Network Exam of AT&T and Frontier/Verizon

UPDATE: Network Exam of AT&T and Frontier/Verizon, Phase I examined the period of 2010-2017 and Phase II examined the period of 2018-19

Definition

The Network Exam is an examination of the telecommunications networks' performance and related services, policies, and practices of Pacific Bell Telephone Company dba AT&T California (AT&T) and Verizon California Inc. (Verizon) [currently Frontier California] as ordered by Decision (D.) 13-02-023.

Proceedings and Decisions

Rulemaking (R.) 11-12-001 – “Order Instituting Rulemaking to Evaluate Telecommunications Corporations Service Quality Performance and Consider Modification to Service Quality Rules.”
Decision (D.) 13-02-023 – “Decision Affirming Provisions of the Scoping Memo and Ruling.”
Decision (D.) 15-08-041 – “Decision Affirming Commission Direction to Conduct the Network Evaluation Study”

Decision (D.) 20-12-021 – “Decision Addressing Carriers' Confidentiality Claims Related to Network Study Ordered in Decision 13-02-023, as Affirmed in Decision 15-08-041”

D.20-12-021 addresses the confidentiality claims of AT&T California and Frontier California in relation to the Network Exam. The Decision orders a majority of the Network Exam Report to be made public. The Commission directs staff to make limited redactions to information that, if revealed, could pose a security risk. The Commission orders Chapters 1, 2, 4 (including 4A, and 4F), and 11 of the report and the Table of Contents to be made available in their entirety on the Commission's website within 30 days of the effective date of the decision. The Commission also orders Chapters 3, 5, 6, 7, 8, 9, 10, and 12 to be redacted consistent with the orders in the Decision and to be made available within 30 days of the Decision's effective date. D.20-12-021, Ordering Paragraphs 1 and 2, requires staff to redact Chapters 3, 5, 6, 7, 8, 9, 10, and 12 consistent with the conclusions in the decision. Accordingly, no redactions were made to Chapters 5, 6, 7, and 8. Please see below, for the complete report for Phase I.

The Phase II report will be posted as each chapter is reviewed for confidentiality claims consistent with D.20-12-021.

Purpose of Study

Pursuant to D.13-02-023, “the performance of Pacific Bell Telephone Company dba AT&T California (AT&T) and Verizon California Inc. (Verizon) [currently Frontier California] has consistently failed to meet existing service quality standards required by General Order 133-D.” The goal of the Network Examination is to evaluate the condition of the telecommunications Service Providers/Carriers’ wired network infrastructure, facility, services, and best practices to deliver a consistent Quality of Service (QoS) with public safety grade to their customers.

Methodology

Evaluation of Service Quality data, review of documents related to the service providers' company policies, standard operating procedures, best practices, and work rules/job duties.

Current network and operational conditions;
Adequacy of each carrier’s practices and policies in regards to the telecommunications network Operations and Maintenance (O&M), repairs, replacement, capital budget, and operating budget;
Use of capital budget for network upgrades, modifications, or improvements;
Physical inspection of a sample of carrier facilities; and
Recommendations for changes.

Data Sources

Carriers’ quarterly service quality raw data and report provided to the California Public Utilities Commission (CPUC);
Public information (media coverage, annual reports, census data);
Financial Reports (both confidential and public);
Data requests (specific information supplied by both carriers); and
Complaint information from CPUC Consumer Affairs Branch (CAB).

Key Findings from Network Exam Phase I Study:

1. Service Quality has deteriorated – Both carriers exhibited a higher relative number of outages and longer time required to restore service for outages lasting more than 24 hours.

2. Demonstrated lack of resiliency – AT&T and Frontier are not always maintaining networks to withstand environmental and weather-related conditions. Networks are not robust, both Incumbent Local Exchange Carriers (ILECs) have cut back on preventative maintenance expenditures.

3. Disinvestment in Plain Old Telephone Service (POTS) – AT&T and Frontier are putting very little investment into infrastructure that supports only Time Division Multiplexing (TDM) service. Both ILECs are relying on price increases and customer inertia to maintain the revenue stream.

4. Increased investment in broadband improves POTS service quality – AT&T and Frontier areas with higher broadband investment have a higher level of POTS service quality and better performance on all General Order 133-D metrics.

5. AT&T is focusing on higher-income communities – AT&T wire centers serving areas with the lowest household incomes exhibit higher trouble report rates and longer out-of-service durations compared to the areas of higher-income communities.

6. Direct relationship between the amount of competition and service quality results – Areas with limited or no competition experience lower service quality results. Both AT&T and Frontier put more investment and attention in areas with higher rates of competitive offerings.

Network Exam Phase I Report:

Table of Contents

Chapter 1 - Executive Summary and Overview of this Report
Chapter 2 - Introduction and Background for this Study
Chapter 3 - California ILEC Network Overview (Redacted)
Chapter 4 - ILEC Responses to Service Outages
Chapter 4A - Service Quality Analysis: AT&T California
Chapter 4F - Service Quality Analysis: Verizon/Frontier
Chapter 5 - Infrastructure Policies and Procedures: AT&T
Chapter 6 - Infrastructure Policies and Procedures: Frontier
Chapter 7 - AT&T Corporate and California ILEC Investment Policies
Chapter 8 - Verizon/Frontier Corporate and California ILEC Investment Policies
Chapter 9 - Assessment of safety, redundancy and resiliency of network(s): AT&T (Redacted)
Chapter 10 - Assessment of safety, redundancy and resiliency of network(s): Frontier (Redacted)
Chapter 11 - Conclusions and Recommendations
Chapter 12 - Communications Division Staff Site Visits (Redacted)

Network Exam Report (April 2019)_Complete Report_PUBLIC per D.20-12-012 (Redacted)

NEW:

In April 2020, the Communications Division updated the Network Exam by conducting a Phase II study. This study follows Phase I, which reviewed both AT&T California’s and Frontier California’s telecommunications networks for the time period of 2010-2017. Phase II reviewed both ILEC’s data for the time period of 2018-2019. This update will provide a complete 10-year review on the condition of the wireline network infrastructure.

Key Findings from Network Exam Phase II Study:

1. Ongoing deterioration of ILEC service quality – Service quality deterioration continue for both carriers; the frequency of service outages and duration has been increasing.

2. Persistent disinvestment – Payment of dividends in excess of earnings, and annual depreciation accruals that exceeded gross additions have continued into Phase II; moreover, the infrastructure investments appeared aimed primarily at nonregulated broadband service upgrades instead of improving legacy service plants.

3. Further decline in the number of POTS customers – Both companies have stopped marketing legacy circuit-switched POTS, focusing instead on broadband service as their strategy for maintaining and growing their revenue stream while allowing POTS service to continue to degrade.

4. A focus upon broadband not POTS – Investments made in 2018-2019 continue to be primarily directed toward broadband services that bundle high-speed Internet access, Voice over Internet Protocol (“VoIP”), and Video.

5. By the end of 2019, AT&T California had become an even smaller part of the overall AT&T corporate organization than it had been two years earlier. - AT&T California’s share of total AT&T Inc. revenues has fallen from 7.80% in 2010 to 3.66% in 2019.

6. Failure to adapt network infrastructure to withstand varying weather and environmental conditions – The strong correlation between significant adverse weather conditions and the incidence of service outages in greater Los Angeles in Phase I is now occurring statewide due to failure to adapt a proper weatherproofing of network infrastructure to withstand varying weather and environmental conditions.

7. Effect of wildfires upon service quality and infrastructure investment – Unlike for weather, we found no identifiable correlation between wildfire events and elevated service outage rates.

8. Investment focus on higher-income communities – This same pattern persisted into the 2018-2019 study period for Phase II.

9. Increased focus on areas most heavily impacted by competition – Both carriers continued to experience a persistent and massive erosion in demand for POTS line over the 2018-2019 study period.

10. Financial capability – AT&T Inc. has the financial resources to maintain and upgrade its wireline network in California but has been pulling capital out of the state rather than putting new capital into its network here. Frontier has a strong interest in pursuing such upgrades but lacks the financial capacity to make the necessary investments.

11. VoIP service quality – AT&T VoIP service experiences a slightly higher rate of service outages than AT&T legacy services. VoIP is dependent upon locally-provided power, battery backup, and customer premises equipment that is not generally required with POTS.

12. CPUC Consumer Affairs Branch (CAB) complaints – It is not possible to link CAB complaints with corresponding ILEC trouble reports. However, complaints relating to Frontier service that CAB received in 2018-2019 were substantially greater than AT&T.