AT&T Blasts Verizon for Blatant Violations of Pro-Competitive Rules, Urges State Regulators to Force Compliance, Withhold Long Distance Entry Approval

Apr 25, 2001, 01:00 ET from AT&T

    HARRISBURG, Pa., April 25 /PRNewswire/ -- AT&T said public records show
 that Verizon, the state's largest local phone monopoly, is blatantly violating
 numerous provisions of the Pennsylvania Public Utility Commission's (PUC's)
 Code of Conduct governing Verizon's business practices.  AT&T urged the PUC to
 withhold its approval of Verizon's bid to enter the state's long distance
 market until Verizon complies with the pro-competitive rules.
     The PUC is holding hearings this week on Verizon's Jan. 2001 petition to
 enter Pennsylvania's long distance market.  The Commission's decision on that
 petition is expected in June.  AT&T's statements concerning Verizon's
 non-compliance were submitted to the PUC in a sworn affidavit by expert
 witness Lee Selwyn, president of Economics and Technology Inc.
     Dr. Selwyn cited evidence that Verizon is violating six different
 provisions of the Code of Conduct, and said Verizon's violations "are
 persistent and not isolated incidents."
     "VPA [Verizon-Pennsylvania] regularly and consistently affords
 preferential treatment to its own retail organization, in several key
 respects," said Dr. Selwyn.
     "These violations thwart competition, and should be addressed with the
 full power of the Commission, including its ability to reject Verizon's
 petition to enter the long distance market in Pennsylvania," said Jim Ginty,
 president of AT&T-Pennsylvania.  "Without full structural separation of
 Verizon's wholesale and retail units, a step the Commission decided against
 for now, it's critical that Verizon be required to comply with the
 Commission's Code of Conduct, including the requirement that Verizon
 functionally separate its wholesale and retail units."
     The Code of Conduct governs the interaction of Verizon's wholesale and
 retail operations.  According to the PUC, the Code was adopted "as a further
 aid to prevent discrimination and other market power abuses by
 [Verizon-Pennsylvania] in its local markets."  Established originally in
 September 1999, the Code of Conduct is still in effect, and the PUC recently
 ordered an official rulemaking process with the goal of strengthening the Code
 with tougher rules and stricter enforcement measures than before.
     The Commission's decision to strengthen the Code of Conduct came with its
 much-anticipated decision on the structural separation of Verizon.  An
 April 11 PUC order said Verizon must comply with the Code of Conduct and
 implement a functional/structural separation or face full structural
 separation of its wholesale and retail operations.  On April 20, Verizon said
 it accepted the Commission's conditions, but Verizon's acceptance is
 questionable because Verizon maintains (and has maintained for more than a
 year-and-a-half) that the Code of Conduct does not, in fact, apply to Verizon
 as it is now structured.
     In his affidavit, Dr. Selwyn lists Verizon's violations, describing in
 detail the resulting damage to would-be competitors in Pennsylvania.  Among
 the violations and consequences Dr. Selwyn cites:
 
     *  Verizon's retail operation has direct electronic access to Verizon
        customer-records databases that show usage and billing information,
        while competitors have no such access.  Instead, Dr. Selwyn points out,
        competitors must rely on records provided by Verizon that are on paper,
        frequently out-of-date and presented so that competitors must expend
        considerable time and resource to sort and extract information, and
        create and validate retail bills.
 
     *  Using a practice known as "carrier freeze," Verizon marks certain
        retail customer accounts to prevent selected customers from changing
        local carriers without first contacting Verizon to request such a
        change.  Based on timing and content of Verizon letters that had been
        sent to customers who switched from Verizon to another carrier, Dr.
        Selwyn expressed "real concerns as to whether Verizon funnels the
        advance information it obtains about its customers' decisions to switch
        to another retail provider directly into its marketing efforts aimed at
        'winning back' the errant subscriber."  Selwyn said Verizon also has
        set procedures that make it impossible in most instances for
        competitors to implement "carrier freeze" procedures for their
        customers who might switch to Verizon.
 
     *  Contrary to Commission rules, when customers call Verizon to order DSL
        service, Verizon-Pennsylvania promotes "in a number of ways" the DSL
        service provided by its own affiliates, Verizon Advanced Data, Inc. and
        Verizon Online.  Dr. Selwyn said through January 2001, of the total
        45,800 line-sharing orders processed by Verizon-Pennsylvania, 45,400,
        or 99.13%, were initiated by Verizon Advanced Data, Inc., with only
        400 coming from competitors.
 
     *  Verizon gives its retail operations preferential treatment in
        processing DSL orders, forcing competitors to take extra, unnecessary
        steps to qualify and configure lines for service -- steps it does not
        require of its own retail unit.
 
     *  Contrary to Commission directives, Verizon has yet to implement a
        functional separation of its wholesale business operations by a
        separate division.  According to Dr. Selwyn, instead Verizon's retail
        operation remains in the same division as the operation that provides
        network services to Verizon customers.  "Such an organization does
        nothing more than enhance the potential for discriminatory treatment of
        [competitors]," said Selwyn.
 
     *  Verizon has not implemented the accounting procedures the Commission
        directed to recognize and record intra-company transfers between
        Verizon's wholesale and retail local exchange businesses.  Dr. Selwyn
        said Verizon's retail operation is not required, as competitors are, to
        record the value of Verizon wholesale services it receives.
 
     Dr. Selwyn concluded, "It is unreasonable to expect competition to succeed
 if Verizon persists in treating its competitors as mere retail customers who
 happen to be purchasing relatively large quantities of Verizon services ... .
 Strengthening the Code of Conduct to capture these additional requirements and
 safeguards ... becomes a critically important step."
 
     AT&T (http://www.att.com) is among the world's premier voice, video and
 data communications companies, serving consumers, businesses and government.
 AT&T has annual revenues of nearly $66 billion and 162,000 employees, and
 provides services to customers worldwide.  Backed by the research and
 development capabilities of AT&T Labs, the company runs the world's largest,
 most sophisticated communications network, is the largest cable operator in
 the U.S., and has one of the largest digital wireless networks in North
 America.  The company is a leading supplier of data and Internet services for
 businesses and offers outsourcing, consulting and networking-integration to
 large businesses.  Concert, the AT&T/BT Global Venture, serves the
 communications needs of multinational companies and international carriers
 worldwide.
     In October 2000, AT&T announced a restructuring plan to create a family of
 four businesses, each operating under the "AT&T" brand, committed to uniform
 standards of quality.  Under the plan, which is expected to be completed in
 2002, each of these four businesses will become publicly held, trading as
 either a common stock or tracking stock.
 
     The foregoing are "forward-looking statements" which are based on
 management's beliefs as well as on a number of assumptions concerning future
 events made by and information currently available to management. Readers are
 cautioned not to put undue reliance on such forward-looking statements, which
 are not a guarantee of performance and are subject to a number of
 uncertainties and other factors, many of which are outside AT&T's control,
 that could cause actual results to differ materially from such statements. For
 a more detailed description of the factors that could cause such a difference,
 please see AT&T's filings with the Securities and Exchange Commission. AT&T
 disclaims any intention or obligation to update or revise any forward-looking
 statements, whether as a result of new information, future events or
 otherwise. This information is presented solely to provide additional
 information to further understand the results of AT&T.
 
     Logo:  http://www.att.com/identity/library/
 
                     MAKE YOUR OPINION COUNT -- Click Here
                http://tbutton.prnewswire.com/prn/11690X30743811
 
 

SOURCE AT&T
    HARRISBURG, Pa., April 25 /PRNewswire/ -- AT&T said public records show
 that Verizon, the state's largest local phone monopoly, is blatantly violating
 numerous provisions of the Pennsylvania Public Utility Commission's (PUC's)
 Code of Conduct governing Verizon's business practices.  AT&T urged the PUC to
 withhold its approval of Verizon's bid to enter the state's long distance
 market until Verizon complies with the pro-competitive rules.
     The PUC is holding hearings this week on Verizon's Jan. 2001 petition to
 enter Pennsylvania's long distance market.  The Commission's decision on that
 petition is expected in June.  AT&T's statements concerning Verizon's
 non-compliance were submitted to the PUC in a sworn affidavit by expert
 witness Lee Selwyn, president of Economics and Technology Inc.
     Dr. Selwyn cited evidence that Verizon is violating six different
 provisions of the Code of Conduct, and said Verizon's violations "are
 persistent and not isolated incidents."
     "VPA [Verizon-Pennsylvania] regularly and consistently affords
 preferential treatment to its own retail organization, in several key
 respects," said Dr. Selwyn.
     "These violations thwart competition, and should be addressed with the
 full power of the Commission, including its ability to reject Verizon's
 petition to enter the long distance market in Pennsylvania," said Jim Ginty,
 president of AT&T-Pennsylvania.  "Without full structural separation of
 Verizon's wholesale and retail units, a step the Commission decided against
 for now, it's critical that Verizon be required to comply with the
 Commission's Code of Conduct, including the requirement that Verizon
 functionally separate its wholesale and retail units."
     The Code of Conduct governs the interaction of Verizon's wholesale and
 retail operations.  According to the PUC, the Code was adopted "as a further
 aid to prevent discrimination and other market power abuses by
 [Verizon-Pennsylvania] in its local markets."  Established originally in
 September 1999, the Code of Conduct is still in effect, and the PUC recently
 ordered an official rulemaking process with the goal of strengthening the Code
 with tougher rules and stricter enforcement measures than before.
     The Commission's decision to strengthen the Code of Conduct came with its
 much-anticipated decision on the structural separation of Verizon.  An
 April 11 PUC order said Verizon must comply with the Code of Conduct and
 implement a functional/structural separation or face full structural
 separation of its wholesale and retail operations.  On April 20, Verizon said
 it accepted the Commission's conditions, but Verizon's acceptance is
 questionable because Verizon maintains (and has maintained for more than a
 year-and-a-half) that the Code of Conduct does not, in fact, apply to Verizon
 as it is now structured.
     In his affidavit, Dr. Selwyn lists Verizon's violations, describing in
 detail the resulting damage to would-be competitors in Pennsylvania.  Among
 the violations and consequences Dr. Selwyn cites:
 
     *  Verizon's retail operation has direct electronic access to Verizon
        customer-records databases that show usage and billing information,
        while competitors have no such access.  Instead, Dr. Selwyn points out,
        competitors must rely on records provided by Verizon that are on paper,
        frequently out-of-date and presented so that competitors must expend
        considerable time and resource to sort and extract information, and
        create and validate retail bills.
 
     *  Using a practice known as "carrier freeze," Verizon marks certain
        retail customer accounts to prevent selected customers from changing
        local carriers without first contacting Verizon to request such a
        change.  Based on timing and content of Verizon letters that had been
        sent to customers who switched from Verizon to another carrier, Dr.
        Selwyn expressed "real concerns as to whether Verizon funnels the
        advance information it obtains about its customers' decisions to switch
        to another retail provider directly into its marketing efforts aimed at
        'winning back' the errant subscriber."  Selwyn said Verizon also has
        set procedures that make it impossible in most instances for
        competitors to implement "carrier freeze" procedures for their
        customers who might switch to Verizon.
 
     *  Contrary to Commission rules, when customers call Verizon to order DSL
        service, Verizon-Pennsylvania promotes "in a number of ways" the DSL
        service provided by its own affiliates, Verizon Advanced Data, Inc. and
        Verizon Online.  Dr. Selwyn said through January 2001, of the total
        45,800 line-sharing orders processed by Verizon-Pennsylvania, 45,400,
        or 99.13%, were initiated by Verizon Advanced Data, Inc., with only
        400 coming from competitors.
 
     *  Verizon gives its retail operations preferential treatment in
        processing DSL orders, forcing competitors to take extra, unnecessary
        steps to qualify and configure lines for service -- steps it does not
        require of its own retail unit.
 
     *  Contrary to Commission directives, Verizon has yet to implement a
        functional separation of its wholesale business operations by a
        separate division.  According to Dr. Selwyn, instead Verizon's retail
        operation remains in the same division as the operation that provides
        network services to Verizon customers.  "Such an organization does
        nothing more than enhance the potential for discriminatory treatment of
        [competitors]," said Selwyn.
 
     *  Verizon has not implemented the accounting procedures the Commission
        directed to recognize and record intra-company transfers between
        Verizon's wholesale and retail local exchange businesses.  Dr. Selwyn
        said Verizon's retail operation is not required, as competitors are, to
        record the value of Verizon wholesale services it receives.
 
     Dr. Selwyn concluded, "It is unreasonable to expect competition to succeed
 if Verizon persists in treating its competitors as mere retail customers who
 happen to be purchasing relatively large quantities of Verizon services ... .
 Strengthening the Code of Conduct to capture these additional requirements and
 safeguards ... becomes a critically important step."
 
     AT&T (http://www.att.com) is among the world's premier voice, video and
 data communications companies, serving consumers, businesses and government.
 AT&T has annual revenues of nearly $66 billion and 162,000 employees, and
 provides services to customers worldwide.  Backed by the research and
 development capabilities of AT&T Labs, the company runs the world's largest,
 most sophisticated communications network, is the largest cable operator in
 the U.S., and has one of the largest digital wireless networks in North
 America.  The company is a leading supplier of data and Internet services for
 businesses and offers outsourcing, consulting and networking-integration to
 large businesses.  Concert, the AT&T/BT Global Venture, serves the
 communications needs of multinational companies and international carriers
 worldwide.
     In October 2000, AT&T announced a restructuring plan to create a family of
 four businesses, each operating under the "AT&T" brand, committed to uniform
 standards of quality.  Under the plan, which is expected to be completed in
 2002, each of these four businesses will become publicly held, trading as
 either a common stock or tracking stock.
 
     The foregoing are "forward-looking statements" which are based on
 management's beliefs as well as on a number of assumptions concerning future
 events made by and information currently available to management. Readers are
 cautioned not to put undue reliance on such forward-looking statements, which
 are not a guarantee of performance and are subject to a number of
 uncertainties and other factors, many of which are outside AT&T's control,
 that could cause actual results to differ materially from such statements. For
 a more detailed description of the factors that could cause such a difference,
 please see AT&T's filings with the Securities and Exchange Commission. AT&T
 disclaims any intention or obligation to update or revise any forward-looking
 statements, whether as a result of new information, future events or
 otherwise. This information is presented solely to provide additional
 information to further understand the results of AT&T.
 
     Logo:  http://www.att.com/identity/library/
 
                     MAKE YOUR OPINION COUNT -- Click Here
                http://tbutton.prnewswire.com/prn/11690X30743811
 
 SOURCE  AT&T

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