During a daylong hearing Tuesday in Richmond, commissioners for the State Corporation Commission asked Verizon officials to explain the company's failure to follow a state rule that requires a timely fix by telephone utilities for customers who have lost phone service.

The hearing continues today.

The SCC's communications division has recommended that Verizon Virginia and Verizon South pay a related fine of $17.5 million -- an estimate of the sum Verizon saved by not responding quickly to customer complaints of "land line" phone outages.

The SCC says the fine is justified because Verizon, even after filing a "corrective action plan," violated a rule that requires the company and competitors to clear each month no less than 80 percent of out-of-service calls within 24 hours and 95 percent of such calls within 48 hours.

In turn, Verizon warns that a fine that high, coupled with the SCC's continuing to hold the company to related performance standards, could set back efforts to fully roll out its fiber networks and put Verizon at a competitive disadvantage.

"As hard as we tried to get this standard right, we didn't," said Stephen Spencer, Verizon's director of regulatory affairs. "It's not the right standard, I believe."

Spencer said Verizon is "losing tens of thousands of lines a month" because of competition.

The SCC began noticing problems with Verizon's response time in May and June 2006, according to case filings.

Verizon filed its corrective action plan in October. The SCC alleges that a performance report from Verizon in April indicated the company has not complied with the plan.

Spencer and other Verizon officials have acknowledged that the company's clearing of trouble calls within 24 and 48 hours has "not been what Verizon would prefer." But the telecommunications company cites numerous factors SCC commissioners should consider before issuing sanctions. They include, among others:

n In 2005, when new rules took effect, the rules "did not fully contemplate the aggressively competitive environment Virginia is experiencing today [among Verizon and other providers]."

n Verizon's significant investment of money and time to deploy a "world-class fiber network" in Virginia has tested Verizon's performance in clearing trouble calls.

n In most months, "fewer than 1 percent of Verizon's access lines experience an out-of-service condition." Spencer told commissioners, "I would submit to you, no harm, no foul. We're not in compliance with the standard, but we are providing good service."

n Most customers now have a cellphone to use during an outage to reach 911 and other emergency services.

During Tuesday's hearing, Robert Woltz, president of Verizon Virginia, told Commissioners Theodore Morrison, Mark Christie and Judith Jagdmann that if the company is held to the 80 percent and 95 percent standard "we will have to sacrifice investment in other areas to meet it."

Commissioners reminded Woltz that the company could have applied for a waiver of the standards if Verizon thought it could not meet them. Verizon is now seeking such a waiver.

If, in fact, Verizon pays a $17.5 million fine for failing to comply with state rules, the money will be deposited in Virginia's Literary Fund -- the same place unclaimed lottery winnings end up.

In fiscal 2007, the Virginia Lottery transferred $10.7 million of unclaimed money to the fund, which is used for such things as school construction or renovation and teacher retirement funding. The Literary Fund's current balance is about $450 million.

SCC arrived at a $17.5 million fine through a complex formula that calculated, based on Verizon's having about 3.2 million access lines, a monthly average of out-of-service trouble reports -- about 30,000, according to the SCC. It estimated a total of 169,831 trouble reports that violated the 24-hour and 48-hour performance standard between January 2006 and May. SCC staff calculations concluded that Verizon's noncompliance had saved the company about $17.5 million.

Verizon has refused to publicly release some of the relevant numbers provided to the SCC, suggesting that their release could aid competitors.

The SCC regulates many Virginia business and economic interests, including large utilities, and is the state's central filing agency for corporations.

The Verizon hearing is scheduled to continue today.

On the Net: Audio from the hearing should be available. Go to scc.virginia.gov/caseinfo.htm and click on webcasting.