R.11!12!001 Public Roycroft Declaration 1-31-12

8/2/2019 R.11!12!001 Public Roycroft Declaration 1-31-12

1/80

BEFORE

THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Evaluate )Telecommunications Corporations Service )

Quality Performance and Consider ) R.11-12-001

Modification to Service Quality Rules )

Declaration of Trevor R. Roycroft, Ph.D.

On Behalf of

The Utility Reform Network (TURN)

Center for Accessible Technology

National Consumer Law Center

January 31, 2012

NON-CONFIDENTIAL VERSION

Material Alleged to be Confidential has been Expurgated


2/80

TableofContentsI. Statement of Qualifications ................................................................................................................................... 1

II. Introduction and Overview ................................................................................................................................... 3

A. The Objectives of the OIR ........................................................................................................................... 3

B. Management Choices Regarding Investment and Service Quality .............................................................. 7

C. Issues Raised by the March 2011 Communications Division Report ........................................................ 11

D. Summary ........................................................................................................................................................... 14

III. Response to OIR Questions ............................................................................................................................ 14

Question 1: Are the adopted GO 133-C service quality standards appropriate and reasonable? If not, should newservice quality standards be adopted or should existing standards be modified or eliminated? ............................. 14

Service Guarantees ............................................................................................................................................. 16

Major Service Outages ........................................................................................................................................ 17

Consistent Reporting ........................................................................................................................................... 18

Question 2: Should additional Out-of-Service standards be established for Out-of-Service events in excess of 24hours? ...................................................................................................................................................................... 19

Question 3: Why are many of the URF carriers consistently missing the service quality measurement standardsfor (a) Out-of-Service Repairs, and (b) Answer Times? ......................................................................................... 19

Management Decisions Favor Advanced Service Platforms .............................................................................. 19

Verizon ............................................................................................................................................................... 20

AT&T ................................................................................................................................................................. 23

SureWest ............................................................................................................................................................. 23

Summary ............................................................................................................................................................. 24

Question 4: The current service quality standards and measures focus on retail customers. Should standards beadopted for wholesale service? If so, what should these standards and measures be? ........................................... 24

Question 5: Is it appropriate to implement a penalty mechanism when standards are not met? If so, what shouldit be? ....................................................................................................................................................................... 25

Benchmark Annual Penalty ................................................................................................................................ 27

Penalty Points ..................................................................................................................................................... 28

Annual Penalty Assessment ................................................................................................................................ 29

Application of the Penalty Mechanism ............................................................................................................... 30

Calculating the Penalty ....................................................................................................................................... 30

Offset Benchmark Penalty by Amount of OOS Service Guarantees .................................................................. 31

Forgiveness for Brief Periods of Substandard Performance ............................................................................... 31

Customer Rebates ............................................................................................................................................... 31

Evaluation of the Penalty Mechanism ................................................................................................................ 31

Question 6: Should exemptions be allowed for calculating reported service quality results for States ofEmergency, Catastrophic Events and events beyond the control of the utility management? If so, should there belimitations on the geographic area(s) covered and/or the duration of the exemption? ............................................ 32

Question 7: Should carriers provide the Commission with additional service quality data in the aftermath of acatastrophic event? If so, what additional data is appropriate? .............................................................................. 33

Question 8: What other reporting requirements or measures are appropriate to evaluate quality of service? ....... 34


3/80

Declaration of Trevor R. Roycroft, Ph.D.On Behalf of TURNCPUC R.11-12-001

_________________________________________________________________________________________________________

1

Question 9: Should the Commission hire a network consultant to: a) review and evaluate the service qualityresults; b) to evaluate and monitor telecommunications carriers infrastructure, investments and manpower toimprove service quality; and c) to help the Commission determine best practices? If so how should they befunded and who should administer the contract(s)? ................................................................................................ 34

Question 10: Are competitive market forces sufficient to ensure service quality? What, if any, are the barriers toswitching to other services and service providers if a customer is dissatisfied with the quality of wirelinetelephone service offered by their current provider? .............................................................................................. 36

Barriers to Switching .......................................................................................................................................... 37

Additional Barriers to Switching for Consumers with Disabilities ..................................................................... 42

Question 11: How do carriers prioritize repairs between classes of customers, (e.g., retail vs. wholesale andbusiness vs. residential) types of technologies, and types of services? Should residential service be given toppriority for repair due to public safety and universal service obligations associated with residential service? ...... 43

Question 12: Is the service quality information posted at the Commissions website sufficient to provideconsumers with the relevant information to make informed communications service purchasing decisions? ....... 47

Question 13: Should the Commission adopt service quality reporting standards for Wireless carriers? ............... 50

Question 14. Are there cost-effective engineering and design standards available that would prevent orbetter mitigate the effects of outages due to storms and other disruptions? If so, what are they? ......................... 53

Question 15. Is the wireline network designed and maintained so as to minimize the duration of outagesdue to catastrophic events? If not, what should be done to rectify that? ................................................................ 53

Question 16. Is the wireline network being properly maintained to serve Californians and the Californiaeconomy? Is wireline service in California comparable to service in other states that have penalties for failure tomaintain service or incentive regulation for service quality?.................................................................................. 53

Question 17. Are there any economic, regulatory, physical, or other barriers or disincentives that stifle ordiscourage wireline maintenance? What are the consequences of poor wireline maintenance? What can andshould be done to foster proper and timely wireline maintenance? ........................................................................ 54

Appendix 1: Generic Calculation of Penalty Mechanism55

Appendix 2: Appendix 2: AT&T and Cox 3

rd

Quarter 2011 Service Quality Reports..56Attachment 1: Dr. Roycrofts Vitae


4/80


_________________________________________________________________________________________________________

1

I. StatementofQualifications

1. My name is Trevor R. Roycroft. My business address is 51 Sea Meadow Lane, Brewster, MA,

02631. I am an independent consultant providing economic and policy analysis related to

telecommunications, public utility, and information technology industries. With regard to my

educational background, I hold three degrees. I received a Bachelor of Arts degree in Economics

with a minor in Statistics from California State University, Sacramento. The degree was

awarded with honors. I also received a Masters and Doctor of Philosophy in Economics from

the University of California, Davis. My Ph.D. fields of specialization are Economic Theory,

Industrial Organization, Public Sector Economics, and Economic History.

2. I have twenty years of experience in the public utility field. My experience began with my

employment at the Indiana Office of Utility Consumer Counselor (OUCC) during the years 1991

to 1994. For most of my tenure at the OUCC, I was Chief Economist. My primary areas of

analytical responsibility at the OUCC related to telecommunications regulation and policy.

3. I have been involved in higher education related to the telecommunications field. From 1994 to

2004, I was a professor in the J. Warren McClure School of Communication Systems

Management at Ohio University. At Ohio University I was granted tenure and promoted to

Associate Professor in the spring of 2000. My primary areas of teaching responsibility were

graduate and undergraduate courses covering regulatory policy, the economics of the

telecommunications industry, consumer issues with telecommunications markets, and

telecommunications technology. I left Ohio University to pursue consulting on a full-time basis

at the end of 2004.

4. I have published research in refereed journals including The Journal of Regulatory Economics,

Contemporary Economic Policy, and Telecommunications Policy. I have contributed chapters

that have been published in book volumes related to the telecommunications field. I have


5/80


_________________________________________________________________________________________________________

2

provided referee service to various academic journals including: The Journal of Regulatory

Economics, Telecommunications Policy, Social Science Computer Review, Utilities Policy,

Journal of Economic Studies, and Communications of the Association for Information Systems.

5. I have provided analysis and testimony as an independent consultant since 1994. In my role as a

consultant, I have addressed a wide variety of issues including: incentive regulation plans, cost-

of-service studies, cost modeling, service quality, merger review, and competition. I have filed

testimony, reports, and affidavits before state regulatory commissions, before the Federal

Communications Commission (FCC), and before the Canadian Radio-Television and

Telecommunications Commission. I have also provided expert services in class action lawsuits

associated with the public utility field.

6. I have extensive experience with regard to the matters the Commission is considering in this

Order Instituting Rulemaking (OIR). I have published research on telephone company service

quality.1

I have provided expert testimony and/or analysis regarding service quality issues in

cases involving CenturyLink, Frontier, Verizon, Embarq, Windstream, D&E Systems, SBC, and

Ameritech. With regard to SBC and Ameritech, I presented testimony before the Indiana Utility

Regulatory Commission regarding the service quality crisis experienced by Ameritech Indiana

following SBCs acquisition of that company. Ultimately that case was settled, with one of the

provisions being that SBC would pay for a management audit of its Indiana operations. On

behalf of some of the settling parities, I worked with the management consulting firm that

performed a management audit of SBC Indiana, and provided extensive review of the

consultants work product on behalf of my clients.2

With regard to other matters raised in the

OIR, I have prepared competition analysis in numerous proceedings. I have provided expert

services in class action lawsuits related to the wireless industry. Working with AARP, I have

1 Trouble Reports as an Indicator of Service Quality: The Influence of Competition, Technology, and Regulation.Telecommunications Policy, Volume 24, No. 10, November, 2000.2 My clients were AARP, Citizens Action Coalition of Indiana, and United Senior Action of Indiana.


6/80


_________________________________________________________________________________________________________

3

drafted model consumer-protection legislation directed at wireless markets. A copy of my

curriculum vitae is provided as Attachment 1 to this Affidavit.

7. I was asked by TURN, Center for Accessible Technology and National Consumer Law Center3

(Consumer Group) to evaluate service quality issues raised in the OIR, focusing on the URF

carriersAT&T, Verizon, Frontier, and SureWest. To prepare this Declaration I reviewed the

Commissions GO 133-C service quality rules, and the previous GO 133-B rules. In addition, I

reviewed the service quality data available on the Commissions web site. I also reviewed

service quality rules in other jurisdictions.

8. I prepared discovery, which was served by TURN on each of the URF carriers on January 3,

2012. As of the date of filing this Declaration, TURN has received only partial responses from

AT&T, Verizon, and Frontier, with the bulk of Frontiers partial response, and much of

Verizons response, arriving on January 30, 2012. SureWest has responded to all TURN data

requests on a timely basis.

9. With regard to discovery issues, TURN has also been informed by AT&T that it will not respond

to any data requests regarding AT&Ts U-Verse deployment, indicating that U-Verse is

irrelevant and has no bearing on this proceeding.4 As will be discussed below in detail,

information regarding AT&Ts U-Verse (and Verizons FiOS) is central to the issues before this

Commission.

II. Introduction and Overview

A. The Objectives of the OIR10.The OIR raises a number of important issues relating to the quality of telecommunications

services in California. The OIR begins by addressing the key responsibilities of the

Commission:

3 The National Consumer Law Center has not signed the Non-Disclosure Agreements. NCLC has not reviewed theconfidential portions of this Declaration.4 E-mail message from Ramiz Rafeedie to Bill Nusbaum, January 27, 2012.


7/80


_________________________________________________________________________________________________________

4

The Commission has a statutory duty to ensure that telephone corporations provide customerservice that includes reasonable statewide service quality standards including, but not limitedto, standards regarding network technical quality, customer service, installation, repair andbilling.5

With regard to the extent of its responsibilities, the Commission also makes clear that it

considers wireless service quality to fall within the scope of this rulemaking.6 The OIR offers

the following statement of purpose:

This OIR is opened to review the performance of telecommunications corporations inmeeting GO 133-C service quality performance standards in 2010-2011, and to assesswhether service quality measures adopted in D. 09-07-019/GO 133-C:

Meet the goals of the service quality measures (i.e., ensure that telecommunicationscarriers provide the level of service required by P.U. Code 451);

Provide consumers with relevant information to make informed communicationsservice purchase decisions;

Are relevant to todays regulatory environment and market;

Need additional measures and/or penalty mechanisms added; and

Should be revised to cover wholesale interconnection services as well as retail. If so,what revisions should be made?

7

The OIR also poses seventeen additional questions. This Declaration will address those

questions in detail. Before turning to that discussion, a brief response to the OIRs statement of

purpose is provided:

The current service quality regime is not meeting the goals required by P.U. Code 451.

The GO 133-C standards are not sufficient given the level of competition facing carriers,

and this is borne out by data indicating that Californias two largest ILECs, AT&T and

Verizon, are generally non-compliant with service quality metrics associated with GO

133-C. As will be discussed below, AT&T and Verizon have implemented a two-tier

service performance and network investment regime, where customers served on their

5 OIR, p. 2.6 OIR, p. 14.7 OIR, pp. 12-13.


8/80


_________________________________________________________________________________________________________

5

advanced service platforms are given superior attention than those who do not purchase

advanced services.

With regard to the issue of information provided to consumers that might enable

informed choices, the current approach is insufficient. With regard to wireline carriers,

the information gathered through the GO 133-C reporting process is posted on the CPUC

web site in a format that generally reflects the carriers data submission worksheets. The

format of this information is not user friendly, limiting its usefulness to consumers. With

regard to wireless carriers, the current GO 133-C standards require that carriers make

coverage maps available, however, there are no standards regarding the accuracy of these

maps, and consumers ability to make accurate side-by-side comparisons of carrier

coverage is limited. Furthermore, on other important issues that affect wireless service

qualitysuch as dropped calls, voice quality, and data throughputno reliable

information is available to the public. The Commission should work with consumer

groups and an information design specialist to develop an informative representation of

service quality information for both wireline and wireless carriers. Distilling service

quality information into a graphical presentation formatusing side-by-side comparisons

with graphics and color that convey carrier performance provides a superior approach to

the current presentation method.

The OIR poses the question of whether service quality standards are relevant in todays

environment. The risks and hardships suffered by California consumers during the

extensive outages in late 2010 and early 2011 provide ample evidence that enforceable

service quality standards continue to be relevant in todays market and regulatory

environment. If competition were effective, consumers would simply switch providers

when their carrier cannot deliver reliable service. The customer loyalty exhibited by


9/80


_________________________________________________________________________________________________________

6

consumers who stood by their carrier during an extended outage is a strong indicator of

the lack of customer choice.

o Furthermore, while it is certainly true that alternative telecommunication

platforms exist, consumers of wireless, over-the-top VoIP, and cable-based VoIP

services are also harmed when ILEC customers experience outages. Voice

telephone service is subject to network effects, i.e., the value of the service is

greater with a larger number of consumers connected to the network. ILEC

service outages decrease the network effects, and harm consumers on all

communication platforms.

o This Commission has an obligation to ensure that the vital telecommunication

services provided over the PSTN perform at a high level of reliability. The health

and safety of the public, as well as economic opportunities, depend on high

quality telecommunications services provided over the PSTN.

With regard to additional service quality measures and penalty mechanisms, as is

discussed in more detail below, the Commission should enhance both the preparedness of

telecommunications service providers during emergency situations, and hold regulated

telecommunications service providers accountable for their performance during normal

operating conditions. Penalty mechanisms should be re-imposed for the URF ILECs.

Yes, wholesale service quality should also be addressed. At a minimum, existing

wholesale service quality standards should be enforced.

In addition, in the course of its investigation of the performance of telecommunications

companies under G.O. 133-C service quality standards, the Commission must also address the

incentives that ILECs have to maintain and invest in their legacy copper networks. Telephone

service quality is affected by inadequate maintenance and investment. For example, in


10/80


_________________________________________________________________________________________________________

7

summarizing the problems experienced by ILECs with regard to phantom 911 calls, the

legislative analysis noted that Telephone corporations and the 911 County Coordinator Task

Force reports that public service access points sometimes receive 911 calls that are triggered by

damaged or aging lines, weather, or other causes.8 If lines are aging or damaged to the

extent that phantom 911 calls are being triggered, this raises issues related to maintenance and

investment. The Commission must assess these factors to determine whether the root cause of

the general lack of compliance with service quality standards, as well as the extensive outages

that occurred during late 2010 and early 2011, lies in a lack of sufficient resources being devoted

to these carrier networks.

B. Management Choices Regarding Investment and Service Quality11.Table 1 summarizes the service quality performance of the URF ILECs for the first three

quarters of 2011 with respect to the out-of-service restoration standard.

Table 1: Repair tickets restored 24 Hours, URF ILECsCPUC Standard, 90% (Shaded Cell IndicatesCompliance with Commission Standard)

Jan Feb Mar Apr May Jun Jul Aug Sep

SureWest 96.4% 86.7% 95.3% 96.9% 95.1% 93.6% 97.0% 91.9% 95.5%

Frontier 75.6% 78.4% 81.7% 80.0% 85.1% 79.4% 83.1% 85.9% 86.4%

Verizon 93.9% 62.0% 61.9% 74.1% 77.2% 75.9% 69.2% 74.2% 69.9%

AT&T 56.3% 57.5% 57.7% 62.3% 70.1% 63.4% 72.7% 71.1% 74.5%

12.Table 1 shows that other than SureWest, the URF ILECs are missing this service quality measure

month-after-month, and sometimes by a wide margin. AT&T and Frontiers performance shows

some improvement over the course of the year, while Verizons show no discernible trend. What

is clear from Table 1 is that the Commissions standard is achievable; SureWest shows high

levels of service quality performance. It may be argued that SureWest can achieve its high level

of service quality due to its relatively small size. However, evidence obtained through

8 Bill Analysis, SB 1375, June 28, 2010. Assembly Committee on Utilities and Commerce, Steven Bradford, Chair.http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_1351-1400/sb_1375_cfa_20100625_140146_asm_comm.html


11/80


_________________________________________________________________________________________________________

8

discovery, discussed in detail below, instead points to SureWest maintaining a high degree of

attention to the delivery of high quality services to all SureWest customers. As will be discussed

in more detail below, evidence associated with AT&T and Verizons operations points to a

segmented approach to network investment and service quality performance. AT&T and

Verizon provide superior service quality to customers who purchase their advanced services.

AT&T and Verizon have evolved to provide what amounts to two separate customer service

experiencesone associated with triple-play services using advanced technology, where the

carriers maintain a keen focus on customer service, and another for services using legacy

technology, where customer service and plant investment has been allowed to degrade.

13.The Commission has increasingly relied on market forces to determine outcomes in California

telecommunications markets,9 including the market for basic local telephone service. With

regard to service quality issues the Commission has noted:

One of the goals of increased competition was to ensure high quality service. A concernwas expressed that competition might not be sufficient in all markets to foster highservice quality for all consumers.10

The concern over whether market forces are sufficient to guarantee high quality service to all

customers is well placed. Telecommunications markets continue to be highly segmented, and

this market segmentation makes it more likely that service quality may deteriorate for certain

customers. Geographic availability of services varies. The largest URF carriers AT&T and

Verizon have deployed their advanced network services (U-Verse and FiOS) in some areas,

while in other areas legacy copper plant remains the only ILEC service platform.

14.There is no question that carriers like AT&T and Verizon are making strategic decisions

regarding resource allocation within their networks that reflect a new vision for service

9 The URF Phase I Decision [D.06-08-030], relaxed regulatory oversight of the four largest ILECs with regard tovarious issues, including pricing.10 D.09-07-019, pp. 6-7.


12/80


13/80


_________________________________________________________________________________________________________

10

16.Carriers like AT&T and Verizon make their capital investment decisions based on a broad view

of their operations. AT&Ts Group President and Chief Strategy Officer, John Stankey, recently

summarized AT&Ts perspective on investment priorities:

So finally, where are we putting your money? How are we investing our capital? And Iwould tell you that the story for '12 is very much the story that we shared with you in '11.We continue to increase the percentage of our spend and to dedicate it to our Mobility

business. We think that's prudent and appropriate. It tracks the revenues. It tracks to

where the opportunities are. We expect that we will continue to do that in 2012. We don'texpect the overall investment percentages as total revenue for AT&T to change. We stillexpect we'll be in the mid-teens as a percentage of revenue, but we do expect that we'll beshifting. And a lot of that shift is created by the benefit of the fact that we've largely

completed our U-verse build at this pointand monies that we are putting toward buildingthat platform and getting this to robust capability in our consumers markets in the mostattractive market is now complete.14

Thus AT&T indicates that its overall investment priorities are slanted toward wireless.15

The U-

Verse build, which covers about 60% of AT&Ts nationwide footprint16 has been halted, with

the investment dollars freed up flowing to AT&Ts wireless operations. While it is natural for

investments to follow revenues, this Commission must ensure that sufficient investment is made

in facilities that continue to provide critical telecommunications services to large numbers of

Californians.

17.Markets are also segmented by consumer preferences and income levels. While carriers promote

the most comprehensive bundle that their technology is capable of delivering, not all consumers

want or can afford high-end bundled services. If ILEC triple-play bundles are linked to service

14 AT&T's CEO Presents at Citi Global Entertainment, Media & Telecommunications Conference (Transcript),January 5, 2012, emphasis added. Seeking Alpha. http://seekingalpha.com/article/317986-at-t-s-ceo-presents-at-citi-global-entertainment-media-telecommunications-conference-transcript15 There is no question that Verizon also considers wireless operations a priority. Goldman Sachs has identified thedivestiture of all Verizon wireline assets outside of the enterprise market as a possible path forward. See VerizonFixed-Line Sale Would Enable Vodafone Combination, Goldman Says,Bloomberg, January 6, 2012.http://www.bloomberg.com/news/2012-01-06/vodafone-lifted-to-buy-at-goldman-sachs-on-verizon-strength.html16 AT&T nears end of its U-verse service buildout, FierceTelecom, May 20, 2011.http://www.fiercetelecom.com/story/att-nears-end-its-u-verse-service-buildout/2011-05-20


14/80


_________________________________________________________________________________________________________

11

platforms (like U-Verse and FiOS), then a consumers decision to decline the triple-play option

may relegate them to a service platform that receives inferior service quality support.17

18.This outcome is unacceptable, and is inconsistent with 451 of the Public Utilities Code, which

the OIR notes requires the provision of an adequate level of service. However, 451 also

requires that rates be just and reasonable:

All charges demanded or received by any public utility, or by any two or more publicutilities, for any product or commodity furnished or to be furnished or any servicerendered or to be rendered shall be just and reasonable. Every unjust or unreasonablecharge demanded or received for such product or commodity or service is unlawful.18

Service quality standards are essential for the satisfaction of this provision of the Public Utilities

Code. Given that consumers of the URF ILECs have experienced increasing basic rates at a time

when service quality performance has been consistently substandard, the proposition that these

rates are just and reasonable is difficult to support.

C. Issues Raised by the March 2011 Communications Division Report19.The OIR references the March 2011 Communications Division (CD) Report as an indicator of

service quality problems facing California consumers. The CD Report points to two distinct sets

of service quality issues(1) problems that occurred during the storms in late 2010 and early

2011, and (2) URF carriers consistently failing to meet the Commission G.O. 133-C service

quality standards.

20.The CD Report addresses the service outages that occurred in Southern California in late 2010

and early 2011. These service outages affected large numbers of customers, with some

experiencing out-of-service conditions for extended periods. While the service outages present a

dramatic example of service quality problems, the ongoing failure of carriers to meet the

17 AT&T and Verizon do not migrate a customer onto their advanced service platform until the customer chooses totake the advanced services. This leads to some consumers residing in the same general area being served by eitherthe legacy copper facilities or the advanced service platform.18 Public Utilities Code, 451.


15/80


_________________________________________________________________________________________________________

12

Commissions service quality objectives is equally troubling as the problems that emerged

during the emergency conditions of late 2010 and early 2011.

21.The general problem is most pronounced among the URF ILECs, with the two largest URF

carriersAT&T and Verizonleading the pack in poor service quality performance. Where

data is available, some reporting CLECs show substandard performance. However, as illustrated

in data presented in Telepacifics reports, customers of CLECs that rely on inputs from ILECs

are harmed by poor ILEC service quality performance. While the GRC ILECs fail to meet some

standards, their performance generally tends to be superior to the URF ILECs.

22.The ongoing failure to restore service in line with the Commissions requirements has been a

chronic problem for the URF ILECs, even absent the emergency conditions that existed

following the heavy rains. On an ongoing basis, thousands of California consumers are facing

extended delays in service restoration. According to data filed with the Commission, during the

first nine months of 2011, outside of any emergency conditions, over 190,000 customers of the

URF ILECs, primarily AT&T customers, were out-of-service for a period greater than 24 hours.

These customers who experienced out-of-service conditions during the first nine months of 2011

do not include any of the customers who were out-of-service due to the rain events that occurred

during that period.

23.The CD Report also identifies several problems with the current service quality reporting

framework:

There are different interpretations regarding calculating out of service intervals

and the treatment of excludable events in the calculation (e.g., count all repairsmade 24 hours, even those made during excluded events, but exclude from thecalculation the service restoration times > 24 hours made during an excludedevent).

There is a lack of specificity as to when a state of emergency ends, introducingsubjectivity in calculating results.


16/80


_________________________________________________________________________________________________________

13

There are differing interpretations on whether a state of emergency constitutes anexemption for reporting anything for the entire company for one or more months,i.e., should a state of emergency definition be similar to a catastrophic event (e.g.,3% of total company access lines).

Some carriers like, Verizon, include non-voice grade results (data/video) with

small business and residential trouble tickets as well as out of service repairtickets that are only supposed to include voice services.

Not all carriers provided raw data.

The details in raw data do not contain sufficient specificity for staff to replicatecarrier calculations.

AT&T did not provide complete raw data that corresponded to the total number ofoutage tickets reported.

Some carriers did not report data for each service quality measure.19

These observations point to troubling issues associated with the Commissions service quality

regime. For example, service quality reporting should be consistently implemented by all

reporting carriers. The CD report indicates that different carriers report data based on alternative

interpretations of the requirements. Inconsistency of reporting undermines the effectiveness of

service quality standards. The CD report also indicates that different carriers interpret states of

emergency differently, with subjective interpretations of the end of the emergency conditions.

This ambiguity in carrier reporting, especially when it may be in the carriers self-interest to

extend the reporting emergency beyond the existence of emergency conditions, is also a

significant problem with the current service quality regime. Finally, carriers have different

interpretations of the reporting requirements in 4(b)(i) of GO 133-C, which states:

In cases where large numbers of customers are impacted or that are otherwise of greatseverity, a telephone report should be made promptly.

AT&T maintains no records of this communication, while Verizon does.20

19 CD Report, pp. 12-13.20 AT&T Response to TURN Set 1, request 1-5. Verizon response to TURN Set 1, request 1-5.


17/80


_________________________________________________________________________________________________________

14

24.The CD report also states that carriers are mixing voice and non-voice services in their service

quality reports. The reporting regime should be corrected so that reports on voice services are

not mixed with non-voice services. The CD report further points to incomplete filings and the

failure to provide raw data. Carrier provision of raw data is essential for verification of carrier

reports and a full assessment of carrier performance. Likewise, if carriers are simply not filing

the required reports, then there is no possibility of monitoring carrier performance. For service

quality reporting to serve its purpose, the metrics by which carriers are measured must be

consistently applied by all firms subject to the requirements. As will be discussed in more detail

below, the problems illustrated in the CD report require immediate remedy.

D. Summary

25.The service quality problems experienced by AT&T and Verizon should be deeply concerning to

the Commission. The legacy portions of these carriers networks continues to serve a vital

function in California, providing access to critical health and safety services, and enabling CLEC

competition that benefits California business users. The Commission must determine the impact

of discriminatory practices with regard to network investment and service quality provision. The

provisions of the Public Utility Code require that high quality services be provided to all ILEC

customers, not only those who have the desire and wherewithal to purchase high-end services.

III. Response to OIR Questions

Question 1: Are the adopted GO 133-C service quality standards appropriate and reasonable?

If not, should new service quality standards be adopted or should existing standards be modified

or eliminated?

26.Response to Question 1: In D.09-07-019 the Commission concluded:


18/80


_________________________________________________________________________________________________________

15

Consistent with the general agreement of the parties that competitive environments act toapply a natural pressure for carriers to ensure adequate service quality, it is reasonable tosimplify the existing reporting requirements.

21

This assessment resulted in faith in market forces to deliver high quality services to all

consumers. As discussed above, market forces have led the states two largest carriers to target

their service quality efforts on customers being served on their advanced platforms, leaving

customers on their legacy networks to experience substandard performance. While the GO 133-

C service quality standards for the URF carriers might provide a reasonable set of reporting

requirements for companies that have a demonstrated commitment to providing good service

quality, they are not sufficient for companies that are neither committed to providing high quality

services, nor facing sufficient competitive pressure to do so. As a result, the Commission should

retain the GO-133 C standards, and impose increased reporting and penalties. The following

additions should be made to the current GO 133-C service quality standards:

Trouble reportsService Affecting (SA), Out-of-Service (OOS), and repeat SA and OOStrouble reports should be separately reported. If any wire center exceeds theCommissions existing surveillance standard (which is based on the wire centers size),for more than two months in a twelve-month period, then a report should be filed with theCommission detailing remedial actions taken or planned.

Answer Timethe current reporting arrangement requires that monthly data be collectedquarterly and reported annually. This reporting structure is unreasonable. Monthlyreporting should be required, with data published at least on a quarterly basis showing theperformance during the months of the quarter.

Customer complaintsthe number of customer complaints received by the carrier fromcustomers should be reported monthly

The URF Carriers are currently not required to file information regarding installationintervals and installation commitments met. The Commission should extend the GO 133-C reporting requirements that currently apply to the GRC ILECs for installation intervalsand installation commitments met to the URF ILECs.

Customer appointments met. Standards should be set for customer appointments. Whenan appointment for a service visit is made with a customer for a specific appointmenttime, and the customers presence is required for establishing new service or repair, the

21 D.09-07-019, p. 2.


19/80


_________________________________________________________________________________________________________

16

ILEC service representative will arrive at the agreed upon appointment within 30 minutesbefore or after the scheduled time. The ILEC will report data on the number ofappointments met and the number of appointments missed.

Baseline performance penalties. A point-based penalty structure should be imposed toprovide compliance incentives to the carriers by imposing monetary penalties. This

penalty structure will be discussed in more detail in response to Question 5.

Service Guarantees. (1) OOS restoration, for customers that are out of service for morethan 48 hours, the ILEC should credit the customer for one months service, measured atthe basic service rate. (2) For customers who do not have basic service installed withinthe five-day period, a credit of $30 should be applied to the customers first monthly bill.(3) For customers with missed installation or repair appointments, a credit of $30 shouldapply to the customers monthly bill.22

Carriers should be required to file a California-specific emergency response plan.

The Commission should issue more detailed instructions regarding overall service qualityreporting, and verify that carriers are complying with the Commissions service qualityreporting rules.

Additional discussion is provided below regarding service guarantees, the emergency response

plan, and Commission instructions regarding service quality reporting. Other points are

addressed in the response to other of the Commissions questions.

ServiceGuarantees27.With regard to service guarantees, recent testimony from Southern California Edison points to

the positive impact on company performance provided by service guarantees:

Meeting our pledge to our customers related to these guarantees has required a great deal ofcommitment from our employees and multiple changes to our existing processes. SG2

23has

22 The following, where applicable, are exceptions to the ILECs service guarantees described above.(1) There is a Category 1, 2, or 3 Storm Condition.(2) There is a declared Emergency Event.(3) Access to the customers premise is not available or the customer is not ready for service.(4) The premise is not deemed safe.(5) Causes related to force majeure, which include but are not limited to injunction or any decree or order of anycourt or governmental agency having jurisdiction, strikes or other labor disputes such as lockouts, slowdowns orwork stoppages, sabotage, riot, insurrection, acts of public enemy, fire, flood, explosion, earthquake or other acts ofGod, or accidental destruction of or damage to facilities.23 SG2 is SCE's commitment to customers that they will restore service within 24 hours of when SCE first becomesaware of a power outage. SG3 promises to notify any affected customer of a planned outage at least three days

before the outage occurs. SCE's Transmission and Distribution Business Unit (TDBU) tracks its performance onthese two measures and pays customers $30 if SCE does not meet the conditions of the guarantee.


20/80


_________________________________________________________________________________________________________

17

required our staff to develop new call-out processes with improved communication methodsand better integration with after-hour contract resources. SG3 placed more focus on our end-to-end scheduling process by requiring that customer outage notification become a muchmore formalized and consistent procedure.

The service guarantee program encouraged TDBU (Transmission and Distribution Unit) to

invest the time and resources to implement concrete fundamental process changes to benefitour customers.

SG2 established a greater sense of urgency to the restoration of power during an unplannedinterruption. This greater sense of urgency forced TDBU to think in new ways and challengelong held assumptions. For example, TDBU has always been committed to restoring poweras quickly as possible, but never fully explored the routine use of contract resources inemergency conditions. It was long believed by many in the organization that during anunplanned outage, using contractors should be minimized as much as possible even if itwould result in longer restoration times because it was believed that contractors notintimately familiar with our system would not perform efficiently under emergency

conditions. However, we began working with several of our contractors and have been ableto identify and develop several who are able to meet our standards.

SG3 required full review of our work scheduling process that had been in place for decades.Never before was the impact of a planned outage to the customer so carefully considered andcommunicated to the operating personnel. What was once an informal process where CCMsmade casual contact with customers to discuss power disruptions, became a formal procedurebased activity that is now integrated into our everyday routine.

24

This discussion points to the beneficial impact of service guarantees. Service guarantees will be

discussed in more detail in response to Question 5.

MajorServiceOutages

28.Additional measures should be imposed for major service disruptions that could occur in the

carriers California operating territory. All carriers should be required to develop a California-

specific emergency response plan that should be submitted to the Commission, and put out for

comment in a publicly noticed proceeding.25 Emergency response plans should be reviewed

annually. Elements of the emergency response plan should include:

24 Before the Public Utilities Commission of the State of California, 2012 General Rate Case Transmission andDistribution Business Unit (TDBU) SCE-03, Vol. 04 Part 05 & 06, Ch. I-II Witnesses: J. Arencibia, E. Martinez, pp.114-116.25 AT&T and SureWest produced documents related to emergency response planning. These documents do not

provide a satisfactory emergency response plan. Verizon or Frontier did not produce any documents. See AT&T


21/80


_________________________________________________________________________________________________________

18

The development of an outage management system to quickly identify the locationand scope of customer outages and schedule outage restoration based on thatinformation.

A plan to communicate outage information to the Commission, including protocols asto the appropriate contact individuals, information format, and record-keeping

requirements (communication logs).

A plan to communicate information to the Community. The carrier should havechannels available (local media, local emergency response personnel, carrieroutreach/public relations personnel) to provide relevant information before andduring the restoration process to customers. The plan should include information onhow the carrier will communicate with customers who are difficult to reach, includingcustomers with limited-English proficiency and those who have difficulty usingstandard forms of communication due to a disability.

The plan should detail measures that will be taken to ensure sufficient staffing andmanagement of call centers so that customers receive prompt responses to inquiries.

The plan should include measures to ensure ongoing and frequent communicationswith state and local officials about the extent of the outage and the plan forrestoration.

The plan should include procedures for supplementing the workforce in the affectedarea from work force in other areas of the state and/or other states.

In addition, carriers should not be exempted from collecting and reporting data duringemergency events. The Commission should have ongoing access to data regardingservice quality performance. Data provided to the Commission under exemptedconditions can be reviewed by the Commission, but withheld from use for compilingcompliance statistics.

ConsistentReporting

29.As discussed earlier, the CD report indicates that statistics are not being consistently calculated,

and that Carrier reports are not reproducible. It is imperative that service quality reporting be

standardized. Action should be taken to ensure that the reporting carriers prepare service quality

statistics using a uniform methodology that is applied in the same manner by each carrier. For

example, the New York Department of Public Service, Office of Telecommunications, issues

response to TURN Set 1, question 1.2; SureWest response to TURN Set 1, question 1.2; and Verizon response toTURN Set 1, question 1.2.


22/80


_________________________________________________________________________________________________________

19

detailed guidelines associated with service quality measurements.26 The GO-133 standards

should be augmented to ensure uniform reporting occurs.

Question 2: Should additional Out-of-Service standards be established for Out-of-Service

events in excess of 24 hours?

30.Response to Question 2: As discussed above, service guarantees and additional penalties

should be added. However, consumers experiencing extended outages should also be provided

with an alternative communication device (cell phone), or should be reimbursed for personal

cell-phone usage. Communication protocols should be developed that enable reliable

communication channels be established with the affected community, including those who have

disabilities, who do not speak English, or are difficult to reach, so that consumers, businesses,

and public safety personnel are aware of restoration efforts and targets.

Question 3: Why are many of the URF carriers consistently missing the service quality

measurement standards for (a) Out-of-Service Repairs, and (b) Answer Times?

31.Response to Question 3:

Management Decisions Favor Advanced Service Platforms

32.To answer this question it is necessary to examine business decisions that have affected the

operations of the URF carriers. AT&T and Verizon have effectively divided the operations of

their companies into advanced and legacy service platforms. AT&Ts advanced service

platform is known as U-Verse. Verizons advanced service platform is known as FiOS. These

26 Telecommunications Service Quality Uniform Measurement Guidelines, New York Public ServiceCommission, Office of Telecommunications, January 27, 2011.http://www3.dps.ny.gov/W/PSCWeb.nsf/96f0fec0b45a3c6485257688006a701a/7f830c1ff90ab31285257687006f388d/$FILE/Revised%20Uniform%20Measurement%20Guidelines%20-%20January%2027,%202011%20-%20Final%20.pdf


23/80


24/80


25/80


_________________________________________________________________________________________________________

22

Verizon ultimately settled this case, agreeing to a survey of outside plant conditions, and to make

timely repairs to plant that was found to be deficient.32

36.In 2008 Verizon responded to a complaint filed by the Florida Attorney Generals office

regarding poor service quality by pointing to the benefits that arise due to Verizons fiber to the

premises (FTTP) deployment. Verizon stated that it had been:

improving its network reliability through the hundreds of millions of dollars invested inits FTTP network. That network improves maintenance and repair performance in partbecause of the physical properties of fiber, including for example its immunity tomoisture, which make the new network less susceptible to outages than the old coppernetwork. Moreover, when outages and troubles do occur on the fiber network, they areeasier to diagnose and repair, which shortens the time to restore service and cleartroubles. As Verizon continues to extend its FTTP network, and more customers take theFiOS services offered on the network, Verizon's already high network reliability willimprove still further.33

37.However, the Florida Public Service Commission did not find Verizons argument to be

persuasive. Writing in 2009, the Florida Commission stated:

Verizon has indicated that the rate of service line troubles has dropped by almost 95%where the copper network was replaced by fiber. The company also indicated that theFTTP network, in significant part, has contributed to a 34% reduction in out-of-serviceand service-affecting trouble reports from the fourth quarter of 2005 through 2007.Despite the reduction in out-of-service and service-affecting trouble reports due to the

FTTP network, Verizons overall service quality declined during the same timeframe. It

is our view that an investment in the FTTP network is not a justifiable reason for

Verizons failure to maintain and support its copper network, which currently serves the

vast majority of Verizons customers.34

The experience in Florida appears to be very similar to conditions in Californiacustomers

served on the FiOS platform experience OOS service quality improvements, while customers

served on legacy plant experience a lower level of OOS service quality.

32 In re Verizon Service Quality in Western Massachusetts, D.T.C 09-1, Settlement Agreement.33 Response and Answer of Verizon Florida to Joint Petition, In re: Joint Petition for show cause proceedings againstVerizon Florida LLC for apparent violation of Rule 24-4.070, FAC., service availability, and impose fines, by theOffice of the Attorney General, Citizens of the State of Florida, and AARP, Docket No. 08027S-TL, filed June 9,2008. http://www.psc.state.fl.us/library/FILINGS/08/04890-08/04890-08.pdf34 In re: Joint petition for show cause proceedings against Verizon Florida LLC for apparent violation of Rule 25-4.070, F.A.C., Customer Trouble Reports, and impose fines, by the Office of the Attorney General, Citizens of theState of Florida, and AARP. Docket No. 080278-TL Order No. PSC-09-0015-SC-TL. Order to Show Cause,January 5, 2009, p. 6, emphasis added.


26/80


27/80


_________________________________________________________________________________________________________

24

Summary

40.In conclusion on the Commissions question regarding the reason why URF carriers are missing

key service quality standards, the answer boils down to management choices. AT&T and

Verizon have given priority to customers who purchase their premium services. AT&T and

Verizon believe that this is appropriate as they have the ability to challenge cable companies in

the triple-play game in areas where they have upgraded their networks. AT&T and Verizon do

not believe that they will face market penalties for providing lower quality service to the

customers of their non-premium services. Absent penalties from market forces, it is the

responsibility of the Commission to ensure that all voice service consumers, regardless of the

platform on which they are served, receive high quality service.

Question 4: The current service quality standards and measures focus on retail customers.

Should standards be adopted for wholesale service? If so, what should these standards and

measures be?

41.Response to Question 4: The Commission established a performance incentive plan (PIP)

related to wholesale service quality in D.02-09-050. The Commission later modified that

decision in D.08-12-032. This 2008 modification to the PIP resulted in a streamlining of

performance standards, and made the application of the PIP an opt in exercise for the CLEC

i.e., the PIP must be specified as applying to the CLEC in an interconnection agreement.40 The

amended PIP still includes specific non-performance penalties, capped at $15 millionper month

for all CLECs combined.41

I have been advised by counsel that these wholesale service quality

standards are still in effect.

40 D.08-12-032, p. 5.41 D.08-12-032, Appendix, p. 6.


28/80


_________________________________________________________________________________________________________

25

42.Service quality standards and reporting requirements for wholesale services continue to be

important. Wholesale firms and their customers are adversely affected in the same manner as are

the ILECs retail customers. However, the customers of CLECs have another layer of

information to confrontis the problem associated with their CLEC provider or with the ILEC's

network? Reliable information on the performance of ILEC wholesale offerings will assist retail

customers in assessing the performance of their CLEC provider.

Question 5: Is it appropriate to implement a penalty mechanism when standards are not met? If

so, what should it be?

43.Response to Question 5: A penalty mechanism, including a set of service guarantees, is

appropriate. Service quality penalties provide a deterrent to service quality deterioration. The

Commission has found it necessary to impose service quality penalties in the past.42 The

experience under the GO 133-C regime, discussed above, indicates that the largest URF carriers

are discriminating in their service quality practices. Penalties will redirect these carriers

attention to delivering high quality services to all customers.

44.As discussed in the response to Question 1, one component of the penalty mechanism should be

the creation of service guaranteesdirect payments made to consumers to compensate them for

poor performance. With regard to service guarantees, the following should apply: (1) OOS

restorationfor customers that are out of service for more than 48 hours, the ILEC should credit

the customer for one months service, measured at the basic service rate plus subscriber line

charge. (2) Installationfor customers who do not have service installed within the five-day

period, a credit of $30 should be applied to the customers first monthly bill. (3) Missed

42 See, for example, Resolution T-17120, November 1, 2007.


29/80


_________________________________________________________________________________________________________

26

installation or repair appointmentsfor customers with missed installation or repair

appointments, a credit of $30 should apply to the customers monthly bill.43

45.In addition, a service performance penalty structure is appropriate. The URF carriers, especially

AT&T and Verizon, have exhibited substandard performance in some categories of the

Commissions standards for extended periods. The performance penalty mechanism

recommended uses a service quality index (SQI) that assigns penalty points based on carrier

deviation from the Commissions service quality standards. The SQI is based on how the carrier

performs vis--vis the Commissions service quality standards. Monthly penalty points are

assigned based on the difference between the Commissions standard and the carriers actual

performance. For example, with regard to the OOS standard of 90% restored in 24 hours or less,

monthly performance by a carrier of 85% restored would result in five (5) penalty points being

assigned.

46.The SQI has the following components(1) a benchmark annual penalty; (2) penalty points that

are assessed when the carrier is not in compliance with Commission standards; (3) a

forgiveness provision for brief periods of non-compliance which are quickly remedied; (4) an

OOS offset based on OOS service guarantee payments made; (5) a rebate to customers of the

remaining balance of service quality penalties; and (6) an assessment of the impact of the penalty

mechanism.

43 The following, where applicable, are exceptions to the utilitys service guarantees described above.(1) There is a Category 1, 2, or 3 Storm Condition.(2) There is a declared Emergency Event.(3) Access to the customers premise is not available or the customer is not ready for service.(4) The premise is not deemed safe.(5) Causes related to force majeure, which include but are not limited to injunction or any decree or order of anycourt or governmental agency having jurisdiction, strikes or other labor disputes such as lockouts, slowdowns orwork stoppages, sabotage, riot, insurrection, acts of public enemy, fire, flood, explosion, earthquake or other acts ofGod, or accidental destruction of or damage to facilities.


30/80


_________________________________________________________________________________________________________

27

Benchmark Annual Penalty

47.The service quality penalty benchmark for each URF carrier should be established at a level that

represents a substantial penalty so that the carrier will be provided significant incentives to

comply. As noted by the CPUC regarding the performance incentive plan associated with

AT&T Californias (then Pacific Bells) performance incentive plan (PIP), service quality

penalties should include a potential liability that provides a meaningful and significant incentive

to comply with the designated performance standards.44

48.Because the URF carriers have different sizes, the benchmark penalty should be scaled for each

carrier, while providing a meaningful and significant incentive to comply with the designated

performance standards. Given that each carriers basic rates are known, and given that the

service quality reports require access line reports, I believe that each carriers benchmark penalty

should be set based on that data, using the following approach:

Multiply the year-end access line count by the weighted-average annual basic rate ineffect during the year. Then multiply that amount by 4.0% to determine the benchmarkpenalty.

For example, as of the end of the third quarter of 2011, AT&Ts service quality report listed

6,249,528 access lines. For ease of illustration, I will assume that this number of access lines

also represents AT&Ts year-end total, and that all customers are residential flat-rate customers,

with a monthly rate of $19.95.45

Given these assumptions the annual benchmark penalty facing

AT&T for 2011 would be about $60 million.46 While this penalty is substantial, it is

proportionally smaller than other recent penalty mechanisms that have been imposed on ILECs.

For example, on January 18, 2012, the Vermont Commission reduced FairPoints benchmark

44 D.02-09-050.45 G.O. 133 requires reporting for residential and small business customers. The weighted average annual rateshould be based on the relative proportions of residential and small business customers at the end of the reportingyear, and the residential and small business basic rates.46 (Calculated as 4.0 percent of $19.95 x 6,249,528 x 12 = $59.8 million). Of course, in practice the actual year-endtotal access line count and weighted-average rate would be utilized.


31/80


_________________________________________________________________________________________________________

28

annual penalty from $10.5 million to $1.65 million.47 FairPoint Vermont has about 130,000

access lines, i.e., FairPoint Vermont is about 2.4% the size of AT&T California. Thus

FairPoints penalty, if scaled by AT&T California line count, would be equivalent to a $438

million penalty under the old Vermont regime, and $68.75 million under the new Vermont

regime.

Penalty Points

49.To calculate the penalty points the standard for each performance measurement category should

be compared to the carriers actual performance, and the difference between the standard and the

carriers actual performance should calculated. This difference will reflect the number of penalty

points assessed.

50.Service quality performance points should be assessed on a monthly basis for trouble reports and

OOS restoration. For answer time, the penalty assessment should be based on the quarterly data

reported by the companies. Table 3 shows an example of how penalty points would be

calculated.

Table 3: Penalty Points and Reporting PeriodEvaluation

Period

Service Quality Category and

Standard

Carriers Reported

Performance

Penalty Points

Month Trouble Reports (6 Percent forexchanges with 3,000 or more lines)

2 percent None

Quarter Answer Time (80 Percent in LessThan 60 Seconds)

75 percent 5

Month Out-of-Service Restoration (90Percent in 24 Hours or Less)

80 percent 10

47 See, Vermont Public Service Board Docket No. 7724, Petition of Telephone Operating Company of VermontLLC, d/b/a FairPoint Communications ("FairPoint"), for approval of a Successor Incentive Regulation Plan ("IRP"),

pursuant to 30 V.S.A. 226b, January 18, 2012.http://psb.vermont.gov/sites/psb/files/orders/2012/7724%20OrderApprovingSuccessorIncentiveRegPlan.pdf

See also, Docket No. 6959, Investigation into a Successor Incentive Regulation Plan for Verizon New England Inc.,d/b/a Verizon Vermont; Docket No. 7142, Investigation into Tariff Filing of Verizon New England Inc., d/b/aVerizon Vermont, in re: Compliance Filing in Docket, 6959, Order Entered April 27, 2006.http://psb.vermont.gov/sites/psb/files/orders/2006/6959_7142fnl.pdf


32/80


_________________________________________________________________________________________________________

29

As shown in example in Table 3, if a carriers monthly trouble reports in exchanges with 3,000

or more access lines is 2 percent rather than 6 percent, the service level exceeds the standard, and

no points are assigned for that month. If a carriers quarterly speed of answer was 75% in less

than 60 seconds rather than the 80% standard, 5 penalty points should be assessed for the quarter.

If a carriers monthly OOS restoration was 80%, rather than the 90% standard in a given month,

the difference in percentage points should be tallied as penalty points for the monthten (10) in

this example.

Annual Penalty Assessment

51.The penalty assessment should be conducted on an annual basis, with penalty points calculated

on either a monthly or quarterly basis totaled at the end of the yearly evaluation period to assess

penalties. Table 4 shows an example using AT&Ts full-year 2010 service quality performance.

Table 4: Hypothetical Penalty Points Using AT&Ts 2010 Service Quality Data

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec AnnualPenaltyPoints

OOS Standard

(Percent Restored)

90 90 90 90 90 90 90 90 90 90 90 90

AT&T ActualPerformance

50.7 40.2 53.4 38.9 34.2 32.7 32 54 75.6 66.7 69.6 51.7

OOS Monthly PenaltyPoints

39.3 49.8 36.6 51.1 55.8 57.3 58 36 14.4 23.3 20.5 38.3 480.42

Trouble Reports

Standard

AT&Ts Actual Performance

6% 2.38 2.17 1.79 1.45 1.33 1.33 1.36 1.43 1.32 1.74 1.68 2.29

8% 3.93 3.23 2.71 2.13 1.77 1.9 1.91 1.82 1.56 2.45 2.67 3.52

10% 4.85 3.97 3.27 2.79 2.14 2.25 2.76 2.26 2.1 2.92 3.47 3.83

6% Penalty Points 0 0 0 0 0 0 0 0 0 0 0 0 0

8% Penalty Points 0 0 0 0 0 0 0 0 0 0 0 0 0

10% Penalty Points 0 0 0 0 0 0 0 0 0 0 0 0 0

Quarterly Answer

Time

Standard: 80% in Less than 60 Seconds

AT&Ts Actual Performance

Penalty Points 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Percent in 60 Secondsor Less

72.8 85.4 85.7 67.5

Penalty Points 7.2 0 0 12.5 19.7

Total 500.12


33/80


_________________________________________________________________________________________________________

30

Application of the Penalty Mechanism

52.I believe that it is reasonable to structure the penalty mechanism so that penalties escalate and

generate proportionally higher penalties as service quality performance deteriorates. Table 5

shows the escalating penalty structure, using the $60 million benchmark penalty from the AT&T

example. Table 5 shows that penalties are based on the number of points generated by the

carrier, and that the dollars per penalty point increase as the carriers service quality deteriorates,

as reflected by it earning more points. Appendix 1 shows the formula that result in the values

shown in Table 5.

Table 5: Example of Penalty Structure Using Data from AT&T to Establish the Benchmark

PenaltyAnnual Points Accumulated Dollars per Point Benchmark Penalty Maximum

1 to 25 $60,000 $1,500,000

26 to 50 $120,000 $4,500,000

51 to 100 $210,000 $15,000,000

101 to 150 $240,000 $27,000,000

151 and Above (to Maximum) $330,000 $60,000,000

Calculating the Penalty

53.Continuing with the AT&T example, Table 4 shows that AT&T would have had accrued 500

penalty points during 2010 if the mechanism had been in place. Using the penalty structure

shown in Table 5, the first 25 points would be assessed at $60,000 per point, the next 25 would

be assessed at $120,000 per point, the next 50 at $210,000 per point, and the next one-hundred at

$330,000 per point, for a total annual penalty of $60 million.48

On the other hand, if AT&T had

incurred 50 penalty points during the year, its total penalty would be $4.5 million.49

48 If a carrier were to have much better performance than AT&T, its penalty points would not reach theprogressively higher point assessments.49 I.e., the first 25 points at $60,000 each, and the next 25 points at $125,000 each.


34/80


_________________________________________________________________________________________________________

31

Offset Benchmark Penalty by Amount of OOS Service Guarantees

54.For each annual period the Commission may reduce the carriers calculated benchmark penalty

by the amount of the service guarantee associated with OOS paid during that same period. The

Commission should collect data on all service guarantee payments.

Forgiveness for Brief Periods of Substandard Performance

55.It is also reasonable to include a substandard performance forgiveness provision. For trouble

reports and out-of-service restoration, if any a carrier drops below the minimum performance

standard for any single month, and returns to compliance the following month, and remains in

compliance for the balance of the year, then the single-month substandard performance penalty

should be forgiven.50

One exemption per service quality performance classification per year

should be permitted under the plan. For example, during 2011, up through the third quarter

reports, SureWest has satisfied the OOS restoration in all months except February, when it

restored 87%, just shy of the 90% threshold. If SureWests performance for the last three

months is above the 90% threshold, the February violation would be without penalty.

Customer Rebates

56.The penalty dollars should be returned to all customers as an annual rebate, which should appear

on customers monthly bill sometime in the first quarter of the year following the assessment.

The Commission should require a line-item on the bill labeled Rebate for Substandard Service

Quality during the Year 20XX.

Evaluation of the Penalty Mechanism

57.If URF carriers do not come into compliance while facing the level of incentive associated with

the method described, the Commission should revisit the penalty level in the future.

50 If December was the only month during the year where the carrier fell below the standard, January of thefollowing year should be used to determine whether forgiveness will be allowed. The forgiveness provision doesnot apply to answer time, as answer time penalty points are assessed using quarterly averages, which gives thecarrier a chance to earn forgiveness within the quarterly period.


35/80


_________________________________________________________________________________________________________

32

Question 6: Should exemptions be allowed for calculating reported service quality results for

States of Emergency, Catastrophic Events and events beyond the control of the utility

management? If so, should there be limitations on the geographic area(s) covered and/or the

duration of the exemption?

58.Response to Question 6: The exemptions should apply to the calculation of service quality

performance metrics alonethe carriers should not be exempted from reporting service quality

data for the period during the emergency. Duration should be consistent with the duration of the

actual emergency conditions.

59.With regard to emergency situations, the CD report states that there are differing interpretations

of what constitutes an emergency, and that there are differing interpretations on whether a state

of emergency constitutes an exemption for reporting anything for the entire company for one or

more months.51 This lack of consistency is a serious problem that was confirmed by the URF

carriers in their responses to discovery. While AT&T, Verizon, and SureWest point to

proclamations from the Governors office or other governmental entities as indicating the start of

an emergency and its geographic scope, the companies have different interpretations of

determining when an emergency is over.

AT&T determines the timeframe associated with a declaration of emergency byutilizing supporting information such as rain data, blocked roads, facilities impacted suchas cables/pairs, poles, manholes, and the number of opening tickets, daily ticket volumes,which exceed the norm.

52

Declarations of emergency issued by the State of California specify the start of theemergency situation, but do not specify when an emergency situation has ended. Verizon

determines the "declarations of emergency" to be ended when repair ticket volumes havereturned to normal volume levels.

53

SureWest believes that a declaration of emergency has ended when it has repaired alltrouble related to the emergency and is operating back under normal conditions.

54

51 CD Report, p. 12.52 AT&T response to TURN Set 1, question 1.9(c).53 Verizon response to TURN Set 1, question 1.9(c).54 SureWest response to TURN Set 1, Question 1.6(c).


36/80


_________________________________________________________________________________________________________

33

These responses indicate that subjective criteria are being utilized to determine when an

emergency situation ends. For example, this could be remedied by the Commission defining

normal trouble ticket volumes to be based on the average monthly trouble ticket volumes

experienced by the carrier during the previous twelve month period.

Question 7: Should carriers provide the Commission with additional service quality data in the

aftermath of a catastrophic event? If so, what additional data is appropriate?

60.Response to Question 7: Yes. As discussed above, an emergency response plan should be

required. Following the emergency, carriers should provide the Commission with a report,

supported by appropriate data, regarding how the emergency response plan was implemented,

and how the company performed under the emergency response plan. The Commission should

develop a full understanding of how carriers performed during the emergency, and should

compare and evaluate carrier performance in subsequent emergency situations in light of past

emergency performance data.

61.In addition, the carrier should continue to provide the Commission with unadjusted raw data

regarding performance vis--vis the standard performance metrics in the affected areas (and

throughout the carriers service area) during the period of the emergency. It appears that GO 133-

C requires this type of reporting. (When reporting includes a delay for one or more months, the

carrier shall provide supporting information as to why the month should be excluded and work

papers that show the date(s) of the catastrophic event and/or widespread outage and how the

adjusted figure was calculated.)

62.The carriers should provide the Commission information regarding the termination of the

emergency period. This will require that the carriers internal tracking of the repair ticket

volumes and normal repair ticket volume be shared with the Commission.


37/80


_________________________________________________________________________________________________________

34

Question 8: What other reporting requirements or measures are appropriate to evaluate quality

of service?

63.Response to Question 8:

64.See response to Questions 1 and 2.

Question 9: Should the Commission hire a network consultant to: a) review and evaluate the

service quality results; b) to evaluate and monitor telecommunications carriers infrastructure,

investments and manpower to improve service quality; and c) to help the Commission determine

best practices? If so how should they be funded and who should administer the contract(s)?

65.Response to Question 9: Yes, a network consultant should be retained. As discussed elsewhere

in this Declaration, there is evidence that AT&T and Verizon have made management decisions

to favor their advanced network services. The Commission must develop an understanding of

the extent to which the legacy networks of these companies have been affected by the priority

that has been given to the advanced services. If inadequate maintenance and investment has led

to degradation of copper plant, the extent of the problem must be documented.55 Legacy copper

networks continue to provide a vital function. Not only do such networks provide connections to

the majority of California households, but copper also serves as a platform for CLECs, which has

provided benefits to the business telecommunications market. Copper continues to provide

avenues for CLEC broadband innovation, such as Ethernet over copper applications that can

economically expand copper loop data carrying capacity.56

66.The network consultant should be charged by the Commission to conduct a thorough evaluation

of maintenance and service restoration practices and priorities (both in normal and emergency

55 For example, the Bill Analysis of the Assembly Committee on Utilities and Commerce reported Telephonecorporations and the 911 County Coordinator Task Force reports that public service access points sometimesreceive 911 calls that are triggered by damaged or aging lines, weather, or other causes. As phantom 911 calls have

been a widespread problem, the extent of plant degradation may also be widespread.http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_1351-1400/sb_1375_cfa_20100625_140146_asm_comm.html56 See, for example, http://www.telepacific.com/offer/data-network/ethernet-broadband.asp


38/80


39/80


40/80


_________________________________________________________________________________________________________

37

discrimination based on customer location, or the type of technology utilized by the ILEC to

provision service.

71.This data also reinforces the fact that outside of those areas where the largest URF carriers have

deployed advanced facilities, that other market alternatives to wireline telephone service are not

viewed by the URF ILECs as bringing a level of competition that warrants high levels of service

quality.

Barriers to Switching

72.The OIR asks about barriers to switching to other services and service providers if a customer is

dissatisfied with the quality of wireline telephone service. I analyzed California markets for

local telephone services in 2

Documents

R.11!12!001 Public Roycroft Declaration 1-31-12