Verizon Seeks Higher Rates

Verizon Communications Inc., California’s second-largest local phone company, is asking state regulators to more than double the rates it is allowed to charge competitors to use its lines and other equipment.

Verizon, which is allowed to charge $16.08 a month per line on average, wants to hike that wholesale rate to $39.85 for customers in the Southern California beach communities it serves. The rate would be about $72 for those in more rural areas.

The rates do not include features, such as call waiting, call forwarding and caller ID, that the current price includes. The added costs would raise the average rate statewide to about $45, or nearly triple the current rate.

Verizon has 4.6 million residential and business lines in California, mostly from Long Beach into Ventura County. The request was filed Nov. 3 with the Public Utilities Commission, which set interim rates in April.

Verizon spokesman Jonathan Davies said the rate request was “appropriate, given our costs.”

“They are supported by substantial documentation that we filed with the PUC,” he said. “This pricing reflects our actual costs as opposed to the artificial subsidized competitive prices that we now have.”

Competitors and consumer groups gasped at the request, saying it shouldn’t see the light of day.

“This is kicking the ball right out of the court,” said Mindy Spatt, spokeswoman for consumer group the Utility Reform Network in San Francisco. “I can only guess that they’re starting out with high costs as a way to negotiate way down to something that is still inflated, but less inflated.”

Federal and state laws, Spatt said, are designed to foster competition, and competitors need access to the Baby Bell networks, which are too expensive and difficult to replicate.

“At prices like these, other companies would be unable to enter the market,” she said.

Rivals such as AT&T; Corp. say that the regulators got it right in April and that wholesale rates represented real costs.

“We think it’s outrageous, given where they are with current rates,” said AT&T; spokesman H. Gordon Diamond. “They are already lobbying to more than double their rates, and competition hasn’t even really started in their area.”

Verizon and SBC Communications Inc., the state’s dominant local phone company, have long complained that wholesale prices set by state regulators in California and some other states are too low and don’t allow them to recover their actual costs.

SBC is asking the PUC to double its wholesale rates to nearly $30 a month, and the agency is expected to decide early next year. A decision on Verizon would follow that.

Federal law requires regulators to look at forward-looking costs, which would result in a less expensive new network that a rival could erect, assuming financing is available.

But with capital markets tight, replication costs expensive and Baby Bells firmly in control of access lines to homes, competitors say they need to lease Bell lines.