4. VERIZON CALIFORNIA INC.

Verizon California Inc.²¹ (Verizon), an incumbent local exchange carrier (ILEC), identified -------- numbers in the 909 area code in its December 31, 2000 NRUF Report. Verizon's numbers (--- NXXs) represented about --% of all TNs assigned to carriers in the 909 area code as of the December 2000 NRUF report date.

4.1 AUDIT FINDINGS

Staff found that Verizon failed to report any of the Intermediate TNs it allocated to other carriers or resellers for the provision of telecommunications service to end-users. In addition, the company included ---- TNs in the Administrative category that were otherwise available for immediate assignment to end-users. Table 2 shows Verizon's utilization data as reported in the December 2000 NRUF Report and the net audit adjustment of ------ TNs from the staff review. For summary information on staff's audit methodology and Verizon's number inventory systems, see Appendix A-1.

Table 2
Verizon California Inc.
Summary of Audit Findings
	December 2000 NRUF Report	Proposed Audit Adjustments	Audited Balance
Total TNs
TNs
Assigned
Administrative
Reserved
Aging
Intermediate
Available
Donated to Pool
Net Available TN

Assigned Numbers

Verizon reported -------- Assigned TNs in its December 2000 NRUF Report. Based on its audit, staff determined that Verizon overstated its Assigned TNs by about ------ in the following ways:

· ------ Intermediate numbers misreported as Assigned numbers

· ------ Available numbers unreported by intermediate carriers

· ------ Available numbers with erroneous customer names

· ------ Aging Numbers understated

· ------ Reserved numbers understated

------ Total net audit adjustment

Out of the -------- TNs that Verizon reported as Assigned, it claimed it allocated about ------ of these TNs to other carriers to provide telecommunications service. If this were true, Verizon should have classified these ------ TNs as Intermediate. Staff found, however, that the receiving carriers reported to NANPA only ------ of these ------ TNs. The December 2000 NRUF Reports of the other carriers indicated that none of them reported utilization of the remaining ------ TNs out of the ------ TNs. The ------ TNs were thus counted twice in the overall NRUF reporting: once by Verizon as 100% Assigned, and again by the receiving carriers in their NRUF Reports. This double counting could have been avoided if Verizon had properly applied the FCC's rules in preparing its December 2000 NRUF Report by reporting these ------ as Intermediate numbers instead of Assigned numbers.

Staff found that Verizon maintained inadequate records for numbers allocated to carriers. Verizon could not provide any reliable documentation to confirm that it had, in fact, allocated the ------ numbers, cited above, to other carriers. Subsequent to December 2000, Verizon reclassified about 50% of these numbers as Reserved. However, staff found that most of these ------ TNs are Available. Staff recommends that Verizon reclassify these ------ numbers to Available.

Verizon also misreported ----- TNs as Assigned because of an error in compiling NRUF data from its inventory system. Verizon mistakenly classified and reported as Assigned these Available TNs with erroneous customer names attached. The same inventory system problem caused other reporting errors: Verizon erroneously reported ---- TNs as Assigned that it should have reported as Aging numbers, and reported ---- TNs as Assigned that it should have reported as Reserved numbers for the December 2000 NRUF Report.

Intermediate Numbers

Verizon failed to report any TNs in the Intermediate category because it misclassified these numbers as Assigned. As a result of Verizon reporting all its Intermediate TNs as Assigned, carriers double-reported about ------ TNs in the overall NRUF Reports. This problem would not have occurred if Verizon had properly followed FCC rules.

In the First NRO Order, the FCC expressed concern about double counting of numbers.²² According to the Second NRO Order, NANPA has the responsibility of identifying inconsistencies in the reported data.²³ Staff notes that NANPA did not notify Verizon of these inconsistencies. NANPA should, if it has not already done so, develop the capabilities for identifying double-counted numbers and other inconsistencies in carriers' NRUF Reports.

Verizon does not maintain adequate and up-to-date information in its tracking and record-keeping systems, and therefore is unable to properly identify: a) the carrier or non-carrier to which it has allocated numbers, and b) the actual usage of the numbers allocated to non-carriers according to FCC classifications. Verizon's TN inventory system is not set up to properly track the usage of TNs it made available to non-carriers. Therefore, the staff and Verizon were unable to determine from the company's records the correct status of the numbers allocated to carriers and non-carriers. Upon review, staff found that about 92% of the names of carriers and non-carriers in Verizon's records were incorrect or not current. This deficiency in maintaining accurate information results in unreliable data in Verizon's records on Intermediate numbers and unreliable NRUF Reports.

There are two standards for classifying TNs that carriers provide to other carriers or to non-carriers. Verizon should classify as Intermediate all TNs it provided to other carriers. Of the TNs Verizon allocated to non-carriers, only numbers assigned to end-users should be reported as Assigned. Verizon should report as Intermediate any remaining numbers it provided to a non-carrier that have not yet been assigned to end-users. Verizon unreasonably assumed that all Intermediate numbers were Assigned. Staff notes that it appears Verizon does not provide many Intermediate TNs to non-carriers.

Administrative Numbers

Verizon overstated its Administrative numbers in its December 2000 NRUF Report. Most of these TNs were actually available for assignment. Two thousand-blocks were uncontaminated and should be donated to the number pool. Verizon reported ------ TNs as Administrative numbers. Staff determined that about 76% (----- TNs) of these were classified in its inventory as soft dial tone²⁴, 4.4% as test numbers, and the remaining 19.3% as functioning Administrative TNs.

According to Verizon, most of the TNs classified as soft dial tone are the last numbers previously in service at a vacant service address, and are available for assignment. This, according to the company, is to provide the vacant location the ability to call 911 and to enable "home run" orders, which require only switch work in order to activate a new service at that address. California Public Utilities Code Section 2883 requires carriers, to the extent permitted by existing technology and facilities, to provide soft dial tone. The TNs are left in this category until service is established. Documents provided to staff by Verizon during the audit clearly showed that Verizon considers these numbers as available for assignment. Verizon's policy is to reuse these numbers only if service is established at the same service address or if there is a number shortage.

The FCC has provided carriers with clear and concise guidance on the categorization of soft dial tone TNs, but less clear guidance on what should qualify as soft dial tone. The current system allows the companies to classify soft dial tone numbers as Administrative. Verizon should re-evaluate the appropriateness of its extensive use of soft dial tone numbers for all "vacant" residential dwellings.

Verizon erroneously reported ---- TNs as Administrative. Verizon reported --- thousand-blocks as Administrative numbers although none of these numbers were working or used for any official administrative functions. Verizon misclassified a total of ---- Available TNs as Administrative numbers. In addition, Verizon classified ---- TNs as Administrative that its records showed as allocated to an affiliated carrier. However, this affiliated carrier neither utilized these TNs nor did it report them in its NRUF Report. Furthermore, all of these numbers were Available as of the date of the audit. Subsequently, Verizon reclaimed these TNs to correct this problem, and also notified the staff that none of the TNs should be classified as Administrative TNs. Verizon should have classified all these ---- TNs as Available.

Reserved Numbers

Verizon reported --- Reserved numbers. For the December 2000 NRUF Report, the quantity of numbers classified as Reserved was insignificant, and did not warrant extensive audit efforts. Staff's review of the June 2001 NRUF filed by Verizon indicated a large increase of TNs in the Reserved category. Staff noted that, as part of Verizon's efforts to comply with some of the recommendations contained in the Audit Report On The 310 Area Code issued in February 2001, Verizon undertook an internal review of some of the TNs in its inventory. This review is still ongoing according to Verizon, and as a result of this effort, Verizon determined that some of the numbers it reported as Assigned in the December 2000 NRUF Report did not have orders on file or other appropriate information available to support the Assigned classification. The company therefore reclassified some of these numbers to Reserved pending further investigation. Staff recommends that Verizon complete this internal review as soon as possible and reclassify the numbers appropriately. Verizon should not classify numbers as Reserved without verifiable documentation or a valid customer request as required by the FCC.

Aging Numbers

Verizon misclassified ---- Aging TNs as Assigned. Additionally, staff tested TNs reported in the Aging category and found no significant differences between what was reported and what was in Verizon's records.

Verizon also reported as Assigned a ------- held by a single business customer as of December 2000. Subsequent to December 2000, the same customer obtained a --- ----- from Verizon to replace its -------, and Verizon placed all ----- TNs from the ------- in the Aging category to be aged for one year. Staff considers aging the ---- -----to be excessive because very few of these TNs are shown in any directory listings. Verizon should either return this --------- to NANPA or donate those thousand-blocks in which it does not need to age numbers, since it appears that Verizon does not need this -------- for its six-month inventory.

Available Numbers

Verizon reported ------ Available TNs as of December 31, 2000 but should have reported about ------ TNs as Available. Although Verizon donated --- thousand-blocks to the number pool, a review of its Available numbers suggests that Verizon should have donated an additional -- thousand-blocks. All -- of these thousand-blocks had a contamination rate of about -% as of the December 2000 and June 2001 NRUF Reports. Verizon should have donated -- thousand-blocks to the number pool if these TNs were in excess of its 6-month inventory needs. Indeed, Verizon had donated -- of these -- thousand-blocks to the pool by the time it filed its June 2001 NRUF Report. Verizon should continue reviewing its numbering resources and donate those unneeded thousand-blocks that are 10% or less contaminated to the number pool.

Internal Controls

As a result of the 310 area code audit, Verizon implemented some improvements to its internal controls and procedures. In addition to a records verification review, Verizon recently introduced a 5-way-comparison tool for efficiently managing its numbering resources.²⁵ Staff believes that Verizon's internal review and reconciliation processes are steps in the right direction, and will go a long way toward improving the accuracy of its future NRUF Reports. Verizon cooperated with the staff during the audit and ensured that it addressed most of the issues raised by staff. Verizon's cooperation and current efforts to improve the reliability of its numbering resources demonstrate a willingness to efficiently manage and control its numbering resources.

Verizon maintains many inventory status categories for its TN inventory system, which causes problems in categorizing TNs for NRUF reporting. Although numerous inventory categories may be useful internally, a large number of categories can be confusing and result in errors in preparing the NRUF Reports. In addition, Verizon categorizes TNs as "other" in its TN inventory system. For NRUF reporting, these TNs can be classified in any of the six NRUF categories. Staff emphasizes that a vague category such as "other" presents a problem in matching numbers in this category to NRUF reporting categories. This existence of an "other" reporting category presented data analysis problems in the 909 audit. Verizon's internal TN inventory categories must map unequivocally to a single NRUF reporting category in order for its system to efficiently produce reliable NRUF Reports.

4.2 Staff Recommendations

1. Verizon should refine its data gathering procedures for the NRUF Report and it should refrain from assuming that all TN ranges associated with customer names are valid and working Assigned TNs.

2. Verizon should ensure that its internal TN inventory categories map unequivocally to a single NRUF reporting category.

3. As required by FCC rules, Verizon should institute procedures to accurately track its Intermediate numbers and the names of the carriers or non-carrier entities to which it makes them available. If accomplishing this requires Verizon to compile and send to intermediate entities regular reports of the TNs it has provided to them, Verizon should do so.

4. In all its filings with the NANPA, the FCC, and the CPUC, including requests for prefixes or blocks as well as NRUF Reports, Verizon should classify and report as Intermediate all numbers it makes available to other carriers for providing service to end-users.

5. Each carrier that is allocated TNs by Verizon should comply with FCC rules on semiannual NRUF reporting to the NANPA, and should return to Verizon any TNs in excess of its six-month inventory needs.

6. As required by FCC rules, and explained in "Instructions For Utilization and Forecast Forms" in the FCC Form 502, Verizon must report in its NRUF Reports the utilization for the numbers it provides to non-carrier entities. Verizon should report as "Assigned" those numbers it has provided to non-carrier entities that have assigned them to end-users. Verizon should report as Intermediate any remaining numbers it provided to a non-carrier entity that the non-carrier entity has not assigned to end-users. Verizon should institute procedures to collect sufficient information to report accurately the Intermediate TNs that it provides to non-carrier entities.

7. The NANPA should, if it has not already done so, develop the capability to identify TNs that are double-counted in NRUF Reports, inform the involved carriers of these reporting discrepancies, and inform the state commissions of any unresolved double-counted TNs.

8. Verizon should perform a detailed reconciliation of its Administrative numbers and implement reliable systems or procedures to ensure that only numbers in use for official purposes are classified as Administrative for NRUF reporting.

9. Verizon should re-evaluate the appropriateness of its extensive use of soft dial tone numbers for all "vacant" residential dwellings.

10. Staff recommends that the FCC provide additional guidance to carriers as to what qualifies as a soft dial tone TN, to encourage the efficient use of scarce numbering resources.

11. Consistent with FCC regulations, Verizon should maintain verifiable documentation such as the customer requests for TNs classified as Reserved. See Appendix A-3 for a list of historical records carriers should retain.

12. Verizon should reevaluate whether it is necessary to age all business TNs, including those not listed in a telephone directory, for a period of one year.

13. Verizon should complete its on-going internal review of TNs in order to reclassify all TNs that may be misclassified as Assigned, Intermediate, Administrative, Reserved, and Aging numbers.