The Pennsylvania Public Utility Commission moved Thursday to deregulate prices for Verizon's landline phone service in Philadelphia, Pittsburgh, and three other regions - a decision that could lead to sizable price jumps for customers, who pay about $22 a month for traditional local phone service.
By a 3-2 vote that drew sharp dissents from the commission's two Democratic appointees, the PUC partly backed Verizon's October petition, which asked that its service be declared "competitive" in the five markets under a 2004 state law that sought to promote phone and Internet competition.
The commission declined to deregulate 41 of the 194 wire centers Verizon sought to reclassify, largely in suburban areas such as Ardmore, Chester, Jenkintown, and Langhorne, where testimony showed that at least 3 percent of households lacked access to cable companies' phone service as an alternative.
PUC Chairman Robert F. Powelson called the decision "an important step towards modernizing how we regulate telecommunications in Pennsylvania."
"With the proliferation of service bundles and the rising popularity of both wire-line and wireless providers offering competing products and services, consumers now have an array of options to meet their communications needs," Powelson said in a joint motion with Vice Chairman John F. Coleman Jr.
Verizon spokesman Lee Gierczynski said the PUC recognized how consumers in large markets "have benefited from the healthy competition for telecommunications services." He said freeing the company from rate regulation and other traditional utility obligations would enable it to compete more effectively with cable and wireless companies.
Dissenting commissioners and consumer advocates predicted the decision would lead to large price increases for customers, many elderly and living on modest incomes, who maintain traditional service. In addition to Philadelphia and Pittsburgh, the ruling affects customers in Erie, the Harrisburg-York area, the Lehigh Valley, and the Wilkes-Barre and Scranton region.
Commissioner James H. Cawley said in a dissent that the ruling, which also waives a variety of consumer protections previously enforced by the PUC, "visits unrestrained market forces upon unsuspecting and unprepared basic local telephone subscribers."
In other states
Cawley said that the decision would likely affect 100,000 to 200,000 customers but that Verizon declines to disclose exact numbers for competitive reasons.
"If history is any guide, they're going to get a rate increase," he said in an interview. "They have been successful with similar petitions in other states, and they have immediately raised rates afterward."
Gierczynski said the change was unlikely to have widespread impact because a majority of Verizon's customers subscribe to bundles already classified as competitive, such as packages that include long-distance or Internet service.
"You can't predict what's going to happen in the future," he said. "There's a lot of competition out there, so the competitive market will dictate prices for our services."
Tanya J. McCloskey, the state's acting consumer advocate, said Verizon raised rates sharply after similar rulings elsewhere - including by 134 percent in California. "In most areas, it's gone up from 5 to 40 percent," she said.
Cawley said those results belied Verizon's assertions that competition would constrain its prices.
"It's a little bit counterintuitive," he said. "You get permission to be declared competitive because there's so much fierce competition, and then you immediately raise the rates? Come on."
Critics also objected to the process, in which they said Verizon pushed for a quick ruling just a year after it failed to win the General Assembly's backing for legislation to free it statewide from key regulatory obligations.
"This was an end run around the legislature," said Elizabeth Marx, an attorney with the Pennsylvania Utility Law Project.
Cawley said the agency conducted "a very hurried proceeding" that drew little public attention and failed to consider whether customers truly had reasonable alternatives. "We didn't even have time for public-input hearings - or at least none were held," he said.
He also called it striking that the PUC was voting to loosen regulation of Verizon at the same time the Federal Communications Commission was invoking tighter rules over broadband Internet service.
"On a day when our federal counterpart imposes regulation, a state commission like ours abandons regulation. That really is ironic," he said.