For Immediate Release
September 1, 2005
Contact:  Carmine Camillo
Ph: 814-453-2515
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Testimony of State Senator Jane M. Earll
49th Senatorial District
PUC Hearing on Proposed VERIZON/MCI Merger
September 1, 2005 at Edinboro University 

Good Morning, Judge Rainey… 

I am State Senator Jane M. Earll, and I have represented the residents of the 49th Senatorial District (from the Ohio line east to Harborcreek Township) since January, 1997. 

Thank you for convening this hearing today, and for allowing those of us here in Northwestern Pennsylvania the opportunity to have our voices heard on an issue of significant importance - the proposed merger of Verizon and MCI. 

The merger, if consummated, will have far-reaching implications for residential and business consumers alike, and could impact significantly on the economic competitiveness of Erie County for years to come.

 My reason for testifying is to speak on behalf of the people I represent; it is my duty to bring to you, as the proper authority to rule on these matters, issues that are brought to my attention. 

During the past few legislative sessions, the General Assembly has dealt with critical telecommunications issues as part of the Chapter 30 re-authorization. 

My concerns about renewing the Chapter 30 provisions and seeking to improve the status quo, which caused me to vote against the re-authorization bill last year, are all the more relevant today.               

My comments will focus on three categories:  employment, service and technology infrastructure, and customer service. 

First – employment: Verizon employs roughly 1200-1400 people in Erie County alone.    What will happen to these jobs, and what will happen to our economy if hours are cut or jobs are lost? 

Verizon's CEO, Ivan Seidenberg, wrote to MCI on April 4th, 2005, that "Verizon intends to provide MCI's suppliers and employees the comfort that MCI is financially secure and positioned for growth."  

Has Mr. Seidenberg made similar assurance to his own employees?  Furthermore, what will become of collective bargaining agreements when non-union MCI workers become part of the new entity? 

It is my understanding that rancor still exists over the issues that emerged from the Bell-GTE merger creating Verizon several years ago.  How does Verizon plan to ensure a smooth transition?

Second - the rollout of service:  For years, we have heard of Verizon's plans to install and/or upgrade its broadband capabilities, yet there are still entire municipalities and pockets of others throughout Erie County waiting for Verizon to make good on those promises. 

Only days ago, Verizon announced the availability of low-cost DSL for about $15 per month - great news for those who can obtain this new service. 

But a cursory check of Verizon DSL availability in my district found that many areas do not have the ability to take advantage of it: 

Parts of Harborcreek Township, Millcreek Township, Girard Township, Fairview Township, Greene Township, Albion Borough (just to name a few) do not have Verizon DSL available to them. 

In fact, a zip code even within the City of Erie is listed as "out of the DSL service area" on Verizon's website. 

My constituents want to know when they will have actual choices in local telephone carriers.   I do not want them to be forced to endure "more of the same" poor service they already suffer. 

For that reason, some larger players with the resources to do so have sought-out competitors where possible:

For example, the School District of the City of Erie, along with the City itself, contracted with DES Communications to create the Erie W.I.N.S. (Erie Wide-area Information Network System), to provide fiber-optic broadband service to business customers. 

The prices for this fiber-optic broadband are dramatically lower than Verizon's copper-based DSL services.

For example, the County of Erie was quoted a price of $4000 per month from Erie W.I.N.S., as opposed to about $12,000 per month for broadband from Verizon. 

This is not a product Verizon can compete with, and, unfortunately for many, seems content not to. 

The W.I.N.S. project will expand to other parts of Erie County and beyond in the next few years, and eventually move into residential service (it is limited to the urban core of Erie and to business customers now).  But that expansion will take time.    

Competition from COMCAST has prompted Verizon to upgrade its service in small communities like Emmaus, Pennsylvania and other eastern towns;

the same level of competition does not exist here currently, and it is unclear what a merged Verizon/MCI would do differently in that regard.

An article in last week's Allentown Morning Call (8/26/05), noted that Verizon launched a fixed wireless internet project, its 5th such project nationwide. 

Yet, as in the Lehigh Valley, there are pockets of Erie County that have no such service (or plans for any) at all, let alone the basic DSL access. 

Broadband services are offered by cable and satellite TV providers, but again, the competition in Erie County is not as fierce as it is in other parts of the state. 

That is important for the PUC to remember and consider. 

(Note: Adelphia Cable, which serves half my district, is about to be bought-out by Time-Warner Cablevision, which already serves the other half, effectively eliminating all competition for municipal cable contracts.)

In a way, technological advances have lapped Verizon's inadequacies.

High-speed internet access is being developed in a number of different ways, including wireless or Wi-Fi access, and even Broadband over Power Lines (or BPL). 

While we await their implementation, the question arises - what impact will a delay in service rollouts from Verizon have on our economic competitiveness? 

No doubt these other yet-to-appear technologies will force a merged Verizon/MCI to compete eventually, but it will require a serious infusion of cash, personnel, and dedication to upgrade their infrastructure. 

Is Erie a market in which they are willing to invest heavily, or at all?   Their actions in other parts of the state would indicate the contrary. 

Some emerging technologies, such as VoIP (Voice over Internet Protocol), may still require the phone call to go through a local telephone company before going to the VoIP provider; will the new Verizon/MCI entity dedicate the effort necessary to make this available to all who want it, and, if so, what is the time frame- exactly? 

What technological hurdles exist in meshing two seemingly-disparate physical networks into one - do they speak the same language, or will computer system integration be even more costly in terms of dollars and delays to customers? 

How will rural areas be impacted?  Will this new company fight against municipal plans for broadband/Wi-Fi access, as has been the case in other parts of Pennsylvania (Philadelphia, most notably)?

I witnessed first-hand and was personally lobbied very hard by Verizon during Chapter 30 negotiations to include language in the legislation that prevents municipalities from offering internet access on their own. 

This has a chilling effect on customer service and economic competitiveness. 

As highlighted in several Erie Times-News articles last year, many of our businesses are already doubly jeopardized in terms of a technological squeeze play; with each day that goes forward without the technology to compete in a global marketplace they fall behind, as their competitors make strides. 

How will a merged company, with an older infrastructure, catch our businesses up with other parts of the country, and then continue to be responsive and upgrade options as technology advances?

Verizon, again it its letter of April 4, 2005, promises "100% downside protection as to the value to be delivered at closing." 

But, will this protection come at the cost of Erie County customers, both residential and commercial? 

Verizon claims in this letter to be ready to proceed without "drastic cost-cutting to produce the financial capacity to support the combined company's capital structure," but on whose money does this depend? 

Is the merger itself going to cost so much (even when a discount, taken because of MCI's debts and bankruptcy obligations, is applied) that any capital or system-wide improvements will have to be shelved?

We have already seen that Verizon WIRELESS has spent about $1 billion expanding its wireless high-speed network - where is the money to be spent on land-line service in areas with older infrastructure, like Erie County? 

Third - customer service.  How will this merged company handle customer service for a whole new world of customers, both residential and commercial? 

Service complaints are more than just hassles or inconveniences; they are lost economic opportunities for the business community, and potential health or safety hazards for residential customers. 

Many in the business community –as some in the Erie Regional Chamber may attest to later today- have expressed their displeasure with Verizon's current service protocols; will a merger improve the situation? 

My own office was affected by a malfunction in Verizon equipment that they tried to blame on the vendor of our phone sets; the vendor continued to trace the lines back to a Verizon box that the company had failed to check. 

Meanwhile, my office was without phones for hours longer than necessary. 

The number of complaints about delays in obtaining new service, their repeated occurrence among my constituents, the severity and pervasiveness of the problems with repair orders, and the commonalties amongst business and residential customers' pleas for service or repairs that go unheeded – all prompt the question "is the PUC even paying attention"?

While I am fully aware that there are two sides to a coin, and Verizon may have answers for the volume of complaints or a specific customer issue, there is a most appropriate aphorism worth considering- "Quantity has a quality all its own." 

Thus, the three points of concern I have raised, namely jobs, technology rollout, and customer service, all come together in one big picture. 

Much of Verizon's network is old, consisting of copper wires. 

The maintenance of that network requires a trained workforce to cover large areas. 

Yet, at the same time, new technologies need to be integrated with or replace the old ones, requiring a subset of workers and an infusion dollars and personnel as well. 

Verizon clearly has problems doing the job in our area now; what the future holds is what we are here to discuss.

It is my hope that your deliberations will elucidate these issues and bring forth candid answers as well as a set of measurable outcomes for the proposed joint entity, on which our businesses and residents can rely on if the merger does occur. 

It is not unreasonable to require Verizon to provide metrics similar to those other states demand, as a condition for approval of this merger. 

I hope you set forth parameters, goals, timelines and deadlines for improvements in customer service, system capacity and employee security, and that you take the necessary steps to enforce them if the new entity does not meet its requirements. 

I speak not as an expert in mergers and acquisitions in general, nor am I an expert in telecommunications and technology issues; for all I know, this merger may be the best thing ever to happen to Erie County. 

I am here today in much the same capacity that the Public Utility Commission is - to look out for the best interests of the citizens of the Commonwealth of Pennsylvania, and specifically, my constituents.

It is imperative, however, that this merger not reduce telecommunications services or employment in Erie County any further; for this I must depend on you. 

I thank you for your time and the opportunity to testify here today, and will try to answer any questions you may have to best of my ability…