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Three States Approve Bell/NYNEX Merger

Fortnightly Magazine - May 1 1997

Regulators in Maine, Vermont and New York have approved the proposed merger of two of the country's largest local exchange carriers, NYNEX and Bell Atlantic Corp.

All three states imposed similar conditions on their approval designed to protect the interests of ratepayers in the region. The conditions also address concern over how the merger might affect competition in the local exchange market, a high-profile regulatory effort already under way in each state.

Vermont and Maine. In approving the plan, the Maine Public Utilities Commission found that the likelihood of financial benefits to ratepayers from the merger should outweigh the "speculative detrimental effects that will be caused by the possible lessening of competition by the removal of one of the potential competitors to NYNEX."

Both the Maine commission and the Vermont Public Service Board required, as a condition to the merger, that New England Telephone and Telegraph Co. meet by Sept. 30 the "competitive checklist" laid out in Section 271 of the Telecommunications Act of 1996. (The checklist was designed to test whether a Bell operating company has properly opened its system to competition to justify entry into the interLATA toll market. The list requires a carrier to offer specific interconnection services and access to local facilities.)

Despite claims by NET that the emerging competitive market would serve to protect consumers' interests in reliability and service quality, both states required that the new, merged company continue to invest in telecommunications infrastructure for the next four years. The rate of investment must remain comparable to the average level of investment observed from 1992 through 1995. Both commissions also found it unnecessary to adopt specific pre-merger conditions for passing related savings to ratepayers, preferring instead to address the issue in future cases involving the carrier.

New York. The New York Public Service Commission reserved the authority to reduce rates beyond those currently established in NYNEX's Performance Regulatory Plan if the companies do not meet certain conditions. It said the merged company must maintain its New York City headquarters, invest $1 billion in service-related infrastructure over the next five years and hire 750 to 1,000 additional employees before the end of 1997 to address service quality problems.

The commission said it would look closely at whether NYNEX had promoted competition and whether consumers had benefited from such actions before approving any requests by the carrier for recovery of costs or revenue losses under its performance-based price cap plan. It also established new guidelines for measuring service quality to ensure performance in New York matches the rest of the new Bell Atlantic service territory. Re New Eng. Tel. & Tel. Co., and NYNEX Corp., Docket No. 96-388, Feb. 6, 1997 (Me.P.U.C.); Re New Eng. Tel. & Tel. Co.,

dba NYNEX Corp., Docket No. 5900, Feb. 26, 1997 (Vt.P.S.B.); Re New York Tel. Co. dba NYNEX Corp., Case Nos. 96C0603 and 96C0599, March 20, 1997 (N.Y.P.S.C.).

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