California Regulatory Ruling Disrupts Verizon's Investment in Technology

THOUSAND OAKS, Calif. - A ruling by a California Public Utilities Commission administrative law judge (ALJ) has disrupted Verizon's plans to deploy in California highly advanced switching capabilities using advanced Internet Protocol (IP) packet technology.

As the result of a ruling by the ALJ last week, Verizon has halted the installation of a new packet-switched system that would have replaced five telephone switches now serving several communities in the state.

"We deeply regret that California consumers will be denied Internet-based packet-switching technology," said Tim McCallion, Verizon's Pacific region president. "Verizon had planned to make California one of the first states in the country to have a significant deployment of this advanced technology. Verizon has no choice but to halt this program because of a regulatory ruling that imposes conditions we cannot meet and that undermine the economics of this investment."

The packet-switching system - which uses the same type of technology that routes data through the Internet - was slated to be deployed first in Temecula, Calif. The system, when connected with fiber optics, will enable the delivery of one of the industry's most comprehensive suites of entertainment, communications and IP-based multimedia services, beyond anything seen in the marketplace today.

The ALJ's decision permitted competing carriers to lease the elements of Verizon's network - even these brand-new advanced switches - under government-set prices, terms and conditions. Established law is exactly to the contrary because these carriers, called competitive local exchange carriers or CLECs, can purchase and deploy packet switches to compete for customers as readily as Verizon.

"The Communications Workers of American views the CPUC's action as a setback for the California economy from the perspective of consumers and workers," said Tony Bixler, CWA District 9 vice president. "We are appalled by this ruling that favors companies that do not invest in California over Verizon, which has shown that it is willing to invest and create jobs in California. The Public Utilities Commission should strike down this ruling."

Verizon has offered to transition CLECs to an alternative resale arrangement that would enable them to continue to provide service to their customers without interruption. But the CLECs prefer to lease piece parts of Verizon's facilities rather than move to a resale arrangement or invest in their own networks.

A proposed decision confirming the ALJ's ruling, if adopted by the commission, would require Verizon to lease to competitors any deployed packet-switched system as a network element, pending further review by the commission. The proposal is in direct contradiction to rulings by the Federal Communications Commission stretching over eight years, which explicitly state there is no requirement for packet-switching technology to be "unbundled" and leased on a piece-part basis.

The proposal is scheduled to be considered by the full state commission Sept. 23.

Verizon Communications

A Dow 30 company, Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services, with approximately $68 billion in annual revenues. Verizon companies are the largest providers of wireline and wireless communications in the United States. Verizon is also the largest directory publisher in the world, as measured by directory titles and circulation. Verizon's international presence includes wireline and wireless communications operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.

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