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Verizon Says Deregulation Ruling Won't Unravel MCI Concessions
By Amy Schatz
The Wall Street Journal
Thursday, March 23, 2006

WASHINGTON -- Verizon Communications Inc., making clear its view on some implications of a confusing move by the Federal Communications Commission earlier this week, said regulators' decision to deregulate broadband data services it provides to large business customers won't free it from conditions imposed when it acquired MCI Inc. Verizon also said the decision won't eliminate its obligation to continue payments to a fund that subsidizes phone services for low-income and rural customers.

Earlier this week, the FCC granted Verizon's request that its high-volume data lines be reclassified, essentially lifting price controls.  But it did so without written comment, sparking widespread uncertainty over the implications.

Verizon's 2004 petition asked the FCC to ease a wide swath of obligations, including contributions to the Universal Service Fund, which subsidizes phone services for rural and low-income consumers.  But the company said in a Feb. 17, 2005, letter to the FCC that it wasn't asking for relief from its USF obligations.  It now says that letter reflects its current position.;  some FCC officials have said it was unclear that letter trumped Verizon's original petition.

There was enough concern inside the FCC about the issue that FCC Chairman Kevin Martin directed staff to draft an order requiring Verizon to pay into the fund, which is now circulating.  "It's fair to say USF issues are near and dear to the chairman's heart," said one FCC official.  "We want to make sure there's nothing that upsets the status quo."

Verizon also said this week's decision has no impact on conditions the FCC and Justice Department imposed when it acquired MCI last year.  Most of the conditions required it to continue to lease high-volume lines in some markets and limited the price it could charge to some customers.  Although the relief provided by the FCC involves some of the same lines, the merger conditions are a separate obligation and aren't affected, said Ed Shakin, assistant general counsel at Verizon.  "You can have independent obligations on the same services," he said.

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