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: Pacific Low Incidence

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),²²³ 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."²²⁴ 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.²²⁵ 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:

Note: 2001 has data for only part of the year

It is difficult to analyze these data in all their possible permutations, but we can make at least two observations. First, informal complaints were at their highest in 1997-98 and 2000. They spiked in 1997, and are lower now

It is difficult to assess what this data means. Clearly the data show that over the last six years, the number of complaints filed at this Commission has varied greatly without any linear trend. On the other hand, with 25.4 million access lines in California, the number of service quality complaints made by customers affects a very small percentage of lines in service. In 1997, the worst year, informal complaints made to the Commission totaled 7360, or only 0.04% of lines were affected by a service quality complaint. This is approximately 4 in 10,000 lines. In 1995, the best year in our sequence (2001 is a partial year), there were 3566 complaints. This is approximately .02%, or approximately 2 in 10,000 lines. Thus, the Commission's complaint data provides information on the experiences of only a very small number of customers.

B. Informal Complaints: Verizon Very Low Incidence

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 far lower proportionately than Pacific's:

Pacific's comparable 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.

Beyond this obvious result, it is difficult to assess just what this data means. Once again, the percentages of lines affected by an informal Commission complaint are extremely small. In 1998, Verizon's worst year, only 0.03% of lines were affected by a service quality complaint. This is approximately 3 per 10,000 lines. In Verizon's best year, 1995 (2001 is not a complete year), the percentage is 0.02% or about 2 per 10,000 lines. Thus, only a very small percentage of access lines are affected by a Commission-filed customer complaint.

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.²²⁶ 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.²²⁷ 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.²²⁸

· A.95-12-043/D.97-03-021 regarding ISDN.²²⁹ 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 . . . ."²³⁰

· A.96-04-038/D.97-03-067 regarding the Pacific Telesis/SBC merger.²³¹ 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 . . . ."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.

· 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.²³⁴

· 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 violates § 451., as well as a Commission-ordered condition of the SBC/Telesis merger.²³⁵ The Commission also found that Pacific did not inform customers of their right to be given a window of time within which a representative would complete required service.

· 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."²³⁶

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.

What, however, do a mere eight enforcement proceedings spread out over more than a decade mean? Indeed, it is not possible to draw a statistical conclusion by simply observing the increase in formal proceedings when there are so few proceedings. In particular, we cannot say whether NRF itself caused the increase in formal complaints. Moreover, despite the increase in formal complaints, our data indicate a general improvement in Pacific's service quality under most measures. (Trouble repair intervals, associated with several of the formal complaints, remain a notable exception to this trend.) As noted earlier, NRF triggered a more systematic monitoring of service quality than was conducted in the pre-NRF period, and led to a greater Commission focus on service quality issues. Moreover, in the next section, we will see that Verizon exhibited the exact opposite pattern, an outcome that sheds doubt on the assignment of causality to NRF regulation.

The problems addressed in these formal cases are likely independent from the existence of the NRF framework - they could still have occurred if Pacific had been subject to a GRC framework. For example, the largest fine associated with an enforcement case for Pacific was prior to the existence of NRF.²³⁷ The refunds and costs associated with that case - over $95 million - virtually equals the combined fine amount of all the formal cases in the post-NRF period. 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 specific deficiencies in Pacific's service quality that required the expenditure of significant resources - of the complaining parties and the Commission - to correct. 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, ²³⁸ the Commission strives to ensure that customers do not experience any problems that violate statutory and other service quality requirements. We invite parties in phase 3B of this proceeding to consider whether the foregoing complaints give rise to a need for monitoring, incentives, or other regulatory methods to address service quality problems identified in this decision, 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 measures.

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.²³⁹ 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.²⁴⁰ 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. ²⁴¹ 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. ²⁴²

We disagree with TURN's conclusion that this complaint data provides substantial evidence of poor service quality. The first complaint tracks the findings of our own data analysis - in some years Verizon failed to meet the GO 133-B service quality standards in certain months. The decision in this proceeding 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. 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 a significant and continuing service quality problem.