Verizon May Not Fulfill FCC Agreement

The Federal Communications Commission (FCC) is looking for comment on Verizon Communication's desire to get "credit" for its $150 million buyout of NorthPoint Communications. The credit would apply to the merger agreement that Verizon signed with the FCC and does not seem to plan to fulfill.

by Jim Wagner of internetnews.com [March 14, 2002]

Verizon Communications filed a request with the Federal Communications Commission (FCC) last week. The company says it is trying to recoup the monetary loss in its investment with regulatory capital in the form of credit towards its merger obligation, and denies that the shutdown was an agressive buyout of a competitor.

Bob Bishop, Verizon spokesperson, said the $150 million credit is critical for the company to meet its merger conditions, which come due June 2003.

"We made that investment in good faith, with the expectation that it would result in the acquisition of customers outside our operating areas, but like any investment in business you make, there's risks involved," he said. "That investment might not yield the desired outcome. In this case it didn't and we ended up writing off that $150 million."

NorthPoint is suing Verizon for $1 billion lawsuit in damages, on charges the carrier only made the investment to bolster short-term share value and was looking for a reason to renege on the merger.

Verizon was ordered by the FCC to invest $500 million in out-of-region broadband companies as a condition to its merger in 2000. The company chose instead to purchase two competitors, NorthPoint and OnePoint.

Verizon is the product of two Baby Bells, Bell Atlantic and GTE, which merged to become the powerhouse telephone company serving most of the East Coast.

The FCC mandated the $500 million investment outside its coverage area (into other Baby Bell territories) to make up for the loss of competition the merger would entail, and the carrier quickly looked for outside companies ripe for acquisition.

Verizon spent $295 million to acquire OnePoint in December 2000, and renamed the company Verizon Avenue. The subsidiary provides DSL access to condominiums and apartments throughout the country, competing with rivals BellSouth, SBC Communications, and Qwest Communications.

Recently, another Bell company, SBC, was also fined for failing to meet a merger agreement—an agreement signed in 1999.

The FCC advises in Part 1 and Part 2 of its release (which should be available in Microsoft Word or Adobe Acrobat formats [part 1 .pdf] [part 2 .pdf] but at press time the Adobe Acrobat links were broken) that to file comments, ISPs should:

Parties who choose to file by paper should also submit their comments on diskette. These diskettes should be submitted to Ernestine Creech, Accounting Safeguards Division, Common Carrier Bureau, Federal Communications Commission, 445 12 th Street S. W., Washington, D. C. 20554. Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible format using Microsoft Word or compatible software. The diskette should be accompanied by a cover letter and should be submitted in "read only" mode.

The diskette should be clearly labeled with the commenter's name, proceeding (including the docket number, in this case, CC Docket No. 98- 184), type of pleading (comment or reply comment), date of submission, and the name of the electronic file on the diskette. The label should also include the following phrase: "Disk Copy—Not and Original" [sic]. Each diskette should contain only one party's pleading, preferably in a single electronic file.

In addition, commenters must send diskette copies to the Commission's copy contractor, Qualex International, Portals II, 445 12 th Street S. W., CY- B402, Washington, D. C. 20554. Regardless of whether parties choose to file electronically or by paper, parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, Qualex International, Portals II, 445 12 th Street S. W., CY- B402, Washington, D. C. 20554 (telephone 202- 863- 2893; facsimile 202- 863- 2898) or via e-mail at qualexint@aol.com.

Comments and reply comments must include a short and concise summary of the substantive arguments raised in the pleading. Comments and reply comments must also comply with section 1.48 and all other applicable sections of the Commission's rules.

We direct all interested parties to include the name of the filing party and the date of the filing on each page of their comments and reply comments. All parties are encouraged to utilize a table of contents, regardless of the length of their submission. For further information, contact Mark Stone at (202) 418- 0816.

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