Agenda Date: 7/11/08Agenda Item: IVC

STATE OF NEW JERSEYBoard of Public Utilities

Two Gateway CenterNewark, NJ 07102www.ni.Qov/bDu/

TELECOMMUNICATIONS

IN THE MATTER OF THE BOARD INVESTIGATIONREGARDING THE RECLASSIFICATION OF INCUMBENTLOCAL EXCHANGE CARRIER (ILEC) SERVICES ASCOMPETITIVE

ORDER SETTINGPUBLIC HEARING

DOCKET NO. TXO7110873

IN THE MATTER OF THE APPLICATION OFUNITED TELEPHONE COMPANY OF NEW JERSEY,INC. d/b/a EMBARQ FOR APPROVAL OF A PLAN FORAN ALTERNATIVE FORM OF REGULATION DOCKET NO. TOO8060451

(SERVICE LIST ATTACHED)

BY THE BOARD:

By Order dated November 28, 2007, the Board determined that it is appropriate at this time toconduct a full investigation of and hearing on whether incumbent local exchange carrier (ILEG)provided mass market retail services should be declared competitive pursuant to N.J.S.A. 48:2-21-19 (b), after review and consideration of the necessary criteria.

Subsequent to the hearings in the above referenced matter, on June 27, 2008, UnitedTelephone Company of New Jersey, Inc. d/b/a Embarq (Embarq), filed a petition with the Boardfor approval of a proposed Plan for An Alternative Form of Regulation (PAR) as authorized byN.J.S.A 48:2-21.8. If the Board approves Embarq's proposed PAR, Embarq would no longer besubject to traditional utility rate base, rate of return regulation. In evaluating Embarq's request,the Board must determine whether the proposed PAR: (1) will ensure the affordability ofprotected telephone services; (2) will produce just and reasonable rates for telecommunicationsservices; (3) will not unduly or unreasonably prejudice or disadvantage a customer class orproviders of competitive services; (4) will reduce regulatory delay and costs; (5) is in the publicinterest; (6) will enhance economic development in the State while maintaining affordable rates;(7) contains a comprehensive program of service quality standards, with procedures for boardmonitoring and review; and (8) specifically identifies the benefits to be derived from thealternative form of regulation. N.J.S.A.48:2-21.18(a).

In addition, by letter dated June 27, 2008, Embarq submitted a proposed settlement of allEmbarq issues in Docket No. TX07110873 for Board approval. Under the terms of the proposedsettlement, some of Embarq's retail mass market services would be declared competitive andno longer subject to rate regulation by the Board, while others would remain rate regulated.

Rate increases are requested for the services that would remain subject to regulation underEmbarq's proposed PAR. The services that would remain rate regulated are residential basicexchange service; basic business service; residential directory assistance service; and non-recurring charges for installation of residence service.

Approval of a proposed plan for alternative regulation and of rate adjustments for regulatedservices is only permitted after notice, hearing and Board review, and determination that therates for regulated services remain just and reasonable. Accordingly, to aid the Board in itsreview of the proposed settlement and of Embarq's proposed PAR, it is HEREBY ORDEREDthat one public hearing be held on August 7,2008, at 7p.m. at

Council ChambersClinton Municipal Building43 Leigh StreetClinton, New Jersey 08809

to receive input from the public on both the proposed form of regulation and the proposedStipulation and Agreement. Copies of the proposed PAR and the proposed Stipulation andAgreement are available for inspection at the Board's Newark offices during regular businesshours and also can be found on the Board's website at www.bpu.state.n).us. It is FURTHERORDERED that Embarq publish notice of the public hearing in the form of Exhibit C attachedhereto, in publications of general circulation within its service territory.

DATED: 1)JLfjvi BOARD OF PUBLIC UTILITIESBY:

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O_'_~ --NICHOLAS ASSEL TACOMMISSIONER

ATTEST:

I HEREBY CERTIFY that the IItr!hii:.l:\BE~.RA~ALLdocument is a true copy of the ~~~SI<)NERin the files of If ie Board of PublicUtilities v. :.' ,

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I t~ V~/""\ KRISTIIZZ~ Dr

SECRETARY

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2 BPU Docket No. TXO7110873BPU Docket No. TOO8060451

DOCKET NO. TXO711087~

Mark A. KefferPhilip S. ShapiroAT&T Communications3033 Chain Bridge RoadOakton.VA 2218Smkeff~tt.com~sshaDi~com

John DeLucaBoard of Public UtilitiesTwo CJateway Cenfa"Newark. NJ 07102~leluca@bpu-..§!1ate.nj. us

Anthooy Centrella, ~Division of TclecommWlicationsBoard of Public UtilitiesTwo Gateway CenterNewark, NJ 07102~n): .centrelI!@!JDu.state.ni'y§

Gamet Goins. Director & AttorneyBenjamin J. AronState Reg. Affairs, NortheastRegionSprint Nextel Corp.200 1 Edm1D1d Halley DriveRcston, VA 20191Gamet. 2Oins(ii}soci "t. cornben i ami n. aron(@.sDrintcom

Stefanie A. BraDd, Esq.Division of Rate Counsel31 Clinton Street, 11 dI Floor

P.o. Box 46OOSNewark, NJ 07102~@mI.statc.niJ'!§

Jose Rivera-Benitez, Esq.Division ofRatc Counsel31 Clinton Stteet.11 ~ Floor

P.O. Box 46005NcwaI1k:, NJ 07101

~ma.state.ni.L~

A va Marie MadeamVcrlzon New Jersey, Inc.540 Broad Street, 20. FloorNewark. NJ 07102a va marl e .D. madcamlaiv erizon .com

Collen A. Foley, Esq.Saul EwingOne Riverfront PlazaNcwarik:, Nl 07102

~~saul.com

Lawanda Gilbert, Esq.Carol Artale, Esq.CoWlsel's OfficeNew Jersey Board of Public UtilitiesTwo Gateway CenterNewark, Nl 07101La wanda. 2i IbeI1(Q>. boo. state. n i .usCarol, arta1 e@bou. state .m .us

Christop~ 1. White, Esq.DivisitJin of Rate Counsel31 Clinton Street, 11 dI Floor

P.O. Box 46005Newark, N1 07101~~.state .ni. us

Patricia CampbellDivision ofTcleconnnunicationsNew Jersey Board of Public UtilitiesTwo Gateway CenterNewark, NI 07101Patricia.camD bellralbou .state.ni .US

Jeanne W. Stockman, Esq.United Telephone Company of New Jersey,Inc.d/b/a Embarq14111 Capital Blvd.Wake forest, NC 27587-5900ieanne.w .stoc~~bU9.com

JaIIM:S F. MurphyDivision ofTclc<:omnnmicationsNew Jersey BoaJd of Public UtilitiesTwo Gateway CenterNewark, NJ 07101James. ImImhXcw.bou. state .n] .us

MUlTaY E. BevanW1l1iamK.MoscaBevan, Mosca, Giuditta & Zarillo. P .C.776 Mountain Blvd.Watchung.NJ 07069mbevan~bm2Zlaw .comwmosca(Q1 bin 2Z law. com

Harold BondDivision of TelecommunicationsNew Jersey Board of Puhlic UtilitiesTwo Gateway CenterNewaI:k, NJ 07101H!I:2l!f.bond(aJb12u.s~.nj .Y§

Thomas ChuDivision of TelecommunicationsNew Jersey Board of Public UtilitiesTwo Gateway CenterNewaIk, NJ 07101ThQnYIS.chU@bol1. ~ltate.n_i. YJ

Martin C. Rothfelder. Esq.BradfCX'd M. Stem. Esq.Rothfeld~ Stem. L.I-C.625 Central AvenueWestfield, NJ 07090rncro thf e 1 d er(Q1ro thf e 1 d erstem. combmstern(Qao thf e 1 d ~. com

Russell R. GutshallEMBARQ240 North Third AvenueSuite 201Hmisburg. PA 17101Russell.r .wtshall@embara.com

Mark BeyerDivisicm of EconomistNew Jersey Board of Public UtilitiesTwo Gateway CenterNewark. Nl 07101~bev~bou,state.ni.~

William AgeeNew Jersey Board of PubJic UtilitiesTwo Gateway CenterNcwark, NJ 07101~n.a2~state.ni.us

Susan M. Baldwin17 Arlington StreetNewbulypart, MA 01950~ win@comcast.net

Babette Teozer. DAGDivision of Law124 Halsey Street, Sdl FloorNewark. N] 07101babette.tenzer(Q)do1.l~s.state.nj .us

K.C. Halm, Esq.Davis Wright Tremaine LLP1919 Pennsylvania Ave., N.W,Suite 2001Washington, DC 20006kchalm(Q);dwt.com

Ralph V. Lee, Esq.Richard Chapkis, Esq.Vice President & General CounselV crizon NJ540 Broad Str=t. 20tl FloorNewark, NJ 07102R!mhJ' .]~~.com~I.c~~zon.com

Cherie R. Kiser, Esq.Ernest Cooper, Esq-Mintz, Levm, Co1m, Ferns, Glovsky &Popeo, PC701 Pennsylvania Ave., N. W.Washington. DC 2 0004ckiser<a1mintz.comec~r@mintz.~

NicholiiS PascarettiJ. Stoe1)CflWarwick Valley Telephone Company47-49 Main StreetWarwick. NY 10990

~~@wvtc.comj.stoe~l~.com

Paul Flanagan, Assistant DirectorDivision of Rate Co\msel31 Clinton Street. P.O. Box 46005N~wark.NJ 07101l1!1~@m§:.state :ni .us

2

James C. MeyerRiker, Danzig. Schcrcr, Hyland &PCn'etti, LLPHeadquarters PlazaOne Speedwell Ave.MOITistown, NJ 07962i mever(Q}rlker .com

Richard A. HripEMBARQ .240 North Third Ave., Suite 201Harrisbmg, PA 17101~rd. a .hrio(Q).embara .com

Maria T. Novas-RIliz; Esq.Division of Rate Counsel31 Clinton Street, P.O. Box 46005Newark, Nl 07101~s-ruiZ@rDa.state.nj.us

Geo fficy Gerstenlessi~ CampbellDeputy Attorney Gen~Division of Law-Board of Public Utilities124 Halsey StreetPO Box 45029Newark. Nl 07101-5029~. 2er8ten@dol.lgs .state.ni .~~.CamDbe l1@dol.l~.state.nj. y~

Hesser McBrideWilentz Goldman & Spitzer90 Woodbridge Center DriveSuite 900 Box 10Woodbridge. NJ 070953-0958hmcbride~leotz.com

Kare Tasch, Esq.Vice ~sident .

Legislative and Regulatory AffairsNew Jersey Cable Telecomm1D1icatioosAssociation124 West State StreetTrenton. Nl 08608ktasch(q)cableni.or&

Elana ShapochnikovSenior Regulatory CounselGovernment AffairsCablevision Lightpatb, Inc.1111 stewart AvenueBethpagc.NY 11714-3581esha ~ h@cablevision.com

3

NOTICE OF I=ILING & PUBLIC HEARING

IN THE MATTE:R OF THE APPLICATION OFUNITED TELEPHONE COMPANY OF NEW JERSEY, INC. d/b/a EMBARQ

FOR APPROVAL OF A PLAN FOR ANALTERNATIVE FORM OF REGULATION

BPU DOCKET NO. TO08060451

IN THE MATTER OF THE BOARD INVESTIGATIONREGARDING THE RECLASSIFICATION OF

INC;UMBENT LOCAL EXCHANGE CARRIER (ILEC)SERVICES AS COMPETITIVE

BPU DOCKET NO. TX0711 0873

Please Take Notice that on June 27,2008, United Telephone Company of New Jersey,Inc. d/b/a Embarq (Embarq) filed a request with the New Jersey Board of Public Utilities(Board) seeking approval of a proposed Plan for An Alternative Form of Regulation(PAR). Pursuant to Embarq's proposed PAR, Embarq would no longer be subject totraditional utility rate base, rate of return regulation by the Board. Under a PAR, ratesmay be based on, among other things, "the use of an index, formula, price caps or zoneof rate freedom." N.J.S.A. 48:2-21.17. In evaluating Embarq's request, N.J.S.A. 48:2-21.18(a) requires the Board to review Embarq's proposed PAR and authorizes the Boardto approve the proposed PAR if the Board finds the proposed PAR: (1) will ensure theaffordability of protected telephone services; (2) will produce just and reasonable ratesfor telecommunications services; (3) will not unduly or unreasonably prejudice ordisadvantage a customer class or providers of competitive services; (4) will reduceregulatory delay and costs; (5) is in the public interest; (6) will enhance economicdevelopment in the State while maintaining affordable rates; (7) contains acomprehensive program of service quality standards, with procedures for boardmonitoring and review; and (8) specifically identifies the benefits to be derived from thealternative form of regulation.

Please Take Further Notice that by Order dated November 28,2007, the Boardinitiated a full investigation of and hearing on the question of whether incumbent localexchange carrier (ILEG) provided mass market retail services, including basic localexchange service, should be declared competitive pursuant to N.J.S.A. 48:2-21-19 (b)(ILEG Proceeding). Embarq submitted documentation supporting its contention that itsmass market retail services should be deemed competitive. In the event that certain ofEmbarq's services are deemed competitive, the Board would no longer regulate therates, terms and conditions of service, rate base, rate of return, or cost of service ofthose competitive services.

Please Take Further Notice that a Stipulation and Agreement has been filed with theBoard in the PAR and ILEC Proceedings. The Stipulation and Agreement recommendsthat the Board approve Embarq's proposed PAR and declare many of Embarq's servicesto be competitive pursuant to N.J.S.A. 48:2-21.19. While the Stipulation and Agreementrecommends that most, but not all, of Embarq's retail mass market telecommunicationsservices be declared competitive, pursuant to the terms of the Stipulation and

Agreement, the following services will remain rate regulated services, and will be subjectto the following rate caps for the years identified:

Service Current Rate Year 1 Year 2 Year 3

Basic ResidentialService

$7.95 (touch tone

charge included)

$10.95 $13.45 $15.45

$16.40 (touch tonecharge included)

$19.20 $22.00 $25.50Basic BusinessService

Residence

DirectoryAssistance

$0.20 wi 10 freecalls

$1.25 wi 2free calls

$1.50 wi 2free calls

$1.50 wi 2free calls

$25.00Non-RecurringCharges forInstallation ofResidentialServices

This non-recurring charge may be increasedup to $5.00 over 3 years, with the possibilitythat the increase be implemented during thefirst year.

Rates for Lifeline service will not be increased under the Stipulation and Agreement.

Please Take Further Notice that the Board will hold a public hearing to gather inputfrom the public concerning Embarq's proposed PAR and the Stipulation and Agreement,A public hearing has been scheduled at the following time and location:

August 7,2008, at 7:00 p.m.Council ChambersClinton Municipal Building43 Leigh StreetClinton, New Jersey, 08809

Any interested entity or member of the public who wishes to make a statement orcomment with respect to either the proposed PAR or the Stipulation and Agreementshould attend the public hearing. In order to encourage full participation in thisopportunity for public comment, please submit any requests for neededaccommodations, including an interpreter, listening devices, or mobility assistance, 48hours prior to the hearing, to the attention of Kristi Izzo, Secretary, Board of PublicUtilities, Two Gateway Center, 8th floor, Newark, NJ 07102.

In addition, members of the public can send written comments to Kristi Izzo, Secretary ofthe Board at Two Gateway Center, Newark, N.J. 07102. These written comments mustbe received by August 8, 2008. Comments should be identified with the applicableheading, I/M/a The ADDlication of United TeleDhone ComDanv ofNe~ J~rs.~v, 'pc. d/b/aEmbara for ADDroval of a Plan for an Alternative Form ofRe~ulagon, including theDocket No. TO08060451 , and/or I/M/O The Board Investiaation Reaardina the

Reclassification of Incumbent Local Exchanae Carrier (ILEC) Services as Competitive,including the Docket Number TX0711 0873, as appropriate.

Further, this notice, the Stipulation and Agreement, the proposed PAR and the list of allservices affected may be inspected either on the Board's website at www.ni.Qov/bpu orduring regular business hours at the Board of Public Utilities, Two Gateway Center, 8thFloor, Newark, NJ 07102.