UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





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FORM 10-Q



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|(Mark one) |  |                                                                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|           | 
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2003
|           | 
|           |  | OR                                                                                                                                     
|           | 
| ̈          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from        to        





Commission file number 0-1210





VERIZON NORTH INC.





|A Wisconsin Corporation |  | I.R.S. Employer Identification No. 35-1869961
|----------------------- |  | ---------------------------------------------





1095 Avenue of the Americas, Room 3868, New York, New York 10036



Telephone Number (212) 395-2121





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THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH
REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).



Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



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Verizon North Inc.



TABLE OF CONTENTS



|              |  |                                                               |  | Page
|------------- |  | ------------------------------------------------------------- |  | ----
|             
|              |  |                                                              
|PART I        |  | Financial Information                                         |  |     
|              |  |                                                              
|Item 1.       |  | Financial Statements                                          |  |     
|              |  |                                                              
|              |  | Condensed Statements of Income                                |  |     
|              |  | Three and Nine Months Ended September 30, 2003 and 2002       |  | 1   
|              |  |                                                              
|              |  | Condensed Balance Sheets                                      |  |     
|              |  | September 30, 2003 and December 31, 2002                      |  | 2   
|              |  |                                                              
|              |  | Condensed Statements of Cash Flows                            |  |     
|              |  | Nine Months Ended September 30, 2003 and 2002                 |  | 4   
|              |  |                                                              
|              |  | Notes to Condensed Financial Statements                       |  | 5   
|              |  |                                                              
|Item 2.       |  | Managements Discussion and Analysis of Results of Operations |  | 8   
|              |  |                                                              
|Item 4.       |  | Controls and Procedures                                       |  | 15  
|              |  |                                                              
|PART II       |  | Other Information                                             |  |     
|              |  |                                                              
|Item 6.       |  | Exhibits and Reports on Form 8-K                              |  | 16  
|              | 
|Signatures    |  | 17                                                           
|              | 
|Exhibit Index |  | 18                                                           



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Verizon North Inc.



PART I
FINANCIAL INFORMATION



|Item 1. |  | Financial Statements
|------- |  | --------------------





CONDENSED STATEMENTS OF INCOME



|                                                                                                 |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|------------------------------------------------------------------------------------------------ |  | ------------------------------- | ----- | ------------------------------
|(Dollars in Millions) (Unaudited)                                                                |  | 2003                            |       |                               
|                                                                                                
|Operating Revenues(including $141.9, $96.5, $402.6 and $259.8 from affiliates)                   |  | $                               | 815.5 |                               
|                                                                                                 |  |                                 |       |                               
|Operating Expenses(including $135.6, $125.0, $401.2 and $343.2 to affiliates)                    |  |                                 |       |                               
|Cost of services and sales (exclusive of items shown below)                                      |  |                                 | 192.2 |                               
|Selling, general and administrative expense                                                      |  |                                 | 175.9 |                               
|Depreciation and amortization                                                                    |  |                                 | 203.9 |                               
|                                                                                                 |  |                                 |       |                               
|Total Operating Expenses                                                                         |  |                                 | 572.0 |                               
|                                                                                                 |  |                                 |       |                               
|                                                                                                 |  |                                 |       |                               
|Operating Income                                                                                 |  |                                 | 243.5 |                               
|                                                                                                 |  |                                 |       |                               
|Other income and (expense), net (including $(.9), $1.2, $3.9 and $(.6) from affiliates)          |  |                                 | (.6   | )                             
|                                                                                                 |  |                                 |       |                               
|Interest expense (including $(2.3), $.7, $1.6 and $3.0 to affiliate)                             |  |                                 | 22.7  |                               
|                                                                                                 |  |                                 |       |                               
|                                                                                                 |  |                                 |       |                               
|Income before provision for income taxes and cumulative effect of change in accounting principle |  |                                 | 220.2 |                               
|                                                                                                 |  |                                 |       |                               
|Provision for income taxes                                                                       |  |                                 | 84.5  |                               
|                                                                                                 |  |                                 |       |                               
|                                                                                                 |  |                                 |       |                               
|Income Before Cumulative Effect of Change in Accounting Principle                                |  |                                 | 135.7 |                               
|                                                                                                 |  |                                 |       |                               
|Cumulative effect of change in accounting principle, net of tax                                  |  |                                 |      |                               
|                                                                                                 |  |                                 |       |                               
|                                                                                                 |  |                                 |       |                               
|Net Income                                                                                       |  | $                               | 135.7 |                               
|                                                                                                 |  |                                 |       |                               



See Notes to Condensed
Financial Statements.



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Verizon North Inc.



CONDENSED BALANCE SHEETS



ASSETS



|(Dollars in Millions)                                                    |  | September 30, 2003 |          | December 31, 2002
|------------------------------------------------------------------------ |  | ------------------ | -------- | -----------------
|                                                                        
|                                                                         |  | (Unaudited)        |          |                  
|Current assets                                                           |  |                    |          |                  
|Cash                                                                     |  | $                  |         |                  
|Short-term investments                                                   |  |                    | 1.6      |                  
|Accounts receivable:                                                     |  |                    |          |                  
|Trade and other, net of allowances for uncollectibles of $69.6 and $82.3 |  |                    | 408.5    |                  
|Affiliates                                                               |  |                    | 112.0    |                  
|Material and supplies                                                    |  |                    | 49.9     |                  
|Prepaid expenses                                                         |  |                    | 27.8     |                  
|Deferred income taxes                                                    |  |                    | 68.8     |                  
|Other                                                                    |  |                    | 64.0     |                  
|                                                                         |  |                    |          |                  
|                                                                         |  |                    | 732.6    |                  
|                                                                         |  |                    |          |                  
|Plant, property and equipment                                            |  |                    | 10,757.4 |                  
|Less accumulated depreciation                                            |  |                    | 7,014.4  |                  
|                                                                         |  |                    |          |                  
|                                                                         |  |                    | 3,743.0  |                  
|                                                                         |  |                    |          |                  
|Intangible assets, net                                                   |  |                    | 1,061.0  |                  
|                                                                         |  |                    |          |                  
|Prepaid pension asset                                                    |  |                    | 2,063.6  |                  
|                                                                         |  |                    |          |                  
|Other assets                                                             |  |                    | 187.1    |                  
|                                                                         |  |                    |          |                  
|Total assets                                                             |  | $                  | 7,787.3  |                  
|                                                                         |  |                    |          |                  



See Notes to Condensed
Financial Statements.



2



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Verizon North Inc.



CONDENSED BALANCE SHEETS



LIABILITIES AND SHAREOWNERS INVESTMENT



|(Dollars in Millions)                         |  | September 30, 2003 |         | December 31, 2002
|--------------------------------------------- |  | ------------------ | ------- | -----------------
|                                             
|                                              |  | (Unaudited)        |         |                  
|Current liabilities                           |  |                    |         |                  
|Debt maturing within one year:                |  |                    |         |                  
|Note payable to affiliate                     |  | $                  | 362.5   |                  
|Other                                         |  |                    | 250.0   |                  
|Accounts payable and accrued liabilities:     |  |                    |         |                  
|Affiliates                                    |  |                    | 146.2   |                  
|Other                                         |  |                    | 363.2   |                  
|Other current liabilities                     |  |                    | 229.7   |                  
|                                              |  |                    |         |                  
|                                              |  |                    | 1,351.6 |                  
|                                              |  |                    |         |                  
|                                              |  |                   
|Long-term debt                                |  |                    | 1,250.5 |                  
|                                              |  |                    |         |                  
|                                              |  |                   
|Employee benefit obligations                  |  |                    | 533.6   |                  
|                                              |  |                    |         |                  
|                                              |  |                   
|Deferred credits and other liabilities        |  |                    |         |                  
|Deferred income taxes                         |  |                    | 1,471.4 |                  
|Other                                         |  |                    | 118.0   |                  
|                                              |  |                    |         |                  
|                                              |  |                    | 1,589.4 |                  
|                                              |  |                    |         |                  
|Shareowners investment                       |  |                    |         |                  
|Common stock  one share, without par value   |  |                    | 978.3   |                  
|Contributed capital                           |  |                    | 1,034.7 |                  
|Reinvested earnings                           |  |                    | 1,049.2 |                  
|                                              |  |                    |         |                  
|                                              |  |                    | 3,062.2 |                  
|                                              |  |                    |         |                  
|                                              |  |                   
|Total liabilities and shareowners investment |  | $                  | 7,787.3 |                  
|                                              |  |                    |         |                  



See Notes to Condensed
Financial Statements.



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CONDENSED STATEMENTS OF CASH FLOWS



|                                                                                                                                          |  | Nine Months EndedSeptember 30, |         
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --------
|(Dollars in Millions) (Unaudited)                                                                                                         |  | 2003                           |         
|                                                                                                                                         
|Net Cash Provided by Operating Activities                                                                                                 |  | $                              | 1,141.6 
|                                                                                                                                          |  |                                |         
|                                                                                                                                          |  |                               
|Cash Flows from Investing Activities                                                                                                      |  |                                |         
|Capital expenditures (including capitalized network and non-network
software  $707.0 and $594.7 of non-network software from affiliates) |  |                                | (1,048.4
|Net change in short-term investments                                                                                                      |  |                                | 94.4    
|Investment in unconsolidated business                                                                                                     |  |                                |        
|Other, net                                                                                                                                |  |                                | .1      
|                                                                                                                                          |  |                                |         
|Net cash used in investing activities                                                                                                     |  |                                | (953.9  
|                                                                                                                                          |  |                                |         
|                                                                                                                                          |  |                               
|Cash Flows from Financing Activities                                                                                                      |  |                                |         
|Principal repayments of capital lease obligations                                                                                         |  |                                |        
|Change in note payable to affiliate                                                                                                       |  |                                | 105.0   
|Dividends paid                                                                                                                            |  |                                | (293.0  
|Capital contribution from parent                                                                                                          |  |                                |        
|Net change in outstanding checks drawn on controlled disbursement accounts                                                                |  |                                | (.1     
|                                                                                                                                          |  |                                |         
|Net cash used in financing activities                                                                                                     |  |                                | (188.1  
|                                                                                                                                          |  |                                |         
|                                                                                                                                          |  |                               
|Net change in cash                                                                                                                        |  |                                | (.4     
|                                                                                                                                          |  |                               
|Cash, beginning of period                                                                                                                 |  |                                | .4      
|                                                                                                                                          |  |                                |         
|                                                                                                                                          |  |                               
|Cash, end of period                                                                                                                       |  | $                              |        
|                                                                                                                                          |  |                                |         



See Notes to Condensed
Financial Statements.



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NOTES TO CONDENSED FINANCIAL STATEMENTS



(Unaudited)





1.    Basis of Presentation



Verizon North Inc. is a wholly owned subsidiary of GTE Corporation (GTE), which is a wholly owned subsidiary of Verizon Communications Inc. (Verizon). The accompanying unaudited condensed financial statements have been prepared based upon
Securities and Exchange Commission rules that permit reduced disclosure for interim periods. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial position for the
interim periods shown including normal recurring accruals. The results for the interim periods are not necessarily indicative of results for the full year. The balance sheet at December 31, 2002 has been derived from the audited financial statements
at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For a more complete discussion of significant accounting policies and certain other
information, you should refer to the financial statements included in our 2002 Annual Report on Form 10-K.



We have reclassified certain amounts from prior years data to conform to the 2003 presentation.





2.    Adoption of New Accounting Standards



Stock-Based Compensation



We participate in employee compensation plans sponsored by Verizon with awards of Verizon
common stock. Prior to 2003, Verizon accounted for stock-based employee compensation under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and followed the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. In accordance with APB Opinion No. 25, no stock-based employee compensation expense for our fixed stock
option plans is reflected in our 2002 net income as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.



Effective January 1, 2003, Verizon adopted the fair value recognition provisions of SFAS No.
123, using the prospective method (as permitted under SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure) to all new awards granted, modified or settled after January 1, 2003. Under the prospective
method, employee compensation expense in the first year will be recognized for new awards granted, modified, or settled. The options generally vest over a term of three years, therefore the expenses related to stock-based employee compensation
included in the determination of net income for the three and nine months ended September 30, 2003 are less than what would have been recorded if the fair value method was also applied to previously issued awards. The following table illustrates the
effect on net income if the fair value method had been applied to all outstanding and unvested options in each period.



|                                                                                                                                                     |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | -
|(Dollars in Millions)                                                                                                                                |  | 2003                            |       |   | 2002                           |  
|                                                                                                                                                    
|Net income, as reported                                                                                                                              |  | $                               | 135.7 |   |                                | $
|Add: Stock option-related employee compensation expense included in reported net income, net of related tax
effects                                  |  |                                 | .3    |   |                                |  
|Deduct: Total stock option-related employee compensation expense determined under fair value based method for all awards, net of
related tax effects |  |                                 | (1.2  | ) |                                |  
|                                                                                                                                                     |  |                                 |       |   |                                |  
|Pro forma net income                                                                                                                                 |  | $                               | 134.8 |   |                                | $
|                                                                                                                                                     |  |                                 |       |   |                                |  



After-tax compensation expense for
other stock-based compensation included in net income as reported for the three and nine months ended September 30, 2003 and 2002 was not material.



Asset Retirement Obligations



Effective January 1, 2003, we adopted SFAS No. 143, Accounting for Asset Retirement Obligations. This standard provides the accounting for the cost of legal
obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies recognize the fair value of a liability for asset retirement obligations in the period in which the obligations are incurred and capitalize that
amount as part of the book value of the long-lived asset. We have determined that we do not have a material legal obligation to remove long-lived assets as described by this statement. However, prior to the adoption of SFAS No. 143, we included
estimated removal costs in our group depreciation models. These costs have increased depreciation



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Verizon North Inc.



expense and accumulated depreciation for future removal costs for existing assets. These removal costs were recorded
as a reduction to accumulated depreciation when the assets were retired and removal costs were incurred.



For some assets, such as telephone poles, the removal costs exceeded salvage value. Under the provisions of SFAS No. 143, we are required to exclude costs of removal from our depreciation rates for assets for which
the removal costs exceed salvage. Accordingly, in connection with the initial adoption of this standard on January 1, 2003, we have reversed accrued costs of removal in excess of salvage from our accumulated depreciation accounts for these assets.
The adjustment was recorded as a cumulative effect of an accounting change, resulting in the recognition of a gain of $273.9 million ($169.1 million after-tax). Effective January 1, 2003, we began expensing costs of removal in excess of salvage for
these assets as incurred. The ongoing impact of this change in accounting resulted in a decrease in depreciation expense and an increase in cost of services and sales, which was not material to our total operating expenses for the three and nine
month periods ended September 30, 2003.



Debt Extinguishment



In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other things, eliminates the requirement that all gains and losses on the extinguishment of debt must be
classified as extraordinary items on the income statement, thereby permitting the classification of such gains and losses as extraordinary items only if they meet the criteria of APB Opinion No. 30, Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. We adopted this provision of SFAS No. 145 effective January 1, 2003 and, upon
adoption, reclassified the losses on the early extinguishment of debt and related tax benefits that were previously reported in our statements of income as extraordinary items to Other expense and Provision for income taxes.





3.    Dividend



On November 3, 2003, we
declared and paid a dividend in the amount of $100.0 million to our parent, GTE.





4.    Shareowners Investment



|(Dollars in Millions)         |  | CommonStock |       | ContributedCapital |   | ReinvestedEarnings | 
|----------------------------- |  | ----------- | ----- | ------------------ | - | ------------------ | 
|                             
|Balance at December 31, 2002  |  | $           | 978.3 |                    | $ | 1,034.6            | 
|Net income                    |  |             |       |                    |   |                    | 
|Dividends declared            |  |             |       |                    |   |                    | 
|Other                         |  |             |       |                    |   | .1                 | 
|                              |  |             |       |                    |   |                    | 
|Balance at September 30, 2003 |  | $           | 978.3 |                    | $ | 1,034.7            | 
|                              |  |             |       |                    |   |                    | 



Net income and comprehensive income
were the same for the nine months ended September 30, 2003 and 2002.





5.    Employee Severance and Other Benefit Costs



Employee Severance Costs



We maintain ongoing severance plans for both management and associate employees, which provide benefits to employees that are terminated. The costs for these plans are
accounted for under SFAS No. 112, Employers Accounting for Postemployment Benefits. We accrue for severance benefits based on the terms of our severance plan over the estimated service periods of the employees. The accruals are
also based on the historical run-rate of actual severances and expectations for future severances. From time to time, because Verizons severance programs are implemented across its subsidiaries, Verizon must redistribute the amount of
severance liability based on actual experience at the companies.



In the fourth
quarter of 2001, it was determined that our severance liability was not sufficient as a result of new downsizing plans and we recorded a special charge of $8.6 million. In the second quarters of 2002 and 2003, again, it was determined that the
severance liability was not sufficient because of further downsizing plans and we recorded special charges of $15.0 million and $8.1 million, respectively. As of September 30, 2003, approximately 1,060 employees have been separated and nearly all of
the separations under these previous severance programs have occurred. As of September 30, 2003, our severance liability was $30.0 million, which includes future payments to employees previously separated under these severance programs.



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Verizon North Inc.



During the first nine months of 2003, the companys severance liability was increased by $14.0 million for
special charges and the redistribution of severance liabilities across Verizons subsidiaries and decreased by $25.5 million principally for payments. Severance costs are included in selling, general and administrative expense in our statements
of income. We continually evaluate employee levels, and accordingly, we may incur future severance costs.



Other Benefit Costs



During the nine
months ended September 30, 2003, we recorded a pension settlement loss of $9.9 million related to employees that received lump-sum distributions during the third quarter of 2003 in connection with previously announced employee separations. Also, we
recorded a special charge of $.5 million in the second quarter of 2003 in connection with pension and retirement benefit enhancements. During the nine months ended September 30, 2002, we recorded a pension settlement loss of $20.4 million related to
employees that received lump-sum distributions during the third quarter of 2002. The special termination benefits and settlement of pension obligations are recorded in accordance with SFAS No. 88, Employers Accounting for Settlements and
Curtailments of Defined Pension Plans and for Termination Benefits and SFAS No. 106, Employers Accounting for Postretirement Benefits Other than Pensions. Special termination benefits and settlement of pension obligations are
included in selling, general and administrative expense in our statements of income.





6.    Commitments and Contingencies



Various legal actions and regulatory proceedings are pending to which we are a party and claims which, if asserted, may lead to other legal
actions. We have established reserves for specific liabilities in connection with regulatory and legal matters, including environmental matters that we currently deem to be probable and estimable. We do not expect that the ultimate resolution of
pending regulatory and legal matters in future periods will have a material effect on our financial condition, but it could have a material effect on our results of operations.



From time to time, regulatory decisions require us to assure customers that we will provide a level of service performance that falls within
prescribed parameters. There are penalties associated with failing to meet those service parameters and we, from time to time, pay such penalties. We do not expect these penalties to have a material effect on our financial condition, but they could
have a material effect on our results of operations.



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|Item 2. |  | Managements Discussion and Analysis of Results of Operations
|------- |  | -------------------------------------------------------------

| |  | (Abbreviated pursuant to General Instruction H(2).)
| |  | ---------------------------------------------------



This discussion should be read in conjunction with the Condensed Financial Statements and Condensed Notes to Financial Statements.





RESULTS OF
OPERATIONS



We reported net income of $594.4 million for the nine
month period ended September 30, 2003, compared to net income of $421.6 million for the same period in 2002. Our reported results included the following special item:



Cumulative Effect of Change in Accounting Principle



Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement
Obligations. This standard provides the accounting for the cost of legal obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies recognize the fair value of a liability for asset retirement
obligations in the period in which the obligations are incurred and capitalize that amount as part of the book value of the long-lived asset. We have determined that we do not have a material legal obligation to remove long-lived assets as described
by this statement. However, prior to the adoption of SFAS No. 143, we included estimated removal costs in our group depreciation models. These costs have increased depreciation expense and accumulated depreciation for future removal costs for
existing assets. These removal costs were recorded as a reduction to accumulated depreciation when the assets were retired and removal costs were incurred.



For some assets, such as telephone poles, the removal costs exceeded salvage value. Under the provisions of SFAS No. 143, we are required to exclude costs of removal from
our depreciation rates for assets for which the removal costs exceed salvage. Accordingly, in connection with the initial adoption of this standard on January 1, 2003, we have reversed accrued costs of removal in excess of salvage from our
accumulated depreciation accounts for these assets. The adjustment was recorded as a cumulative effect of an accounting change, resulting in the recognition of a gain of $273.9 million ($169.1 million after-tax). Effective January 1, 2003, we began
expensing costs of removal in excess of salvage for these assets as incurred. The ongoing impact of this change in accounting resulted in a decrease in depreciation expense and an increase in cost of services and sales, which was not material to our
total operating expenses for the three and nine month periods ended September 30, 2003.



This and other items affecting the comparison of our results of operations for the nine month periods ending September 30, 2003 and 2002 are discussed in the following sections.



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OPERATING REVENUES

(Dollars in Millions)



|                        |  | Nine Months EndedSeptember 30,
|----------------------- |  | ------------------------------
|                        |  | 2003                          
|                       
|Local services          |  | $                             
|Network access services |  |                               
|Long distance services  |  |                               
|Other services          |  |                               
|                        |  |                               
|Total                   |  | $                             
|                        |  |                               





LOCAL SERVICES



|2003-2002   |  | (Decrease)           
|----------- |  | ---------------------
|           
|Nine Months |  | $(28.1)        (2.5)%



Local service revenues are earned from
the provision of local exchange, local private line, wire maintenance, voice messaging and value-added services. Value-added services are a family of services that expand the utilization of the network, including products such as Caller ID, Call
Waiting and Return Call. The provision of local exchange services not only includes retail revenues, but also includes local wholesale revenues from unbundled network elements (UNEs), interconnection revenues from competitive local exchange carriers
(CLECs) and wireless carriers, and some data transport revenues.



Local service
revenues declined in the first nine months of 2003 primarily due to lower demand and usage of our basic local exchange and accompanying services, as reflected by a decline in switched access lines in service of 3.1% from a year ago. This decline was
mainly driven by the effect of technology substitution. This decrease was partially offset by the impact of sales of packaged wireline services as a result of expanded new products and pricing plans.





NETWORK
ACCESS SERVICES



|2003-2002   |  | Increase         
|----------- |  | -----------------
|           
|Nine Months |  | $24.6        3.0%



Network access service revenues are
earned from end-user subscribers and from long distance and other competing carriers who use our local exchange facilities to provide usage services to their customers. Switched access revenues are derived from fixed and usage-based charges paid by
carriers for access to our local network. Special access revenues originate from carriers and end-users that buy dedicated local exchange capacity to support their private networks. End-user access revenues are earned from our customers and from
resellers who purchase dial-tone services. Further, network access revenues include our digital subscriber line (DSL) services.



The increase in network access revenues in the first nine months of 2003 was mainly attributable to the favorable effect of regulatory decisions in Michigan in 2002 and
increased demand for DSL services. These increases were partially offset by the effects of price reductions and a decline in switched minutes of use of 5.8%, from a year ago, reflecting the impact of access line loss and wireless substitution.



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LONG DISTANCE SERVICES



|2003-2002   |  | (Decrease)            
|----------- |  | ----------------------
|           
|Nine Months |  | $(14.2)        (20.1)%



Long distance revenues are earned
primarily from calls made to points outside a customers local calling area, but within our service area (intraLATA toll). IntraLATA toll calls originate and terminate within the same LATA, but generally cover a greater distance than a local
call. These services are regulated by state regulatory commissions except where they cross state lines. Other long distance services that we provide include 800 services and Wide Area Telephone Service (WATS). We also earn revenue from private line
and operator services associated with long distance calls.



Long distance
service revenues declined in the first nine months of 2003 primarily due to the effects of expanded local calling areas, as well as lower access line growth and technology substitution. These declines were partially offset by the effect of
intrastate price increases in Michigan.





OTHER SERVICES



|2003-2002   |  | Increase           
|----------- |  | -------------------
|           
|Nine Months |  | $137.7        46.3%



Our other services include such
services as billing and collections for long distance carriers and affiliates, facilities rentals to affiliates and nonaffiliates, public (pay) telephone and customer premises equipment (CPE). We have contractual arrangements with affiliates for the
use of our non-network software and we earn revenues from affiliates for their usage of our non-network software based upon proportional cost allocation methodologies. Other service revenues also include fees paid by customers for nonpublication of
telephone numbers, multiple white page listings and late payment of bills, and fees paid by affiliates for usage of our directory listings and the provision of sales agent services.



Other service revenues increased in the first nine months of 2003 primarily due to higher rent revenues from affiliates for usage of our
capitalized non-network software. This increase was slightly offset by a decline in public telephone revenues as more customers substitute wireless communications for pay telephone services and by lower revenues from CPE sales.



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Verizon North Inc.



OPERATING EXPENSES

(Dollars in Millions)





COST OF SERVICES AND SALES



|2003-2002   |  | Increase         
|----------- |  | -----------------
|           
|Nine Months |  | $17.8        3.3%



Cost of services and sales includes
the following costs directly attributable to a service or product: salaries and wages, benefits, materials and supplies, contracted services, network access and transport costs, customer provisioning costs, computer systems support and cost of
products sold. Aggregate customer care costs, which include billing and service provisioning, are allocated between cost of services and sales and selling, general and administrative expense.



The increase in cost of services and sales in the first nine months of 2003 was mainly driven
by lower net pension and other post-retirement benefit income. The company participates in Verizon Communications Inc.s (Verizon) defined pension plan and postretirement healthcare and life insurance plans. As of December 31, 2002, Verizon
changed key employee benefit plan assumptions in response to current conditions in the securities markets and medical and prescription drug costs trends. The expected rate of return on pension plan assets has been changed from 9.25% in 2002 to 8.50%
in 2003 and the expected rate of return on other postretirement benefit plan assets has been changed from 9.10% in 2002 to 8.50% in 2003. The discount rate assumption has been lowered from 7.25% in 2002 to 6.75% in 2003 and the medical cost trend
rate assumption has been increased from 10.00% in 2002 to 11.00% in 2003. For the nine month period ended September 30, 2003, the company recorded pension income, net of postretirement benefit expenses (after consideration of capitalized costs) of
$20.5 million, compared to $65.9 million for the same period in 2002. This increase was partially offset by lower costs allocated from affiliates.





SELLING, GENERAL AND ADMINISTRATIVE EXPENSE



|2003-2002   |  | Increase         
|----------- |  | -----------------
|           
|Nine Months |  | $17.0        3.3%



Selling, general and administrative
expense (SG&A) includes salaries and wages and benefits not directly attributable to a service or product, bad debt charges, taxes other than income, advertising and sales commission costs, customer billing, call center and information
technology costs, professional service fees, and rent for administrative space. Aggregate customer care costs, which include billing and service provisioning, are allocated between cost of services and sales and selling, general and administrative
expense.



The increase in SG&A expense in the first nine months of 2003 was
primarily driven by higher general and administrative costs allocated from affiliates, principally related to rent costs. This increase was partially offset by lower bad debt expense principally due to a reduction in uncollectible accounts
receivable, improved collections and additional customer deposit requirements. In the second quarter of 2002, we recorded an impairment charge of $21.7 million driven by our financial statement exposure to WorldCom.





DEPRECIATION
AND AMORTIZATION



|2003-2002   |  | Increase           
|----------- |  | -------------------
|           
|Nine Months |  | $102.4        20.7%



Depreciation and amortization expense
increased in the first nine months of 2003 primarily due to the effect of increased software amortization costs. This increase was partially offset by the favorable impact of adopting SFAS No. 143, effective January 1, 2003. Under SFAS No. 143, we
began expensing costs of removal in excess of salvage for outside plant assets as incurred. Previously, we had included costs of removal for these assets in our depreciation rates.



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Verizon North Inc.



OTHER RESULTS

(Dollars in Millions)





OTHER INCOME AND (EXPENSE), NET



|                           |  | Nine Months Ended September 30, |     |      |   |     
|-------------------------- |  | ------------------------------- | --- | ---- | - | ----
|                           |  | 2003                            |     | 2002 |   |     
|                          
|Interest income            |  | $                               | 4.5 |      | $ | 3.1 
|Equity loss from affiliate |  |                                 |    |      |   | (1.9
|                           |  |                                 |     |      |   |     
|Total                      |  | $                               | 4.5 |      | $ | 1.2 
|                           |  |                                 |     |      |   |     



nmNot
meaningful



The increase in other income and (expense), net was primarily
attributable to the effect of equity losses recognized in the first nine months of 2002 from our investment in Verizon Ventures III Inc. (Ventures III), an affiliated company. As a result of the reintegration of Ventures III completed in the second
quarter of 2002, we no longer recognize equity income (loss) from this investment. In addition, an increase in interest income due to a higher average note receivable balance with an affiliate during the first nine months of 2003, as compared to the
same period last year, further contributed to the increase in other income and (expense), net.





INTEREST EXPENSE



|                                      |  | Nine Months Ended September 30, |         |      |  
|------------------------------------- |  | ------------------------------- | ------- | ---- | -
|                                      |  | 2003                            |         | 2002 |  
|                                     
|Interest expense                      |  | $                               | 76.8    |      | $
|Capitalized interest costs            |  |                                 | .8      |      |  
|                                      |  |                                 |         |      |  
|Total interest costs on debt balances |  | $                               | 77.6    |      | $
|                                      |  |                                 |         |      |  
|Debt outstanding                      |  | $                               | 1,863.0 |      | $



The decrease in interest expense in
the first nine months of 2003, over the same period in 2002, was primarily due to changes in the mix of short- and long-term interest rates and changes in the levels of debt during each period.





PROVISION FOR
INCOME TAXES



|                           |  | Nine Months Ended September 30, |       |   |      |  
|-------------------------- |  | ------------------------------- | ----- | - | ---- | -
|                           |  | 2003                            |       |   | 2002 |  
|                          
|Provision for income taxes |  | $                               | 264.7 |   |      | $
|Effective income tax rate  |  |                                 | 38.4  | % |      |  



The effective income tax rate is the
provision for income taxes as a percentage of income before provision for income taxes and cumulative effect of change in accounting principle. Our effective income tax rate was lower for the nine months ended September 30, 2003, compared to the
same period in 2002, due to a one-time adjustment of deferred income taxes included in the 2002 effective income tax rate for state income taxes, as discussed below.



On June 28, 2002, the State of Indiana enacted a law that repealed the supplemental net income tax and increased the adjusted gross income
tax on corporations from 3.4% to 8.5% effective January 1, 2003. As required under SFAS No. 109, Accounting for Income Taxes, the effect of this tax law change on deferred tax assets/liabilities was included in income from continuing
operations for the period that included the enactment date. This one-time adjustment of deferred income taxes generated an approximate $15 million state income tax expense (net of federal income tax benefit), which was reflected in the income tax
provision for the nine months ended September 30, 2002.



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Verizon North Inc.



OTHER MATTERS



FCC Regulation and Interstate Rates



We are subject to the jurisdiction of the Federal Communications Commission (FCC) with respect to interstate services and related matters. In 2002, the FCC continued to
implement reforms to the interstate access charge system and to implement the universal service and other requirements of the Telecommunications Act of 1996 (the 1996 Act).



Access Charges and Universal Service



On May 31, 2000, the FCC adopted the Coalition for Affordable Local and Long Distance Services (CALLS) plan as a comprehensive five-year plan for regulation of interstate
access charges. The CALLS plan has three main components. First, it establishes a portable interstate access universal service support of $650 million for the industry. This explicit support replaces implicit support embedded in interstate access
charges. Second, the plan simplifies the patchwork of common line charges into one subscriber line charge (SLC) and provides for de-averaging of the SLC by zones and class of customers in a manner that will not undermine comparable and affordable
universal service. Third, the plan sets into place a mechanism to transition to a set target of $0.0055 per minute for switched access services. Once that target rate is reached, local exchange carriers are no longer required to make further annual
price cap reductions to their switched access prices. The annual reductions leading to the target rate, as well as annual reductions for the subset of special access services that remain subject to price cap regulation was set at 6.5% per year.



On September 10, 2001, the U.S. Court of Appeals for the Fifth Circuit ruled
on an appeal of the FCC order adopting the plan. The court upheld the FCC on several challenges to the order, but remanded two aspects of the decision back to the FCC on the grounds that they lacked sufficient justification. The court remanded back
to the FCC for further consideration its decision setting the annual reduction factor at 6.5% minus an inflation factor and the size of the new universal service fund at $650 million. The entire plan continued in effect pending the FCCs
further consideration of its justification of these components. On July 10, 2003, the FCC released an order on remand reaffirming these aspects of its plan. As a result of tariff adjustments which became effective in July 2003, we reached the
$0.0055 benchmark.



The FCC has adopted rules for special access services that
provide for pricing flexibility and ultimately the removal of services from price regulation when prescribed competitive thresholds are met. In order to use these rules, carriers must forego the ability to take advantage of provisions in the current
rules that provide relief in the event earnings fall below prescribed thresholds. Verizon has been authorized to remove special access and dedicated transport services from price caps in 56 Metropolitan Statistical Areas (MSAs). In addition, the FCC
has found that in 24 MSAs Verizon has met the stricter standards to remove special access connections to end-user customers from price caps.



In November 1999, the FCC adopted a new mechanism for providing universal service support to high cost areas served by large local telephone companies. This funding
mechanism provides additional support for local telephone services in several states served by Verizons telephone operations. This system has been supplemented by the new FCC access charge plan described above. On July 31, 2001, the U.S. Court
of Appeals for the Tenth Circuit reversed and remanded to the FCC for further proceedings. The court concluded that the FCC had failed to adequately explain some aspects of its decision and had failed to address any need for a state universal
service mechanism. On October 16, 2003, the FCC announced a decision providing additional justification for its non-rural high-cost universal support mechanism and modifying it in part. The FCC also has proceedings underway to evaluate possible
changes to its current rules for assessing contributions to the universal service fund. Any change in the current assessment mechanism could result in a change in the contribution that local telephone companies must make and that would have to be
collected from customers.



Unbundling of Network Elements



In November 1999, the FCC announced its decision setting forth new unbundling requirements,
eliminating elements that it had previously required to be unbundled, limiting the obligation to provide others and adding new elements.



In addition to the unbundling requirements released in November 1999, the FCC released an order in a separate proceeding in December 1999, requiring incumbent local
exchange companies also to unbundle and provide to competitors the higher frequency portion of their local loop. This provides competitors with the ability to provision data services on top of incumbent carriers voice services.



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Verizon North Inc.



On May 24, 2002, the U.S. Court of Appeals for the D.C. Circuit released an order that overturned the most recent FCC
decision establishing which network elements were required to be unbundled. In particular, the court found that the FCC did not adequately consider the limitations of the necessary and impair standards of the 1996 Act when it chose
national rules for unbundling and that it failed to consider the relevance of competition from other types of service providers, including cable and satellite. The court also vacated a separate order that had authorized an unbundling requirement for
line sharing where a competing carrier purchases only a portion of the copper connection to the end-user in order to provide high-speed broadband services using DSL technology. The U.S. Supreme Court subsequently declined to review that
decision.



On October 25, 2002, the U.S. Court of Appeals for the D.C. Circuit
released an order upholding the FCCs decisions that established interim limits on the availability of combinations of UNEs known as enhanced extended links or EELs. EELs consist of unbundled loops and transport elements. The FCC
decisions limited access to EELs to carriers that would use them to provide a significant amount of local traffic, and not just use them as substitutes for special access services.



Prior to the issuance of these orders from the U.S. Court of Appeals for the D.C. Circuit, the FCC had already begun a review of the scope
of its unbundling requirement through a rulemaking referred to as the triennial review of UNEs. This rulemaking reopened the question of what network elements must be made available on an unbundled basis under the 1996 Act, and will address the
impact of the order by the U.S. Court of Appeals for the D.C. Circuit overturning its previous rules, as well as other pending issues relating to unbundled elements, including the question of whether competing carriers may substitute combinations of
unbundled loops and transport for already competitive special access services. On February 20, 2003, the FCC announced a decision in its triennial review. The order was released on August 21, 2003. With respect to broadband services, the order
generally removed section 251 unbundling obligations. With respect to narrowband services, the order generally left unbundling obligations in place, and delegated to state regulatory proceedings a further review. The order also provided a new set of
criteria relating to when carriers may purchase EELs. Multiple parties, including Verizon, have appealed various aspects of the decision.



The FCCs February 2003 order significantly increases arbitrage opportunities by making it easier for carriers to use EELs for non-local service at regulated prices
set using the pricing formula that applies to unbundled network elements rather than competitive special access prices. In addition, the FCCs order eliminates important safeguards that protected against this kind of arbitrage, including the
FCCs previous rule against co-mingling unbundled elements and other services.



Compensation for Internet Traffic



On April 27, 2001, the FCC
released an order addressing intercarrier compensation for dial-up connections for Internet-bound traffic. The FCC found that Internet-bound traffic is interstate and subject to the FCCs jurisdiction. Moreover, the FCC again found that
Internet-bound traffic is not subject to reciprocal compensation under Section 251(b)(5) of the 1996 Act. Instead, the FCC established federal rates per minute for this traffic that decline from $0.0015 to $0.0007 over a three-year period. The FCC
order also sets caps on the total minutes of this traffic that may be subject to any intercarrier compensation and requires that incumbent local exchange carriers must offer to both bill and pay reciprocal compensation for local traffic at the same
rate as they are required to pay on Internet-bound traffic. On May 3, 2002, the U.S. Court of Appeals for the D.C. Circuit rejected part of the FCCs rationale for its April 27, 2001 order, but declined to vacate the order while it is on
remand.



Several parties requested rehearing, asking the court to vacate the
underlying order. Those requests were denied in a series of orders released on September 24, 2002 and September 25, 2002. The U.S. Supreme Court has declined to review that denial. In the meantime, pending further action by the FCC, the FCCs
underlying order remains in effect.





State Regulation of Rates and Services



On July 26, 2001, the Pennsylvania Public Utility Commission (PPUC) rejected, in part, and accepted, in part, a proposed price cap plan filed by us. The PPUC accepted,
with some modification, that part of the plan that provided for the deregulation of the pricing of competitive services; elimination of earnings sharing; adoption of a productivity factor based on inflation; a provision to adjust rates for exogenous
events; and a price cap of rates of protected services. The PPUC rejected that part of our plan that provided for improvement of our network infrastructure. The PPUC subsequently approved a revised infrastructure plan for us that requires, among
other things, universal broadband deployment by 2015.





Management Separation Offer



In September 2003, Verizon announced a voluntary separation program for management employees. The election period for this program ends on November 15, 2003.



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Verizon North Inc.



|Item 4. |  | Controls and Procedures
|------- |  | -----------------------



| | (a) |  | Evaluation of Disclosure Controls and Procedures
| | --- |  | ------------------------------------------------



Our chief executive officer and chief financial officer have evaluated the effectiveness of the registrants disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report
is recorded, processed, summarized and reported, within required time periods. They have concluded that the registrants disclosure controls and procedures were adequate and effective to ensure that material information relating to the
registrant and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.





| | (b) |  | Changes in Internal Control Over Financial Reporting
| | --- |  | ----------------------------------------------------



There were no significant changes in the registrants internal control over financial reporting during the period covered by this quarterly report,
nor were there any significant deficiencies or material weaknesses in these controls requiring corrective actions.



15



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Verizon North Inc.



PART II
OTHER INFORMATION



Item 6.    
Exhibits and Reports on Form 8-K



|(a) |  | Exhibits:                                                                                                 |  |                                                                                                    
|--- |  | --------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------
|    |  |                                                                                                          
|    |  | ExhibitNumber                                                                                             |  |                                                                                                    
|    |  |                                                                                                          
|    |  | 12                                                                                                        |  | Computation of Ratio of Earnings to Fixed Charges.                                                 
|    |  |                                                                                                          
|    |  | 31.1                                                                                                      |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|    |  |                                                                                                          
|    |  | 31.2                                                                                                      |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|    |  |                                                                                                          
|    |  | 32                                                                                                        |  | Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  
|    | 
|(b) |  | There were no Current Reports on Form 8-K filed or furnished during the quarter ended September 30, 2003.



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Verizon North Inc.



SIGNATURES



Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|                        |  |  |  | Verizon North Inc.
|----------------------- |  |  |  | ------------------
|                        |  |  | 
|Date: November 12, 2003 |  |  |  | By:               
|                        |  |  |  |                   





UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF NOVEMBER 6, 2003.



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Verizon North Inc.



EXHIBIT INDEX



|ExhibitNumber |  |                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------
|              | 
|12            |  | Computation of Ratio of Earnings to Fixed Charges.                                                 
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|32            |  | Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                  



18