Telecommunications Law- NJ Superior Court Issues Opinion on Services Provided by Verizon

It is not often that the Appellate Division of the Superior Court of New Jersey issues an opinion of interest in Telecommunications Law. Last week it did so. As one of the few firms in New Jersey that practices Telecommunications Law, we like to keep our clients up to date.

The issue is whether certain specified services provided by Verizon should be reclassified as competitive rather than ILEC. BPU entered the order based on a settlement between the Board staff and Verizon after an contested hearing. Division of Rate Counsel then appealed to the Appellate Division.

Verizon originally submitted a request to BPU in 2007, covering all the services that it provided that were not yet designated as competitive. In 2008 that was settled (the settlement included not just Verizon but other ILEC’s), and all but four services were reclassified as competitive. The four services not reclassified were for (1) residential basic exchange service; (2) single-line business basic exchange service; (3) non-recurring charges for residential service connection and installation; and (4) residential directory assistance services. As to these, the Board continued to exercise authority to regulate the rates and terms of service, while providing that there would be further hearings to determine if these could be re-designated.

BPU issued an order in 2011 to initiate the additional hearings, which began in 2012. In 2013 CenturyLink (formerly Embarq) and Rate Counsel reached a settlement preserving the status as to all but directory assistance; the Board approved this Order. Subsequently, in May of 2015, the Board staff and Verizon reached a proposed settlement. Under it, Verizon’s four remaining regulated services be reclassified as competitive services, subject to a five-year transition period and several conditions. Those conditions included that (1) the services would have rate caps for five years; (2) existing service quality standards would continue to apply to certain services for three years and, thereafter, the Board would determine whether those quality standards would continue for the remaining two years; (3) the rate for Verizon’s Life Line services would not increase during the five-year transition period; (4) Verizon would continue to offer social program and services for disabled and low-income customers; (5) Verizon would undertake certain obligations, including reporting on the number of residential basic exchange service lines and single-line business exchange lines; and (6) Verizon would continue to be governed by applicable statutory and administrative requirements. The 2015 Stipulation also provided that the Board could, pursuant to its statutory authority, investigate the classification of telecommunications services should competitive conditions change in the future. The Board sought comments, which came from various sources, most prominently Rate Counsel, which opposed the settlement that the data from the 2012 hearings was stale and that in the interim the market had become less competitive. Verizon submitted comments disputing this. The Board accepted the settlement by order on June 5, 2015.

On Rate Counsel’s appeal, the App Div affirmed the BPU order. It noted that when reviewing administrative agency decision its scope of review was limited. Thus, it accepted findings of fact as long as they had some support in the record; and they defer to a degree to the administrative agency’s assessments of fact and law, due to the agency’s greater familiarity with both. Applying those standards, it found no basis to overturn the Board’s decision. The Board properly considered each of the three factors defined in NJ’s Telecommunications Act of 1992 with regard to such reclassifications, which provides that the Board shall develop standards of competitive service which, at a minimum, shall include evidence of ease of market entry; presence of other competitors; and the availability of like or substitute services in the relevant geographic area.” The Board considered the number of CLEC’s operating in the state, together with alternatives such as cable and wireless, as establishing these. Further, it held that the Board did consider the public interest, noting that the 1992 Act showed a preference for competition and with it less regulation.

The Appellate Division is:

A-4769-14T2
IN THE MATTER OF THE BOARD’S INVESTIGATION REGARDING THE RECLASSIFICATION OF INCUMBENT LOCAL EXCHANGE CARRIER SERVICES AS COMPETITIVE
(BOARD OF PUBLIC UTILITIES)