Department of Public Service

00-C-1945: Verizon NY - Cost Recovery and Regulatory Framework



Verizon NY -- Incentive Plan

Case 00-C-1945- Proceeding on Motion of the Commission to Consider Cost Recovery by Verizon, New York, Inc. aka New York Telephone Company and Modification of Performance Regulatory Plan Under Merger Standards and to Investigate the Future Regulatory Framework

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SUMMARY OF THE VERIZON INCENTIVE PLAN

GENERAL BACKGROUND
    • The Verizon Incentive Plan (Plan) replaces the Performance Regulatory Plan. The Plan has a two-year term, beginning March 1, 2002, with a third year for the Service Quality Plan.
PRICING FLEXIBILITY
    • Under the Plan, Verizon is allowed pricing flexibility on virtually all retail services beginning March 1, 2002. Pricing flexibility will not apply to lifeline, 911-related, and certain non-recurring charges.
    • Service connection rates for Lifeline customers are reduced from $10 to $5.
    • Overall revenue increases in each year are capped at 3% on an annualized basis.
    • Increases in the monthly Basic Service charges under the Pricing Flexibility provisions are limited to no more than $1.85 in the first year and $0.65 in the second year for the customer’s first line. These increases, if implemented, will count towards the allowed annual revenue increase of 3%.
    • Verizon’s ability to maintain the pricing flexibility outlined in the proposal is tied to its performance under the Service Quality Plan.
SERVICE QUALITY
    • A retail Service Quality Plan extends one year beyond the two-year incentive Plan. The Service Quality Plan is designed to prevent service deterioration in five measurement areas: customer trouble report rates, customers out-of-service over 24 hours, installation performance, PSC complaints, and other measures related to the Commission’s Service Standards.
    • Failure to meet any of the performance objectives results in credits to the affected customers. Failure to meet any two of the five performance objectives in any quarter results in suspension of pricing flexibility for Verizon.
    • An independent, external auditor will review Service Quality procedures and measurements.
    • Verizon has agreed to implement a special services process improvement plan, with associated milestones and customer credits.
COMPETITION
    • Unbundled Network Element (UNE) and Unbundled Network Element – Platform (UNE-P) wholesale rates are as established in the Commission’s January 28, 2002 UNE Rate Order, except that nonrecurring charges for hot cuts are $35 for the term of the Plan, and a Forward Fund reconciling temporary switching rates is established. UNE-P is available to Competitive Local Exchange Carriers (CLECs) for serving small business customers on the same terms as for serving residential customers under the Pre-filing Statement.
    • Two Task Forces will be established to address the following competitive issues:
    • New products and procedures to standardize efficient wholesale transactions, specifically including billing and collection, building access and ordering of UNE/Enhanced Extended Loops, and
    • Removing barriers to the migration of CLEC customers from Verizon’s switch to the CLEC’s switch, specifically including efficient hot cut processes for the mass market.
MISCELLANEOUS
    • To assure system investments are commensurate with good service quality, Verizon will file and review with Department staff its annual construction budgets, with an emphasis on service quality improvements, efforts to increase network reliability, introduction of new technology, and deployment of advanced services.

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