VI. Other Direct Measures of Service Quality

In addition to the systematic study of service quality measures and a survey based assessment of customer experiences, it is also important to examine the experiences of those customers who have had the worst experiences with telecommunications utilities. For this reason, we now examine the history of complaints for Pacific and Verizon, starting with customer complaints and ending with those that have led to formal regulatory proceedings.

Before our analysis of complaints, we must know the customers served by Pacific and Verizon. According to each company's annual reports to the FCC for 2001 included in the table below, we find that Pacific has 25.4 million access lines, while Verizon has 6.3 million access lines.

Thus, with service levels of this size, it is reasonable to expect a number of complaints. Moreover, while making comparisons between the two utilities, we must remember that Pacific has approximately 4 times the number of access lines in California than does Verizon.

A. Informal Complaints for Pacific

In the OII initiating this proceeding, the Commission listed informal complaint data for Pacific Bell in Appendix C, as follows:

Number of Informal Complaints Filed at the Commission

January 1, 1995, through July 12, 2001

In Exhibit 2B:701(C),²²² the Commission's legal staff clarified how the data in the foregoing table were derived. The data were compiled from summary reports maintained in the database of the Commission's Consumer Affairs Branch (CAB). An informal complaint, as the term is used in the context of the foregoing data, "is one that is handled by CAB staff in an attempt to come to a mutually agreed upon resolution between the consumer and the utility."²²³ The numbers do not include formal complaints, which "consumers may also file . . . with the Commission and [which] are handled by the ALJ Division." CAB also furnished Pacific Bell the underlying data from which it compiled the results.

Pacific did not object to receipt of the complaint information into evidence.²²⁴ Thus, we will assume the informal complaint figures are valid as reported.

Because the informal complaint data were not organized into categories reflective only of service quality problems, we have summarized the results of complaints that relate most directly to service quality. The results are as follows:

Given that the absolute numbers of these informal complaints are small relative to the approximately 25 million access lines for Pacific in California, we will not reach any conclusions about Pacific's service quality based on the absolute numbers. The data are more useful for comparisons over time. In this regard, informal complaints increased significantly from 1995 levels and were at their highest in 1997-98 and 2000. For some categories (e.g., disputed bill, quality of service, and delayed orders and missed commitments), as well as the total, the numbers for 2000 (the most recent full year) remain significantly higher than in 1995, the first year for which we have data in the record. On the other hand, in some other categories with generally smaller numbers (e.g., company practice and payment arrangements), the complaint numbers are significantly lower in 2000 than 1995. Overall, the data show that over the last six years, the number of complaints filed at this Commission has varied greatly without any linear trend.

B. Verizon Informal Complaints

The OII initiating this proceeding also attached Verizon's informal complaint record, as follows:

Number of Informal Complaints Filed at the Commission

Verizon's totals compare to Pacific's as follows:

We note that Verizon's pattern of complaints has the same spiked pattern as Pacific's, jumping in 1997 and 1998, and then declining. This repetition of the pattern suggest a causal factor beyond the companies' control.

However, Pacific also has more than 4 times the number of access lines in California than does Verizon. If one organizes Verizon's data into the same categories as we did for Pacific - that is, those most directly related to service quality, Verizon's numbers are generally lower proportionately than Pacific's:

Pacific's comparable total numbers - with four times the access lines - are as follows:

If one multiplies the Verizon figures by 4, Verizon's proportional numbers are generally lower than Pacific's. This finding comports with the assessment that we earlier made on service quality measures: in general, Verizon's service quality is better than Pacific's.

C. Formal Complaints - Pacific

TURN relies on several formal Commission proceedings to make its case that service quality has declined under NRF. We briefly discuss each below. TURN also notes that the pace of such cases seems to have increased since 1995, indicating that the tendency for service quality decline under NRF has not diminished with the passage of time.

TURN's list of proceedings shows that there have been at least six proceedings finding serious problems with Pacific's service quality since 1995, as compared to two proceedings in the five-year period from January 1990-December 1994. TURN points to the following cases over the period 1991-present:

· C.91-03-006/D.93-05-062 regarding late payment charges. Pacific was found to have imposed erroneous late payment charges for five years because it did not timely process payments as they came into its payment processing center.²²⁵ The decision found that, because of an apparent aversion to incurring increased costs, Pacific failed to implement internal recommendations to fix its payment processing system.²²⁶ The Commission required Pacific to refund $34 million in unlawful late charges, and to pay a $15 million fine.

· A.92-05-002/D.94-06-011 NRF review; settlement with ORA's predecessor, DRA, regarding Pacific's TRSAT answer times, among other things.²²⁷

· A.95-12-043/D.97-03-021 regarding ISDN.²²⁸ The Commission found Pacific had insufficient staffing, and poor installation and customer service records, and noted that incentives to cut costs prevented Pacific from addressing the problem. We found that, "Pacific does not provide high quality customer services to its ISDN customers and potential ISDN customers . . . ."²²⁹

· A.96-04-038/D.97-03-067 regarding the Pacific Telesis/SBC merger.²³⁰ In this case, ORA's predecessor (DRA) presented evidence of Pacific's poor performance on its TRSAT and BOAT reports. DRA also claimed that an inadequate workforce caused service deterioration in the TRSAT. The Commission concluded in D.97-03-067 that, "Pacific is and has been out of compliance with GO 133-B, apparently for some time. . . . Pacific failed to meet [the] standard for trouble report answering time almost 50% of the time for the period 1993 through the first six months of 1996 . . . ."²³¹

The Commission also stated: "We are concerned by Pacific's failure to meet trouble report service answering time standards following our adoption of a settlement in D.94-06-011 under which Pacific, as a settling party, agreed to improve its trouble report service answering time in order to avoid the imposition of a penalty mechanism. In D.94-06-011, we found that `. . . Pacific will also be adjusting its procedures to improve its quality of service . . . .' (see page 118, D.94-06-011). Since that time, in fact, Pacific's service quality has declined."²³² The Commission threatened Pacific with penalties if it did not improve its results in 90 days. Subsequently, Pacific's TRSAT and BOAT results improved, and no penalties were imposed.

· C.98-04-004/D.01-09-058 regarding Pacific marketing abuse.²³³ The Commission found that Pacific provided poor service quality and failed adequately to disclose information regarding its Caller ID, Wire Pro, and "The Basics" packaged services. Regarding service quality, the Commission stated that, "customer service quality is compromised when Pacific Bell representatives ask each caller, at the beginning of every call, for permission to access the subscriber's proprietary network information and to repeat the question if the answer is `no,' and force customers to listen to unwanted sales pitches prior to providing a response to a customer service inquiry. Therefore such practices are inconsistent with reasonable service quality."²³⁴

· C.99-06-053/D.01-10-071, in which Pacific was accused of deceptively marketing its "Saver 60" intraLATA toll calling plan. D.01-10-071 found that "The facts of this case show that Pacific acknowledged its error, took steps to avoid perpetrating the error (including a self-imposed ban on averaging customers' variable usage data), and promptly processed refunds for those customers disadvantaged by the error." Pacific settled by agreeing to provide customers notification of the error, make refunds and establish a two-way feedback/complaint mechanism for telemarketing services.²³⁵

· C.99-16-018/D.01-12-021 found that the 45% increase in the average number of hours to restore dial tone service to residential customers over the period 1996 - 2000 violated § 451, as well as a Commission-ordered condition of the SBC/Telesis merger.²³⁶ The Commission also found that Pacific did not inform customers of their right to be given a window of time within which a representive would complete required service.²³⁷

· C.02-01-007/D.02-10-073 regarding DSL. Settled with Commission adopting Pacific's proposed penalty payment into the State general fund of $27 million. Pacific agreed in the settlement that "During the period of January 2000 through the [date of the settlement agreement], an estimated 30,000 to 70,000 [of Pacific's DSL affiliate's] customers complained about and/or experienced billing errors" and that these errors "were not resolved in a timely manner and/or required multiple calls and substantial investment of time to resolve."²³⁸

Pacific does not appear to have addressed the formal complaint data TURN cites, except to note that those proceedings should not be considered part of the record of this proceeding, and are irrelevant to an assessment of Pacific's service quality during the NRF period.

We may take official notice of actions of this Commission pursuant to Rule 73. Thus, the formal complaints Commission proceedings TURN or any party cites with regard to Pacific (or Verizon) need not be a part of the record of this proceeding in order for us to rely on them in rendering this decision.

Moreover, we disagree with Pacific's contention that its performance in the context of the listed formal proceedings is irrelevant here. This proceeding is our opportunity to examine the entirety of Pacific's record, and we find that these cases, when examined together, indicate that regulatory monitoring and enforcement is essential to maintenance of good service quality. Moreover, these regulatory findings from formal proceedings tend to complement our own findings made on an analysis of the GO 133-B and ARMIS data.

TURN is correct that the pace of meritorious complaints has increased since 1995. We find that there were far fewer instances where the Commission has found violations of service quality rules or related matters during a similar time period preceding NRF. However, we cannot conclude, based on the record of this case, that NRF is responsible for this increase in formal complaint decisions adverse to Pacific, or that the problems that prompted these complaints would have been less significant under rate of return regulation. By the same token, we observe that these decisions reflect some serious deficiencies in Pacific's service quality that required the expenditure of significant resources - of the complaining parties and the Commission - to correct. While we cannot say that NRF caused these problems, we can safely conclude that NRF did not prevent these problems from developing and that it became necessary for parties to take the significant step of pursuing formal complaints in order to correct the problems.

Consistent with the legislative goal of providing high quality telecommunications services to all Californians, ²³⁹ the Commission strives to ensure that customers do not experience any problems that violate statutory and other service quality requirements. We invite parties in the next phase of this proceeding to consider whether the foregoing complaint history suggests a need for monitoring, incentives, or other regulatory methods to address service quality problems and to present proposals that might limit or prevent future violations of service quality statutes, rules and orders, without making it necessary for parties to pursue lengthy formal complaint processes. In addition, as noted previously, our open docket to revise GO 133-B (R.02-12-004) also provides an opportunity to consider reforms to service quality rules.

D. Formal Complaints - Verizon

TURN cites two formal proceedings that it alleges show problems with Verizon's service quality:

· A.92-05-002/D.94-06-011 regarding GTEC (Verizon's predecessor) answer times and switch outages.²⁴⁰ The Commission found that GTEC's answer times failed to meet minimum GO 133-B standards. For example, GTEC failed to meet the GO 133-B answering time standard for its Customer Care Centers in 17 out of the 24 months in 1991 and 1992. For the Customer Billing Centers, the average speed of answering time was approximately two minutes: 126.1 seconds and 113.1 seconds, respectively.²⁴¹ GTEC also had a high customer billing error rate, a disproportionately high number of informal complaints, inconsistencies in its service quality monitoring data and problems with its calling cards.

· C.98-04-004/D.98-12-084, approving GTEC's payment of $13 million to settle marketing abuse claims stemming from the period 1989-92. ²⁴² However, we later found that we did not have all the facts surrounding the abuse in requiring GTEC to distribute $ 3.2 million among local groups within the Hispanic community for the purpose of telecommunications education and to report the names of recipients and amounts of contributions above its normal contributions. ²⁴³

The first decision reflects some significant problems with Verizon's service quality early in the NRF period, but, as the foregoing analysis shows, to Verizon's credit, the company swiftly corrected these problems after they were identified. The second complaint reflects a serious marketing abuse problem, again early in the NRF period. The problem has not recurred. Nevertheless, Verizon's formal complaint history during the NRF period compares favorably to Pacific's record and to its own prior record. Both decisions against Verizon relate to conduct early in the 1990s. While GTEC did not bring to light the true facts surrounding the marketing abuses in the second case until 1997, the Commission did not find that the abuses themselves continued after 1992.

Therefore, Verizon's formal complaint history, standing alone, does not indicate repeated service quality problems of any significant duration.