Vt., Ohio Approve Verizon-MCI Merger; N.J. Next in Line
Verizon’s merger with MCI took 2 more steps toward completion as a state in Verizon’s region, Vt., and one out-of-region, Ohio, gave their approvals. The actions leave 6 states standing in the way of closing the merger - - the in-region states of N.J., Pa. and W.Va., and the out-of-region states of Alaska, Ariz. and Wash. Meanwhile, N.J.’s regulators are expected to vote on the merger this week; a Pa. hearing officer recommended unconditional PUC approval; and Wash. regulators completed their case record Tues., so only the final vote remains to be done.
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The Vt. Public Service Board approved the Verizon-MCI merger after concluding it will promote the public good and won’t impair competition. But the Public Service Board attached 2 conditions: (1) The companies must continue to provide MCI’s retail mass-market “Neighborhood” telecom service plans for one year at current rates and terms. The board said a year is plenty of time for MCI mass-market customers to find other providers, and will allow time for growth of intermodal alternatives from wireless, cable and VoIP providers. (2) Verizon must provide equal treatment for all traffic routed over its Internet backbone facilities, regardless of source. The board (Case 7056) said Verizon’s acquisition of MCI’s nationwide Internet backbone facilities could put it in position to selectively degrade Internet backbone access used by its retail competitors, which would give Verizon’s services an unfair advantage. The board said the evidence isn’t conclusive about whether this is technically feasible, but said this condition would deter such mischief.
The board declined to order proposed conditions relating to special access rates since MCI doesn’t provide intrastate special access in Vt. It also declined to impose conditions on wholesale service quality. It said there’s no evidence the merger will have any effect on service quality, and any wholesale quality issues could be addressed in other proceedings.
The Vt. action came on the heels of the Ohio PUC’s decision to approve the merger, adopting Ohio conditions that mirror the commitments the companies made to the FCC to secure that agency’s merger approval. It also required the companies to file Ohio-specific reports on their markets and business activities for the next 3 years so the PUC can monitor the status of post-merger competition.
The PUC concluded the merger “is consistent with recent [telecom] advancements [and] will enhance competition with other cable, wireless, and Voice over Internet Protocol providers of communications services, with positive benefits for customers.” The PUC (Case 05- 0497) said the merger won’t impair the companies’ ability to provide quality service but will give the combined companies “the ability to be a more efficient and effective competitor due to each company’s specific strengths and market focus.”
The PUC said the companies’ commitments to the FCC “address the concerns relative to the potential loss of MCI as an alternative wholesale provider” in the national market, and will work just as well in the Ohio market so it adopted them as Ohio conditions. The conditions include capping unbundled network element rates at present levels for 24 months; capping high-speed private line and special access rates at present levels for 30 months; adhering to a special access service quality program, excluding MCI fiber collocations when determining if wire centers are competitive enough for exemption from unbundling; and offering competing carriers for 30 months the same special access services offered to affiliates.
In addition, the PUC required the companies to file annual Ohio-specific market monitoring reports for 3 years on local exchange market conditions in Verizon’s territory, ventures into local exchanges outside Verizon territory, network investments, merger-related synergies, service quality improvements, and new products and services. It also required the companies to maintain regulatory contacts in Ohio with authority to resolve customer complaints, and to seek PUC approval for any merger-related name changes to an Ohio business unit.
The PUC rejected requests from community groups that the companies be required to make charitable donations to programs intended to reduce the “digital divide” between wealthy and poor, increase Lifeline subsidies to individuals, and establish Lifeline subsidies for DSL service. The PUC said digital divide programs have no connection to the merger so forced philanthropy would be inappropriate. As to Lifeline, the PUC said the groups failed to make a case for why the Lifeline subsidies established in 2003 should be increased. The PUC also said that since it has no jurisdiction over DSL rates, it has no authority to compel DSL Lifeline subsidies.
Verizon called the Ohio decision “a major milestone in the approval process, good news for customers and confirmation that this combination is in the public interest.” MCI said it “appreciates” the PUC’s careful process that led to its conclusion that the merger will promote competition and benefit consumers and businesses. But the Ohio Office of Consumer Counsel condemned the PUC approval because it failed to include guarantees that consumers will see benefits from the deal.
Elsewhere, the N.J. Board of Public Utilities has scheduled a final vote on Verizon-MCI merger approval at its Dec. 2 meeting. Competitor interests in this case (TM-05030189) have expressed grave concerns about what will happen to competition in the state’s special access market if MCI is removed as an alternative provider and have called for conditions to ensure continued competitive options.
In Pa., an administrative law judge recommended approval of the Verizon-MCI merger without any state- specific conditions. ALJ Charles Rainey (Case A- 310580F0009) said the conditions imposed by the FCC and U.S. Dept. of Justice adequately addressed the potential anticompetitive impacts in Pa. from the merger: “No additional conditions beyond those imposed by the FCC and DoJ are necessary.” Rainey concluded the merger combines complementary strengths of MCI’s nationwide Internet and enterprise businesses with Verizon’s national wireless and regional local exchange businesses. He said the merger should spur deployment of wireline and wireless broadband and multimedia services that will provide valuable benefits to enterprise and mass-market customers while the federal merger conditions will ensure continued robust competition. The matter wasn’t on the agenda for the Dec. 1 meeting; the next PUC meeting is Dec. 15.
The Wash. Utilities & Transportation Commission (WUTC) completed its merger case record Tues. with filing of final supplemental briefs. All that’s left is the decision on approval. The WUTC is considering a negotiated proposal to approve the merger subject to conditions that would cap basic service rates for 4 years, require Verizon to offer to all comers the same commercial interconnection agreements currently provided to MCI for 24 months, extend local calling areas in certain metropolitan and rural areas, and offer MCI customers a free switch to another carrier of choice for 60 days after merger completion.
The W.Va. PSC plans to hold a discussion with staff about the Verizon-MCI merger at its Dec. 6 meeting. But the matter (Case 05-0349-T-PC) is on the agenda only to go over staff recommendations, not for a vote. The final vote will be scheduled later.