Verizon.(16) CLECs resell Verizon's services to serve approximately 4.3 percent of all business lines and use the UNE-platform (a combination of loop, switch, and transport elements) to serve less than one-tenth of one percent of such lines.(17)

By contrast, CLECs serve approximately 1.3percent of all residential lines in Verizon's New Jersey service area.(18) Virtually all CLEC residential service is provided via resale.(19) CLECs provide less than one-tenth of one percent of all residential lines using the UNE-platform and even fewer such lines with facilities-based service.(20)

The amount of entry by facilities-based carriers and resellers in business markets in New Jersey and the absence of complaints regarding these modes of entry lead the Department to conclude that in New Jersey, opportunities to serve business customers by fully facilities-based carriers and resellers are available. Although there is significantly less competition to serve residential customers by means of facilities and the UNE-platform, the Department does not believe there are any material non-price obstacles to competition in New Jersey.(21) As noted, Verizon has submitted evidence to show that thorough, independent testing of virtually all aspects of its OSS in New Jersey demonstrated them to be highly satisfactory.(22) Moreover, there have been few complaints regarding Verizon's New Jersey OSS.

The low levels of CLEC penetration of residential markets in New Jersey and, in particular, the lack of entry by means of CLECs' own facilities and by means of the UNE-platform, may reflect the higher UNE pricing that was in effect for most of the period preceding this application as opposed to the UNE prices on which the application is based.(23) The New Jersey BPU issued a summary order significantly reducing UNE rates three days before Verizon filed this application.(24) However, the New Jersey BPU has not yet issued a final order "fully setting forth the Board's analysis of the issues, the positions of the parties, and the reasoning underlying the Board's determinations."(25) Verizon has committed to implementing the new rates by January 20, 2002 with an effective date retroactive to December 17, 2001, the date of the Summary Order, but Verizon has not addressed the possibility of appeal.(26) Although the reduced recurring rates appear to be generally within the broad range of TELRIC previously described by the FCC,(27) the non-recurring charges ("NRCs") for "hot cuts"(28) seem to have been increased so that they are now significantly higher in New Jersey than in New York or Pennsylvania.(29) No justification for this difference is presented in the current record.(30) Several facilities-based CLECs have asserted that the new hot-cut NRCs will inhibit their ability to compete in the local telecommunications market.(31) As it has stated previously, the Department will "rely upon the Commission for its ultimate determination of whether the prices supporting this application are appropriately cost-based."(32)

III. Conclusion

The record in this matter suggests that Verizon has succeeded in opening its local markets in New Jersey to competition in most respects. Subject to the Commission satisfying itself as to the pricing issues discussed above, the Department recommends approval of Verizon's application for Section 271 authority in New Jersey.

  Respectfully submitted,
Charles A. James
Assistant Attorney General
Antitrust Division

R. Hewitt Pate
Deputy Assistant Attorney General
Antitrust Division

Michael L. Katz
Deputy Assistant Attorney General
Antitrust Division

Margaret A. Ward
Counsel to the Assistant Attorney General
Antitrust Division

W. Robert Majure
Assistant Chief

John Henly
Jeffrey Prisbrey
Economists
Economic Regulatory Section

__________/s/__________
Nancy M. Goodman
Chief

Laury E. Bobbish
Assistant Chief

John M. Lynch
Katherine E. Brown
J. Parker Erkmann

Attorneys
Telecommunications and Media
Enforcement Section

Antitrust Division
U.S. Department of Justice
1401 H Street, NW, Suite 8000
Washington, DC 20530
(202) 514-5621

January 28, 2002


Certificate of Service

I hereby certify that I have caused a true and accurate copy of the foregoing Evaluation of the United States Department of Justice to be served on the persons indicated on the attached service list by first class mail, overnight mail, hand delivery or electronic mail on January 28, 2002.

  __________/s/__________
John M. Lynch
Attorney
Telecommunications and Media
Enforcement Section
Antitrust Division
U.S. Department of Justice


Service List

Chairman Michael K. Powell
Commissioner Kathleen Q. Abernathy
Commissioner Michael J. Copps
Commissioner Kevin J. Martin
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Magalie Roman Salas
Secretary
Office of the Secretary
Federal Communications Commission
445 12th Street, SW
TW-B204
Washington, DC 20554

Janice Myles
Common Carrier Bureau
Federal Communications Commission
445 12th Street, SW
Room 5-C327
Washington, DC 20554

Qualex International
Portals II
445 12th Street, SW
Room CY-B402
Washington, DC 20554

Alex Johns
Common Carrier Bureau
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Henry Ogden
Acting Secretary
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

Mark E. Haddad
David L. Lawson
R. Merinda Wilson
Ronald S. Flagg
Richard E. Young
Sidley Austin Brown and Wood, L.L.P.
1501K St. NW
Washington, D.C. 20005

Cherie R. Kiser
James J. Valentino
Catherine Carroll
Angela F. Collins
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
701 Pennsylvania Ave., N.W.
Suite 900
Washington, DC 20004-2608

Tom Allibone
Bruce Kushnick
TeleTruth
c/o New Networks Institute
826 Broadway, Suite 900
New York, NY 10003

Rodney L. Joyce
Shook, Hardy & Bacon L.L.P.
600 14th Street, N.W. Suite 800
Washington, DC 20005-2004

Patrick J. Donovan
Ronald W. Del Sesto, Jr.
Swidler Berlin Shereff Friedman, LLP
3000 K Street, NW
Suite 300
Washington, DC 20007

Anna Sokolin-Maimon
Metropolitan Telecommunications
44 Wall Street
New York, NY 10005

Michael Pryor
Lisa N. Anderson
Mintz Levin Cohn Ferris
Glovsky and Popeo, P.C.
701 Pennsylvania Avenue, N.W.
Washington, DC 20004

Roxanne Vivanco
New Jersey Citizen Action
400 Main Street
Hackensack, NJ 07601

Jack Robinson
President
New Jersey State Grange and the Order of Patrons of Husbandry
164 Woodstown-Daretown Road
Pilesgrove, NJ 08098

Shaun D. Wiggins
Executive Director, Keep America Connected
P.O. Box 27911
Washington, DC 20005

Frank Chappa
Division of Telecommunications
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

Michael E. Glover
Senior Vice President and
Deputy General Counsel
Verizon
1515 North Court House Road
Suite 500
Arlington, VA 22201

Keith L. Seat
Senior Counsel
WorldCom, Inc.
1133 19th Street, NW
Washington, DC 20036

Eric J. Branfman
Edward W. Kirsch
Swidler Berlin Shereff Friedman, LLP
3000 K Street, NW
Suite 300
Washington, DC 20007

Marybeth M. Banks
H. Richard Juhnke
Sprint Corporation
401 9th Street, NW
Suite 400
Washington, DC 20004

Mark C. Rosenblum
Richard Rubin
James Talbot
Lawrence Lafaro
Frederick C. Pappalardo
AT&T Corporation
295 North Maple Avenue
Basking Ridge, NJ 07920

Jonathan E. Canis
Kelley Drye & Warren, LLP
1200 Nineteenth Street, NW. Fifth Floor
Washington, DC 20036

Stephen T. Perkins
Alan M. Shoer
Cavalier Telephone
2134 West Laburnum Avenue
Richmond, VA 23227

Blossom A. Peretz
Ratepayer Advocate
Division of the Ratepayer Advocate
31 Clinton Street-11th Floor
P.O. Box 46005
Newark, New Jersey 07101

Francis R. Perkins
Meyner and Landis, LLP
One Gateway Center
Suite 2500
Newark, New Jersey 07102

Charles C. Hunter
Catherine M. Hannan
Hunter Communications Law Group
1424 16th Street N.W., Suite 105
Washington, DC 20006

Dirck A. Hargraves
Telecommunications Research and Action Center
P.O. Box 27279
Washington, DC 20005

Matthew D. Bennett
Policy Director
Alliance For Public Technology
919 18th Street, N.W., Suite 900
Washington, DC 20006


FOOTNOTES

1. Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified as amended in scattered sections of 47 U.S.C.).

2. See FCC Pennsylvania Order; FCC Connecticut Order; FCC Massachusetts Order; FCC New York Order.

3. See DOJ Rhode Island Evaluation at 6-7 ("Evidence available to the Department indicates that Verizon has generally succeeded in opening its local markets in Rhode Island to competition. Subject to the Commission satisfying itself as to the pricing issues mentioned above, the Department recommends approval of Verizon's application for Section 271 authority in Rhode Island."). The FCC is due to issue an order addressing Verizon's Rhode Island application on February 24, 2002.

The Department's Evaluation of Verizon's application for long distance entry in Vermont is due to be filed on February 21, 2002, and the FCC is due to issue an order addressing that application on April 17, 2002.

4. New Jersey BPU Consultative Report at 1-2, 4; New Jersey BPU Revised C2C Guidelines Order at 3-4, 7-9 ("incorporat[ing] revisions to the existing metrics to measure VNJ's provision of 2 Wire xDSL loops and 2 Wire xDSL line sharing . . . encompass[ing] agreements that were reached by all parties to the New York Carrier-to-Carrier Working Group"); KPMG Final Report at 356 ("The NJ BPU adopted the New Jersey Carrier-to-Carrier Guidelines on May 25, 2000, consisting of 207 metrics, incorporating metrics from Pennsylvania and New York.").

5. See generally New Jersey BPU Summary UNE Pricing Order.

6. See New Jersey BPU Incentive Plan Order; New Jersey BPU Consultative Report at 2, 76-77. Cf. DOJ Pennsylvania Evaluation at 14-17 (stating concerns regarding structure of the Pennsylvania Performance Assurance Plan).

7. KPMG Final Report at 15.

8. Id. at 22 ("Initially there were issues on a number of test points; however[,] prior to test completion all issues were resolved by Verizon NJ. Therefore, all 536 test points were 100% satisfied.").

9. New Jersey BPU Section 271 Approval Press Release at 1-2.

10. See DOJ Pennsylvania Evaluation at 3-4 ("The Department first looks to actual competitive entry, because the experience of competitors seeking to enter a market can provide highly probative evidence about the presence or absence of artificial barriers to entry. Of course, entry barriers can differ by types of customers or geographic areas within a state, so the Department looks for evidence relevant to each market in a state." (footnote omitted)). Verizon argues that the level of actual local competition in New Jersey, particularly in the residential market, is "legally irrelevant." Verizon Br. at 80. The recent remand of the FCC Kansas/Oklahoma Order suggests otherwise. Sprint Communications Co. v. FCC, 274 F.3d 549, 555, 561-62 (D.C. Cir. 2001) (upholding FCC's Track A analysis and noting that the 1996 Act is "aim[ed] directly at stimulating competition," such that an analysis of the actual competitive landscape is relevant, if not determinative). Although the Department recognizes that a market can be open to competition even if no firm attempts to enter, it views actual entry as one type of evidence relevant to the issue of whether a BOC has opened its local markets to competition. See DOJ Massachusetts I Evaluation at 4 ("Small market shares held by competitors or even the absence of entry, standing alone, are neither conclusive evidence that a market remains closed to competition nor a basis for denying an application under section 271." (footnote omitted) (emphasis added)).

11. See, e.g., DOJ Georgia/Louisiana Evaluation at 7 ("Although the Department presumes that fully facilities-based competition is not hindered in a competitively significant manner based on the entry recorded in Georgia, the amount of entry does not justify extending such a presumption to other modes of entry in Georgia."); DOJ Missouri I Evaluation at 6-7 ("The Department presumes that opportunities to serve business customers by fully facilities-based carriers and resellers are available in Missouri, based on the entry efforts reflected in SBC's application. There is significantly less competition to serve residential customers. There also is less competition by firms seeking to use UNEs, including the UNE-platform, and there are some indications that a failure by SBC to satisfy all of its obligations may have constrained this type of competition." (footnotes omitted)).

12. See Verizon Line Counts Ex Parte at 1; Verizon Taylor Decl. Attach. 1 at 3 tbl.1. These totals do not include lines served by the other incumbent local exchange carriers in New Jersey, Sprint and Warwick Valley Telephone Company.

13. See id.

14. See id.

15. See id. (CLECs serve approximately 507,000 business lines).

16. See id. (CLECs serve approximately 360,000 business lines using at least some of their own facilities).

17. See id. (CLECs serve approximately 126,000 business lines via resale and approximately 21,000 such lines through the UNE-platform).

18. See id. (CLECs serve approximately 57,000 residential lines).

19. See Verizon Taylor Decl. Attach. 1 at 3 tbl.1 (CLECs serve approximately 56,000 residential lines via resale).

20. See Verizon Line Counts Ex Parte at 1; Verizon Taylor Decl. Attach. 1 at 3 tbl.1 (CLECs serve approximately 800 residential lines through the UNE-platform).

21. The Department's Evaluation of Verizon's Section 271 application for Pennsylvania questioned whether Verizon produced an electronic wholesale bill that was accurate andauditable. DOJ Pennsylvania Evaluation at 11. The problems observed in Pennsylvania may also be present in New Jersey because Verizon uses the same billing system there. See Verizon McLean/Wierzbicki/Webster Decl. ¶ 108. In New Jersey, Verizon relies on the same manual adjustment process relied on in Pennsylvania to produce electronic bills that match the paper bills. Id. ¶¶ 113-15; see New Jersey BPU Consultative Report at 40-41 (finding wholesale billing to be nondiscriminatory, but conditioning approval on Verizon's commitment to continue manual adjustment until it can produce accurate electronic bills). Verizon relies on KPMG's testing to substantiate that it provides nondiscriminatory OSS, but KPMG tested the accuracy of its paper bills only. Verizon McLean/Wierzbicki/Webster Decl. ¶ 113; KPMG Final Report at 343, 347-52. However, Verizon engaged PricewaterhouseCoopers ("PwC") to test its assertion that the electronic bill modified by manual adjustment matches the paper bill, and PwC concluded that Verizon's assertions were fairly stated. Verizon McLean/Wierzbicki/Webster Decl. ¶¶ 115-16.

Few New Jersey CLECs have indicated that problems with Verizon's wholesale billing system have led to significant competitive harm. See AT&T Kirchberger/Nurse/Kamal Decl. ¶¶ 108-11 (noting potential competitive harm due to inaccurate wholesale billing without asserting AT&T has suffered such harm); see also New Jersey BPU Consultative Report at 39-40 (summarizing CLEC claims about billing); cf. Verizon McLean/Wierzbicki/Webster Decl. ¶¶ 121-24 (claiming investigation of CLEC billing complaints revealed few inaccuracies). But given the level of competitive entry in New Jersey, it is difficult to assess whether Verizon's electronic wholesale billing system is working properly. The FCC Pennsylvania Order states the Commission's intent "to monitor Verizon's post-approval compliance" with respect to "non-discriminatory access to its wholesale billing functions." FCC Pennsylvania Order ¶ 42. Given the relative lack of commercial usage of Verizon's OSS systems in New Jersey, the Department believes such monitoring may also be appropriate in New Jersey.

22. See supra note 8.

23. Verizon asserts that the low level of CLEC penetration of residential markets in New Jersey is due to the particularly low retail rates for residential service in New Jersey. Verizon Br. at 82. Commenters argue that the per-line revenue opportunity in New Jersey is actually comparable to that in other states, despite the low retail rates for local residential service. See, e.g., WorldCom Huffman Decl. ¶ 15.

24. New Jersey BPU Summary UNE Pricing Order; see New Jersey BPU Pricing Order Press Release at 1-2 (New Jersey BPU reduced UNE rates an average of approximately 40 percent statewide to "effectively 'jumpstart' local competition in the state"); New Jersey BPU Consultative Report at 2 ("[T]he Board reduced the rates of the components of the UNE-Platform by over 40%, answering the complaints from CLECs that New Jersey UNE rates were a bar to entry into the State."). But see infra note 31(facilities-based CLECs claiming new non-recurring charges may inhibit their ability to compete).

25. New Jersey BPU Summary UNE Pricing Order at 2; see also New Jersey CTA Comments at 5-9 (noting that motions for reconsideration or appeal cannot be filed until a formal Final Order is issued); WorldCom Comments at 4 (same).

26. Verizon UNE Pricing Letter at 1-2. The New Jersey BPU appears to have conditioned its approval of Verizon's application on a commitment not to appeal the rates. New Jersey BPU Section 271 Approval Tr. at 62 ("[T]he rates are in place, but the rates still could be challenged and we have said that we are conditioning our approval based on the continuation and effect of those rates."); see also New Jersey BPU Section 271 Compliance Letter at 1 ("[A] Verizon challenge of the validity or effective date of the rates or any attempt to increase or otherwise change these rates, will call into question whether modified rates would be TELRIC compliant, and, therefore, also call into question the Board's finding of compliance with Checklist Item 2."); New Jersey BPU Consultative Report at 24 (same).

27. Verizon Garzillo/Prosini Decl. ¶¶ 40-45 (comparing New Jersey's new UNE rates to those in New York and Massachusetts when Verizon's applications for Section 271 authority for those states were granted). But see FCC Massachusetts Order ¶¶ 29-30 ("If the New York Commission adopts modified UNE rates, future section 271 applicants could no longer demonstrate TELRIC compliance by showing that their rates in the applicant states are equivalent to or based on the current New York rates, which will have been superseded" and modified New York rates could also "undermine Verizon's reliance on those rates in Massachusetts."). On January 23, 2002, the New York PSC "voted to approve significant reductions in the prices" for UNEs. New York PSC UNE Pricing Press Release at 1.

28. "Hot cuts" involve physically disconnecting the customer's existing in-service loop from the incumbent's switch and reconnecting the loop to the CLEC's switch.

29. AT&T Comments at 11-12 (claiming hot cut NRC raised by Summary Order); AT&T Sczepanski Decl. ¶ 7tbls.1 & 2 (comparing hot-cut NRC charges in New Jersey - $159.76, Pennsylvania - $4.07, Maryland - $16.22, Virginia - $13.49, and Delaware - $22.52); Conversent Comments at 3 (claiming hot-cut NRC raised by Summary Order); XO Comments at 18-19 (New Jersey non-recurring charge ("NRC") for a hot cut that does not require a premises visit is $159.76; the comparable NRCs in New York and Pennsylvania are $29.75 and $70.94, respectively.). It is unclear whether the forthcoming New York PSC pricing decision, see supra note 27, order will affect the New York hot-cut NRCs.

30. See DOJ Kansas/Oklahoma Evaluation at 12 ("In the absence of persuasive evidence of differences in costs between states, substantial differences in prices should trigger a more careful scrutiny by the Commission."); FCC Kansas/Oklahoma Order ¶ 82 (agreeing with DOJ that comparisons of rates between states can be useful), ¶ 101 (discussing the "reasonable differences in judgment" and other "legitimate factors" for the disparity between non-recurring charges in Oklahoma and Texas); Sprint Communications vs. FCC, 274 F.3d at 560 (upholding FCC's finding that the Oklahoma non-recurring rates comply with TELRIC).

31. See AT&T Huels Decl. ¶ 9 (describing effect of new NRCs on AT&T's entry plans); Cavalier Comments at 5 ("[U]nless Verizon substantially lowers its New Jersey hot cut NRC, Cavalier will not attempt to gain any additional customers in New Jersey."); Cavalier Snyder Decl. ¶¶ 6, 9-11 (Cavalier competes using hot cuts in Virginia where NRC is $13.49-$32.50; given New Jersey NRC of $159.76 to $233.12, "it is not economically feasible for Cavalier to expand its successful facilities-based UNE-L local telephone business plan into New Jersey"); Conversent Comments at 6 ("Conversent cannot reasonably pay $300-$400 for hot cuts for a customer with 5 to 6 business lines. . . . [It would be necessary for [Conversent] to abandon in New Jersey its present business plan [focusing on small- and medium-sized business customers] if Verizon implements the new hot cut prices.").

32. DOJ Missouri I Evaluation at 1-2.

Updated June 25, 2015