Cost of a Dial Tone Going Up

By Pradnya Joshi - Staff Writer - February 28, 2002

Verizon Communications Inc. said that it will increase basic phone rates throughout New York by $1.85 a month starting tomorrow, two days after state regulators approved a new plan for the way the New York Public Service Commission regulates the telephone company.

Verizon's residential fee for basic dial tone service will rise from $6.11 a month to $7.96 a month, or about a 30 percent increase. The increase applies only to the first line a customer has. That basic service fee had not increased for 11 years and was actually lowered in 2000 by 49 cents.

However, Verizon spokesman Cliff Lee pointed out that the average New York local-phone customer pays about $44 per month when taxes, local calling and other charges are included, so the average bill will rise by only 4 percent.Verizon provides local service to 7 million business and residentialcustomers in the state.

Rates for low-income customers who are on the "Lifeline" plan will remain unchanged, which in some cases are as low as $1 a month.

Verizon also will be given the flexibility to change other rates under the new plan, as long as the company does not increase its annual revenue that it generates in New York by more than 3 percent. Lee said the company will file notice of any other rate changes with the commission in advance.

Under a previous seven-year plan, Verizon was required to freeze basic rates and eliminate certain other charges.

The commissioners voted unanimously to adopt the new plan, citing the fact that customers have more options when choosing phone service. Competitors include AT&T, MCI as well as start-up companies.

"It's also important to note that an increasingly competitive market and more customer choice may cause Verizon to refrain from exercising all of its pricing flexibility options," PSC commissioner Thomas Dunleavy said in a statement.

But consumer groups said technological improvements and other changes should actually prompt companies to lower rather than raise rates.

"We're going in the wrong direction here," said Ben Wiles, senior attorney of the nonprofit Public Utility Law Project in Albany. "Where is the benefit that residential customers are going to see?"

Wiles also said the public had little notice to comment on the proposal, which was made public less than three weeks ago.

But Public Service Commission officials said the new plan had received broad support from competitors and others who commented. As part of a separate proceeding, Verizon agreed to reduce various rates it charges competitors to lease parts of its network anywhere from 18 percent to 38 percent.

Yesterday's ruling also allows Verizon to raise the charge for basic service another 65 cents in March 2003, but company officials said it won't be making a decision on whether to apply that increase until next year.

Under the new plan, Verizon still will pay rebates if it doesn't meet service standards. The commission will continue to measure Verizon's performance in five areas including how many customers are without phone service for more than 24 hours and the number of complaints filed with regulators. Overall, the commission's staff reported that Verizon's service quality had improved in 2001 compared with the previous year.