Re Verizon of West Virginia,

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posted:: 6/8/2010
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LAW OFFICES

KAUFFELT 8 KAUFFELT
300 CAPITOL STREET STE 803

‘E D. KAUFFELT CHARLESTON, WEST VIRGINIA 25301 MAILING ADDRESS
JAMES D. KAUFFELT P.0. BOX 3082
(304) 345-1272
MARK E. KAUFFELT CHARLESTON, WV 25331-3082
FAX (304)345-1280

June 28,2006

Sandra Squire
Executive Secretary
Public Service Commission of WV
201 Brooks Street
Post Office Box 8 12
Charleston, West Virginia 25323
Re: Verizon of West Virginia, Inc.
Case No. 06-048 1-T-PC

Dear Ms. Squire:

Enclosed for filing in the above-styled case you will find the original and twelve (12)
copies of the “Direct Testimony of H. Russell Irvin, 111.”

Thank you for your attention to this matter.

Very truly yours,

Mark E. Kauffeltb ’

MEWmmw
Enclosures
xc: Stratuswave Communications
,

BEFORE THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA
CHARLESTON

VERIZON OF WEST VIRGINIA, INC.
Petition for consent and approval
to cease rate regulation of certain
workably competitive
telecommunications services.

CASE NO. 06-0481-T-PC

DIRECT TESTIMONY
OF
H. RUSSELL IRVIN, 111,
PRESIDENT AND CEO OF
GATEWAY TELECOM, LLC.,
dba STRATUSWAVE

June 28,2006

1107828.6
DIRECT TESTIMONY OF H. RUSSELL IRVIN, I11

QUESTION: What i your name and occupation?
s

ANSWER: My name is H. Russell Irvin, 111. I am the President and CEO of Gateway

Telecom LLC, dba Stratuswave.

QUESTION: What is Stratuswave?

ANSWER: Stratuswave is a facilities-based competitive local exchange carrier

(CLEC) operating in Verizon territories in the State of West Virginia. Stratuswave serves

customers in Wheeling and other markets in West Virginia.

QUESTION: Why has Stratuswave intervened in this case?

ANSWER: In the Petition for this Docket, Verizon has asked that to deregulate the

sale of business lines in West Virginia. Stratuswave takes exception to this proposal for

the reasons discussed herein.

QUESTION: What are those reasons?

ANSWER: First, Stratuswave takes exception to the Verizon’s assertion that West

Virginia is SG competitive that it needs to deregulate the sale of business lines. Consider

the neighboring states like Maryland and Virginia, which have large cities with

significantly more business customers and business lines. I believe there is major

competition in these states and yet none of these states has deregulated business lines.

One only has to look at the relative revenues for Verizon versus all of the CLECs to see

that all of us together have put nothing more than a mild dent in Verizon’s business in the

state.

I also question how much of the competition that Verizon has stated is facility-

based compared to some form of resale? Many competitors are selling to businesses

2
using traditional resale or else the remnants of what was once called UNE-P, but that is

now contractual. In these arrangements, Verizon still has a significant revenue stream and

such lines should not be considered as competitive lines. Rather, I think they are

wholesale lines where Verizon still gets the bulk of the revenue. Further, a large

percentage of the other competitive lines are using Verizon loops. Verizon needs to be

straightforward with this Commission about how much revenue Verizon gets from

“competition”.

QUESTION: Are you concerned about unfair tactics by Verizon?

ANSWER: Yes. It is my firm belief that the vast majority of business

customers change to CLECs because of service issues, and not price issues. CLECs offer

one service that Verizon does not offer - we will go talk to small businesses and get to

know them and their operations. We help them find solutions that fit their needs rather

than just shuttle them off to a tariff like Verizon does. CLECs offer modest discounts, but

we need to be able to make a profit on every customer. I fear that Verizon will use the

ability to offer business discounts to try to put CLECs out of business in the state. While

customers will change to CLECs for service reasons, they will probably stay with

Verizon if Verizon can offer very large discounts. My fear is that Verizon will offer

prices below its costs and the costs of the CLECs (which are typically higher).

Since many facility-based CLECs also rely on Verizon loops to provide business

service, then loop price reductions ought to be considered along with any ability to offer

cheaper business loops. It would be very easy for Verizon to price below the CLECs’

cost, since CLECs’ most significant cost is often the Verizon loop. To unfetter only one

half of the equation will be a disaster for CLECs. However, if the Commission were to

3
lower loop prices, then this might be workable. Perhaps loop prices ought to vary with

the level of competition rather than by geographic areas. Areas where Verizon lowers

prices ought to see a corresponding lowering of loop costs. If this Commission really

wants to stimulate competition, then lower loop costs.

QUESTION: Will Verizon ' proposal help business customers in West Virginia?
s

ANSWER: Deregulating lines will not help the vast majority of business

customers in the state. Verizon is not going to lower prices to customers who have not

been approached by a CLEC. The vast majority of customers in the state today still use

Verizon for business services. Verizon is not going to make a wholesale lowering of

business rates just because it has the ability to do so. Customers who live where there are

no facility-based CLECs are not going to get lower rates from Verizon. Only customers

in direct competition for service will see any benefit from this.

QUESTION: What do you believe Verizon ' real goal is?
s

ANSWER: Verizon's real goal here is to lower the return for CLECs to force

them out of the state. I would rather see the Commission lower rates for every business

customer rather than let Verizon selectively attack CLECs. All CLECs ask for is a fair

opportunity to compete. If Verizon is allowed to lower rates, probably below costs,

whenever they run into a competitor, then in the long run, customers won't benefit. In the

long run, the competitors will fade away and Verizon will move rates back to where they

were before they were regulated, if not higher. Facility-based CLECs are not making

wildly high profits like Verizon. Most are just keeping their heads above water. The

Commission allows Verizon to selectively edge CLECs out of the market, then granting

Verizon this ability will have no long-term benefit to businesses in the state. Competition

4
is working today in the state, as witnessed by this filing. However, if the Commission is

not careful, they could undo all of the benefits that competitors have brought to

customers in the state.

QUESTION: What do you recommend that the Commission do?

ANSWER: My advice is to tread very carehlly. If it’s not broken, don’t fix it.

5
CERTIFICATE OF SERVICE

I, Mark E. Kauffelt, counsel for Gateway Telecom, LLC, dba StratusWave

Communications, do hereby certify that I have served the foregoing “Direct Testimony of

H. Russell Urvin, III” by depositing a true ccpy thereof in the United States Mail, First

Class postage prepaid, addressed as follows:

J. David Fenwick, Esquire
Goodwin & Goodwin, LLP
P.O. Box 2107
Charleston, WV 25328-2107

Patrick Pearlman, Esquire
Public Service Commission of WV
Consumer Advocate Division
700 Union Building
723 Kanawha Blvd., E.
Charleston, WV, 25301

Lisa Wansley-Layne, Esquire
Public Service Commission of WV
P.O. Box 812
Charleston, WV 25323

this the 28‘h day of June, 2006.

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