ALJ/JAR/tcg DRAFT 1

First January Meeting

Decision DRAFT DECISION OF ALJ REED (Mailed 11/21/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion into Monitoring Performance of Operations Support Systems.	Rulemaking 97-10-016 (Filed October 9, 1997)
Order Instituting Investigation on the Commission's Own Motion into Monitoring Performance of Operations Support Systems.	Investigation 97-10-017 (Filed October 9, 1997)

OPINION ON THE PERFORMANCE INCENTIVES PLAN

TABLE OF CONTENTS

Title Page

OPINION ON THE PERFORMANCE INCENTIVES PLAN 1

I. Summary 2

II. Background 5

III. The Proposed Plans 8

A. Pacific's Proposed Plan 11

B. CLEC Proposed Plan 15

C. Verizon's Proposed Plan 17

D. ORA's Proposed Plan 18

IV. Discussion 19

A. Payment Caps 19

B. Mitigation 22

1. Type II Error 24

2. Statistical Test Assumptions 27

C. Conditional 0.20 Critical Alpha 36

D. Payment Amounts 38

E. Repeated Failures 46

F. Severity 49

G. Statistical Testing for Benchmarks 51

H. Functionality 51

I. Measures 53

J. Remedy Exclusivity 54

K. Implementation 56

1. Forecasting 57

2. Monitoring and Reporting 57

3. Payments 58

4. Payment Recipients 58

5. Root Cause Analysis and Expedited Dispute Resolution 64

6. Payment Delays for New Measures 66

7. Performance Assessments 67

V. Conclusions 67

VI. Comments on Draft Decision 68

Findings of Fact 68

Conclusions of Law 81

ORDER 85

TABLE OF APPENDICES

Appendix A: List of Filings Containing Parties' Final Proposed Incentive Plans, Plan Data Runs, and Plan Comments


Appendix B: Payment Amounts Generated by the Proposed Plans

Appendix C: ARMIS 43-01 Cost and Revenue Table

Appendix D: Verizon's Illustrations

Appendix E: Payment Rate Guide

Appendix F: Individual Performance Result Payment Rate Examples

Appendix G: Payments Generated by Estimated Failure Rates

Appendix H: Failure Rates and Payments in Texas and New York

Appendix I: Workpaper # 13, April 2, 2001, R.97-10-016/I.97-10-017

Appendix J: California Performance Incentives Plan

Appendix K: List of Appearances

OPINION ON THE PERFORMANCE INCENTIVES PLAN

I. Summary

By this decision, the California Public Utilities Commission (Commission or CPUC) adds the final piece to implement an operations support systems (OSS) performance incentives plan. This plan will provide incentives for the incumbent local exchange carriers (ILECs) to give competitors equitable access to their OSS infrastructure. The plan consists of performance measurements established in Decision (D.) 01-05-087, performance criteria established in D.01-01-037, and the monetary incentives we now adopt. The plan measures, evaluates, and imposes monetary charges on an ILEC for OSS performance which could inhibit competition by disadvantaging the competitive local exchange carriers (CLECs).¹

In this decision, we have established the following: (1) limits to the ILECs' "risk"² for poor OSS performance to CLECs and their customers; (2) how incentive payment amounts will be tied to different performance results and how payments will increase as performance worsens; (3) who will receive the incentive payments; (4) necessary adjustments to the statistical performance assessment model; and (5) other provisions necessary to complete a performance incentives plan appropriate for an initial implementation period.

As we explained in D.01-01-037, the Telecommunications Act of 1996 (TA96 or the Act) has guided the process of opening previously monopolistic local telephone service markets to competition. To foster competition, the act requires ILECs to provide competing carriers access to ILEC OSS infrastructure, including the incumbents' pre-ordering, ordering, provisioning, maintenance, billing, and other functions necessary for providing various telephony services. For competition to occur, the CLECs must be able to access these services in the same manner as the ILEC.

For example, for pre-ordering, a CLEC must be able to access customer information relevant to the service being ordered, so that the CLEC can tell its customers what options they have. For ordering, a CLEC needs to be sure that the ordering process for its customers takes no more time than for ILEC customers. Similarly, for provisioning, a CLEC needs to be sure that the time the ILEC takes to actually install or provide a new telephone service for CLEC customers is no longer than for ILEC customers. Delays or inaccuracies in these and the other OSS functions could discourage potential customers from doing business with the competitors.

Under its authority to implement the Act, the Federal Communications Commission (FCC) has strongly encouraged establishment of regulatory incentives to ensure ILEC OSS performance does not present barriers to competition. While not an outright prerequisite for FCC approval of Regional Bell Operating Companies' (RBOC or BOC) applications to provide in-region interLATA service under § 271, the FCC has indicated that such applications must be in the public interest. In its evaluation of the public interest, the FCC states that, "the fact that a BOC will be subject to performance monitoring and enforcement mechanisms would constitute probative evidence that the BOC will continue to meet its section 271 obligations and that its entry would be consistent with the public interest."³ As a consequence, we establish a performance incentives plan to identify and prevent or remove any competitive barriers. The three critical steps for any performance incentives plan are performance measurement, performance assessment, and the corrective actions necessary if performance is deemed harmful to competition.

The CPUC has established performance measures and performance assessment methods in parallel proceedings in this docket. Our decision today establishes a complete performance assessment plan. We have created a set of procedures for allocating payments by the ILEC when OSS performance to the CLECs is deficient. In effect, we have set forth a self-executing decision model that applies barrier-identifying criteria to the performance measurement results and charges the ILECs monetary amounts for deficient performance. A self-executing plan is one that requires no further review and no new proceedings. Explicit, objective, data-based standards were established in D.01-01-037 that automatically identify inferior performance to CLEC customers that present potential "competitive barriers." Statistical tests identify potential barriers when ILEC performance to its own customers can be compared to ILEC performance to CLEC customers. Explicit performance levels, called benchmarks, identify potential barriers when there is no comparable ILEC performance.

This decision now completes the final step of the incentives plan, establishing the incentives that will be tied to any deficient performance identified by the model. The overall goal of the plan will be to ensure compliance with the FCC's directive that OSS performance shall provide competitors a true opportunity to compete.