RICHMOND — The State Corporation Commission (SCC) has
granted in part and denied in part an application from Verizon Virginia and Verizon
South (“Verizon”) to deregulate and detariff essentially all of Verizon’s local
residential and business telephone services throughout Verizon’s Virginia service
The SCC followed state laws that promote competition and authorize the SCC to deregulate
if and where it finds competition to Verizon is sufficient to regulate prices. Verizon
is Virginia’s largest provider of local telephone service.
The SCC focused on actual competitive options available to consumers. It found that
competition or the potential for competition exists in any local telephone exchange
in which at least 75 percent of consumer households have a choice of two or more
competitors to Verizon for residential telephone service. Also, at least one competitor
that owns its own wireline network must be available to 50 percent or more of the
households in the exchange.
The SCC noted that the competitiveness test it adopted in this case is similar to
competitiveness tests used in several other states to decide whether to deregulate
local telephone services.
Applying its test to the evidence, the SCC determined that telephone exchanges that
together include, at a minimum, approximately 62 percent of Verizon’s residential
telephone lines are presently competitive. Those exchanges are located in Virginia’s
largest urban and suburban areas, including most of Northern Virginia, Richmond,
Hampton Roads, and Roanoke County.
The SCC applied a similar test for business telephone services, and determined that,
at a minimum, approximately 57 percent of individual-line business customers in
Virginia were in exchanges determined to be competitive.
In exchanges found to be competitive, basic local telephone and related services
are deregulated as to price. To protect consumers from large price increases for
basic telephone service, the SCC imposed a $1 per year limit on any price increase
per line for basic local telephone service for residential consumers, and a $3 per
year cap for basic local business service. The yearly price caps will be in place
for five years, from 2008 to 2012.
The SCC’s determination of competitiveness in various telephone exchanges in this
order does not preclude additional exchanges from being declared competitive if
Verizon files tariffs showing that the additional exchanges meet the competitiveness
test. The Commission has established a streamlined administrative procedure for
the filing of such tariffs.
The SCC found “bundled” telephone services to be competitive statewide and deregulated
them as to price. These are services that consumers can choose to purchase in various
packages and configurations that may include both local and long distance calling,
wireless telephone, Internet or video services.
The SCC also found competitive, and deregulated as to price, the “big business”
market in Virginia, consisting of those businesses that have the purchasing power
to negotiate individual contracts for telecommunications services from Verizon or
The SCC found that Verizon had not proven its claim that Virginia’s entire statewide
telephone market was competitive under Virginia law. The SCC further found that
Verizon had not met the legal standard to justify deregulating and detariffing essentially
all its residential and business telephone services statewide.
Referring to the record in the case, the SCC noted that it appeared that only two
states, South Dakota and Rhode Island, have deregulated local telephone services
on a scale comparable to what Verizon proposed for Virginia, and that neither South
Dakota nor Rhode Island is comparable to Virginia in population or economic diversity.
The SCC also said that it appeared that no other state has detariffed essentially
all local telephone services, as Verizon requested.
In the order, the SCC wrote that “Considering together the various statutes that
govern this case, we find that the General Assembly has set forth a general policy
that directs this Commission to favor, within the parameters of those statutes,
the promotion of competition for local exchange telephone services … In promoting
competition and deregulating as competition develops, however, we find that the
General Assembly has also directed this Commission to proceed carefully and cautiously.”
Case Number PUC-2007-00008