Verizon Maryland Inc. settlement would cap rates and speed repairs

Daily Record, The (Baltimore), Feb 13, 2009 by Danielle Ulman

The state's utility regulators reviewed a proposed settlement with Verizon Maryland Inc. Thursday that would freeze or cap rates for local telephone service and pay $1 million to customers for lengthy delays in service repairs.

The Public Service Commission heard details of the settlement -- born of an investigation into thousands of complaints that Verizon took more than four days to restore telephone service to consumers from 2007 to 2008 -- and questioned the merits of approving an agreement that would deregulate some of Verizon's bundled services.

Verizon negotiated the settlement with PSC staff and the Office of the People's Counsel after several months of wrangling over specifics, including a $1 monthly increase to basic-telephone rates in July, followed by a three-year freeze on those rates through 2012. Once the rate freeze is removed, Verizon would cap its yearly increase at $12 for residential customers and $24 for business customers.

"To avoid what I would call the BGE problem, we would agree to ongoing caps so that when price caps come off, or the freeze comes off, we're not in here asking for a very large and painful increase," said John R. Gilbert, vice president of regulatory affairs for Verizon, referring to the issues Maryland faced after the deregulation of the energy industry when rate caps came off and rates at Baltimore Gas & Electric Co. skyrocketed.

Verizon agreed to make those concessions in return for more flexibility to adjust pricing on its bundled products that are competitive with phone-service providers in the region that the PSC does not have jurisdictional rights to regulate, like Comcast.

The settlement would allow Verizon to give the PSC one day of notice before it changes rates on its bundled services, instead of the typical 30-day period the commission uses to approve a request. That would mean that Verizon could roll out changes without approval.

That freedom to make changes would be tempered by the rates the competition offers, Verizon officials said, because if the company raised its rates too high, it would lose customers.

However, PSC Chairman Douglas R.M. Nazarian said that element of

deregulation would force the PSC to do its job in reverse, reviewing a change after it has gone into effect. He said he worried that it would be hard to get Verizon to undo the changes. But Verizon officials assured Nazarian that PSC rulings would still stand.

"We are not at all deregulated because we still file tariffs with you all," Gilbert said. "And when we do you all have the ability to review them; if they violate the rules, we would owe the money back to the customers."

Under the settlement, Verizon agreed to make all repairs within an average of two days and said it would file a quarterly report of the aggregate time it took it to return service to its customers.

Nazarian said he doubted the company could meet its requirement, which it has done in some but not all months since August 2007. Verizon would have to pay $4 million to affected customers if it did not meet the two-day standard.

The company has had major problems reaching consumers who need service because its work on building a fiber optic network in Maryland pulled employees off of fixing its existing network.

PSC Commissioner Harold Williams questioned if the changes in the settlement would act as a "Band-Aid," but Verizon's Gilbert said the settlement was meant to have "teeth."

"But down the road the teeth are going to go away," Williams said, "and you're going to be gumming it."

The PSC will hold a second day of hearings Friday; officials would not say when it will issue a ruling.