Press Release

HARRISBURG – The Public Utility Commission (PUC) today ordered Verizon to recalculate the wholesale rates it charges competitors to lease portions of its network, based on the PUC’s tentative conclusions on the value of certain inputs used to compute these rates.

Today’s tentative order is not a final determination of whether Verizon’s wholesale rates -- called unbundled network elements, or UNEs -- should be lowered, raised or maintained. But it does tentatively resolve some of the major issues related to UNE pricing.

For example, the Commissioners voted to use Verizon’s model for recurring costs -- the same cost model that the New York Public Service Commission used for deciding its UNE rates. The Commission voted to use AT&T’s and MCI Worldcom’s cost model for non-recurring costs.

The Commission is directing Verizon to recalculate both recurring and non-recurring costs based on new input values provided by the Commissioners, who reviewed recommendations from both an administrative law judge and the Commission’s Office of Special Assistants. In order to ensure that the new rates will be calculated correctly, today’s case is being remanded to an administrative law judge, who will establish a process to allow parties to challenge the accuracy and validity of the new rates.

"Today's vote represents an important step forward for Pennsylvania's transition to fully competitive local telephone markets," PUC Chairman Glen R. Thomas said. "The wholesale rates which we are tentatively ordering Verizon to recalculate will form the basis by which Pennsylvania's competitive markets are defined. I believe that these new calculations will be more reflective of the competitive realities of the Pennsylvania market and advance our Commonwealth 's efforts to restructure our utility markets."

Today’s action, unanimously approved on a motion by Commissioner Terrance J. Fitzpatrick, also directs the Commission’s Office of Administrative Law Judge to examine the impact of the new rates on the state’s four density cells and to recommend whether the Commission should address any disproportionate differences between cells.

"The Commission must consider carefully the impact of its decisions upon competition in all areas of the state – urban, suburban and rural," Commissioner Fitzpatrick said. "At the same time, the Commission must follow federal law."

Competitors lease parts of Verizon’s network, called unbundled network elements, at wholesale rates set by state utility commissions. The rates are calculated based on guidelines from the Federal Communications Commission (FCC). Utility commissions decide the value of inputs -- such as the cost of capital, repair and maintenance expenses, and inflation factors -- that will be used to calculate the rates.

In a May 3 recommended decision, PUC Administrative Law Judge Michael Schnierle rejected some of Verizon’s input values and ordered the company to recalculate its wholesale rates using new values determined by the judge. Under today’s action, the Commission tentatively adopted some of the ALJ’s recommendations, but ordered Verizon to rerun its cost model with different inputs provided by the PUC. Verizon must file the results within 30 days of the entry of today's tentative order.

Links to Commissioner Fitzpatrick's motion, Chairman Thomas' statement and Vice Chairman Bloom's statement.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition.