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February 13, 2001, Tuesday KR-ACC-NO: HA-VERIZON
Mid-Atlantic States Press for Split of Verizon's Wholesale, Retail Operations BYLINE: By David DeKok
Structural separation of Verizon Communications Corp. is not just a Pennsylvania issue anymore.
Much to the dismay of the state's largest telephone company, the idea of separating it into wholesale and retail operations to promote local telephone competition has spread within the past two weeks to the adjoining states of New Jersey and Maryland.
In New Jersey, AT&T Corp. has petitioned the Board of Public Utilities to order structural separation of Verizon. A bill introduced in the Maryland Legislature by Delegate Joan F. Stern is modeled on the Pennsylvania plan and aims at the same end. Both moves are expected to face vigorous opposition from Verizon.
"They find it very interesting," Stern said of her fellow legislators. "Some are very excited. Others say, 'You're taking on a large corporation, one of the largest in the state.' Everyone is looking forward to the debate."
Verizon frequently has accused the Pennsylvania Public Utility Commission of acting rashly and doing something no other regulators in the nation had done when the PUC ordered structural separation as part of its 1999 order on local telephone competition.
"Structural separation remains a solution in search of a problem," Verizon spokesman Harry Mitchell said. "It's the wrong idea in Pennsylvania and the wrong idea anywhere."
But Verizon has had no success thus far in stopping the idea in Pennsylvania, despite pouring large amounts of advertising dollars and lobbying muscle into Harrisburg
Commonwealth Court unanimously rejected a legal appeal by Verizon last October and said structural separation is legal. PUC Administrative Law Judge Wayne L. Weismandel recommended last month that the commission proceed with structural separation, saying Verizon had presented no verifiable evidence to back up its claim that a breakup would cost $ 1 billion.
C. Michael Armstrong, AT&T chairman and chief executive officer, said in a speech last week at the National Press Club that state utility regulators should require structural separation so that Verizon and the other regional Bell companies provide the same prices and service to competitors as they do to themselves. He called Pennsylvania a model for local telephone competition.
Last week in New York City, anti-Verizon activist Bruce Kushnick of New Networks Institute told a meeting of disgruntled Verizon DSL customers that if the company does not improve its DSL high-speed Internet service in the coming year, Congress should order structural separation of the entire company.
Last November, H. Russell Frisby Jr., president of the Competitive Telecommunications Association, told the National Association of Regulatory Utility Commissioners at its annual convention in San Diego that it was time to consider structural separation to get past the ability of monopoly telephone companies like Verizon to frustrate competition.
"The same conditions that the Pennsylvania PUC addressed in its order exist all over the country," he said in his speech. "Other states should consider structural separation as a regulatory approach to speed the process."
Carl Giesy, regional director for public policy with WorldCom Inc., said Monday that structural separation is "the right thing to do" and the only way to prevent non-price discrimination.
He said the growing interest in structural separation outside Pennsylvania shows that the idea is gaining respect among regulators and legislators.
The PUC is expected to make a decision on structural separation next month, before the March 31 end of Chairman John M. Quain's term. Few are willing to predict how the decision will come down.
"I think Pennsylvania will be proven right and the Pennsylvania commission will realize the step they took was the right step," said AT&T-Pennsylvania President Jim Ginty.
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