Verizon would pay $1 million to address customer complaints in Maryland, increase some fees and lower others for regional telephone service, and deregulate some bundled products under a settlement that the company and members of the Public Service Commission staff are proposing to state regulators.
The settlement is designed to deal with thousands of consumer complaints about the telephone company that emerged in 2007 and spurred a PSC investigation into Maryland's largest telephone provider. According to written testimony provided to regulators, nearly 80,000 customers had to wait more than four days for repairs after losing their phone service in 2007 and 2008.
In exchange, Verizon executives are seeking more flexibility to change prices on company phone services that are also provided by competitors that do not face the same regulatory scrutiny. Verizon wants to be able to adjust prices more quickly on bundled packages of telephone services, based on market conditions.
Such a move would provide a measure of deregulation in the state's telephone market.
The Maryland Public Service Commission will hear testimony on the settlement agreement during hearings next week. If the settlement is approved, Verizon would raise rates for basic dial-tone service by $1 a month in July but freeze rates for the next three years. In 2012, the company could raise rates by up to $12 each year.
Basic telephone service is the bare-bones calling option that typically costs $6 to $15 a month. At least one-third of Verizon's more than 2 million customers have basic telephone service rather than a bundle, said John R. Gilbert, vice president for regulatory affairs.
In exchange for those moves, Verizon would provide bill credits to customers who complained in 2006 and 2007 about poor response on repairs. Customers who waited more than four days for service to be restored would receive a $10.88 credit; about 47,000 who waited for technicians who did not show up for appointments would receive $2.77.
The company also would allow disabled or senior customers without land-line alternatives to preregister for priority repairs. And the company would pay penalties of up to $4 million to customers if it misses service targets in the future.
Verizon also would cut the rate that customers in the region pay to avoid long-distance charges to areas such as Washington, Annapolis and Bel Air. Customers in those locales can pay $14 a month to avoid the added charges. Under the proposed settlement, Verizon would lower that fee to $2 a month for those who subscribe to bundled packages.
"We want to make sure that the customers are protected in terms of their access to the phone network and to have some good assurances they will have services at a reasonable price," said Theresa Czarski, a deputy in the Office of the People's Counsel, which represents Maryland consumers. The People's Counsel, along with commission staff members, negotiated the agreement with Verizon.
She said the decision to allow Verizon more flexibility on bundled plans was designed so the company does not push legislators for full deregulation of the state's telephone market. "That to me would be the worst outcome," Czarski said.
PSC spokeswoman LaWanda Edwards said she could not comment about matters before the commission. However, in written testimony, staff members said the settlement would provide affordable, quality and available service and would spur competition.
William R. Roberts, Verizon's regional president, said the company is subject to regulations set by the Public Service Commission, unlike cable and other businesses that have begun offering telephone services. Amid rapid advances in technology, Verizon is less a telecom these days and more like an information and entertainment company, he said.
But "from a regulatory perspective, they'd like to treat us like a basic utility, whereas other competitors are not hamstrung by the same regulations," Roberts said.
For example, Verizon wants the PSC to reduce the time required to alert regulators about pricing changes to bundled services. The company wants its 30-day requirement to be cut to 24 hours so it can adapt to competition, Roberts said.
Commission members will hear testimony on the settlement proposal in their Baltimore offices Feb. 12 and 13, and will issue an order later. The agreement would settle four matters before the commission as well as a lawsuit filed by Verizon against the PSC.
The PSC began its investigation of service complaints against Verizon in 2007, after consumers filed more than 300 complaints by July of that year about canceled or missed repair appointments and long waits to restore service.
The company responded with ways it planned to improve repair responses, including moving workers from installing new fiber-optic lines to repairing traditional services, increasing overtime and retraining call center staff.
Edwards, the PSC spokeswoman, said consumers filed more than 900 repair complaints from August 2007 to August 2008.
"We haven't been perfect in the past, and we'd like to do better," Gilbert said. "The real penalty we face is customers leave us."
Highlights of the settlement proposed by Verizon and PSC staff:
Rate increases: Verizon would increase monthly rates for basic residential dial-tone service by $1 in July, then freeze rates for the next three years. In 2012, the company would be able to raise rates by up to $12 a year. Business rates would increase $2.
Service quality: Verizon would give $1 million in bill credits - from $2.77 to $10.88 - to customers affected by long waits for repairs in 2006 and 2007.
Local calling areas: Residents who live outside Baltimore, Annapolis or Washington now pay an extra $14 monthly for a local telephone number and local calling rates to those cities. Under the settlement, they could pay $2 a month if they sign up for a Verizon bundled package.