April 16, 2001

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, CC Docket No. 01-9.

With the stakes so high, the Commission cannot afford to let Verizon into the Massachusetts long distance market before the company has fully demonstrated compliance with the market opening requirements of section 271. The availability of unbundled network elements (UNEs) at cost-based rates is an essential ingredient of a primary strategy for entering the residential market in Massachusetts. Accordingly, I must dissent, because the Commission should not permit Verizon to enter the in-state long distance market without more rigorous support for its unbundled switching rates in Massachusetts.

Based on the evidence in the record, I cannot conclude that Verizon has demonstrated that its switching rates are based on the forward-looking, total element long run incremental cost (TELRIC) of providing that network element. Prior to filing its second 271 application for Massachusetts, Verizon elected not to rely on the unbundled switching rates set by the Massachusetts Department of Telecommunications and Energy (Massachusetts Department). Instead Verizon chose to rely on voluntarily-adopted rates equivalent to those currently in effect in New York, without providing any further evidence that those rates are TELRIC compliant for Massachusetts.

By allowing Verizon simply to mirror rate levels set four years ago in another state and subject to imminent revision, the Commission has undermined the rigor of its 271 process. Indeed the majority has sent a signal that it will allow reliance on previously approved rates, irrespective of the amount of time passed or pricing information gathered since those rates were last before us. In a declining cost industry characterized by rapid technological innovation, such an approach is inconsistent with our statutory mandate. Nor can the majority’s threats of future enforcement action -- particularly with regard to “section 271 checklist items where Verizon’s performance was most marginal,” such as the pricing of unbundled elements -- substitute for a requirement that Verizon demonstrate full checklist compliance before winning long distance authority.

The record that supported Verizon’s New York 271 application in 1999, based on a pricing docket completed in 1997, is not adequate to support Verizon’s case in Massachusetts today. The New York Public Service Commission (NYPSC) is expected to revise the New York rates this summer, after it completes its review of additional information regarding the cost of unbundled switching. The NYPSC adopted the current rates at a time when there was comparatively little experience with TELRIC pricing. Since the New York application was adopted, however, the Commission has acquired additional information about the pricing of switching in particular. The applications that the Commission has approved since that time reflected rates for the per-line, per-month cost for switching, transport, and signaling that -- based on WorldCom’s usage assumptions -- are roughly half of New York’s rates.² Such rate disparities suggest there is a good chance that the NYPSC may revise its rates significantly. At a minimum, such comparisons support the need for additional information to ensure that the Massachusetts switching rate is within the range that reasonable application of TELRIC principles would produce.

In any case, Verizon did not adopt the New York rates for unbundled switching in their entirety. The New York rates, unlike the fixed rates on which Verizon relies, are subject to true-up and potential refund. Moreover, although the NYPSC is expected to complete its pricing proceeding shortly, Verizon did not commit to adopt the resulting rates, which will be based on more complete and updated cost information.

Finally, when we approved Verizon’s New York 271 application, we placed “great weight on the New York Commission’s active review and modification of Bell Atlantic’s proposed unbundled network element prices, its commitment to TELRIC-based rates, and its detailed supporting comments concerning its extensive, multi-phased network elements rate case.”³ We do not have the same record in Massachusetts. As the majority describes, significant errors appear to have been made in establishing the original UNE switching rates in Massachusetts. Like the majority, I expect that the Massachusetts Department will examine these issues during the course of its on-going rate case and set rates within the range that a reasonable application of TELRIC principles would produce. But, based on the record currently before me, I cannot conclude that the unbundled switching rates on which Verizon relies are within that range and accordingly must dissent.