Regulatory News - State Regulators Go After Ameritech

Posted: 11/2000

State Regulators Go After Ameritech
By Kim Sunderland

Regulators are holding Ameritech Corp.’s feet to the fire, because of serious
service quality problems in its five-state region.

While Ameritech (www.ameritech.com)
executives say the company’s service problems are being fixed, state regulators
in Indiana, Illinois, Michigan, Ohio, and Wisconsin say the corrections aren’t
happening quickly enough. In a unique strategy to force the company, and its
parent company, SBC Communications Inc. (www.sbc.com),
to address the ongoing operational deficiencies, the states’ regulatory
commissions are conducting a regional joint forum to address Ameritech’s QoS
deficiencies.

"SBC/Ameritech … has in recent months consistently demonstrated its
inability to effectively operate the local exchange telecommunications
operations that it controls," according to a joint statement the
commissions’ chairpersons. "This region wide forum is unprecedented in
scope and cooperation and will represent a first of its kind effort to monitor
SBC/Ameritech’s service quality performance."

Michael Leppert, director of external affairs for the Indiana Utility
Regulatory Commission (IURC, www.ai.org/iurc),
says the IURC has been talking to the public utility commissions in the other
four Ameritech operating states for months about such a plan, because they
believe the QoS problems have increased this year.

For example, the Wisconsin Public Service Commission (WPSC, www.psc.state.
wi.us) says the company’s monthly volume of complaints had surged 800
percent since May.

SBC spokesman David Pacholczyk confirms that Ameritech is experiencing the
same kinds of problems in the five states. He says Ameritech is working as fast
as it can to correct the problems, but with nearly 20 million business and
residential customers and more than 22 million access lines, it’s a tough job.

Illinois Ills

In Illinois, Ameritech is buried under a mountain of consumer complaints at
the same time it wants to raise rates, according to sources.

"That is the epitome of a monopoly and it’s bad for everyone," says
Gary Mack, executive director of the Illinois Coalition for Competitive
Telecommunications (ICCT), a group that advocates for public policies to promote
competition in the Illinois local phone market.

The Illinois Commerce Commission (ICC, www.icc.state.il
.us) is investigating Ameritech’s increase in service failures since its
takeover by SBC last year. It reports preliminary anecdotal evidence which
indicates that SBC/Ameritech is "falling significantly short in achieving
wholesale and retail service quality standards."

Since 1998, An ICC team has monitored the company’s retail service quality
performance to small business and residential consumers. ICC staff also has
tracked SBC/Ameritech’s service to CLECs, says ICC Chairman Richard L. Mathias,
who has been meeting with the company’s senior officials to discuss service
quality.

Mathias says that that despite Ameritech’s contention that its merger with
SBC is part of the problem, "Ameritech Illinois was experiencing service
quality problems prior to its merger with SBC."

Mathias advised SBC/Ameritech to get its ducks in a row before it continues
its application to provide long-distance service in four of the five former
Ameritech states.

"It is incomprehensible to me that SBC/Ameritech-Illinois, whose current
customer service quality raises … grave questions … could seek authority to
expand the services it provides," Mathias says.

Mathias also sent a letter to Edward A. Mueller, president and CEO of
Ameritech Illinois, demanding that complete information be provided to the ICC
explaining how the company plans to rectify its QoS problems.

Ameritech executives provided the ICC with details and a timeline on a
service quality initiative, which they say began several months ago.

Former Ameritech president Joset Wright said service shortfalls in
installation and repair times essentially stemmed from the unexpected loss of
nearly 10 percent of the company’s experienced technicians last year to
retirements; and unanticipated growth in customer demand this year.

To remedy the shortfalls, Jim Gerber, general manager of installation and
repair for the Chicago area, says Ameritech launched an aggressive hiring
program. He also says that Ameritech is conducting round-the-clock training, is
providing employees with advanced equipment to enhance individual productivity
and is investing more than $1 billion in its Illinois infrastructure to build a
more reliable network.

Wright said the full impact of the enhancement programs would be felt within
nine months.

Michigan Mishaps

The Michigan Public Service Commission (MPSC, www.cis.state.mi
.us/mpsc) took action against Ameritech following thousands of customer
complaints regarding poor service this year, according to MPSC staff.

The MPSC issued orders to address the concerns. First, it opened a proceeding
to establish enhanced standards and enforcement provisions for the company’s
service quality.

In a related order, the MPSC ordered Ameritech Michigan to explain how it’s
handling of bill credits during service outages comply with the commission’s
rules and the Michigan Telecommunications Act.

Ameritech had to explain how it provides the credits, and identify any
charges or conditions it imposes on requests for repair service, as well as how
these charges and conditions meet state rules. Ameritech also had to explain how
it manages service requests.

"We are aware that nearly 2,000 Ameritech Michigan customers contacted
our office in August to voice their frustration with the company’s quality of
service," MPSC Chairman John Strand said. "We have taken action to
ensure Michigan consumers that we take very seriously our duty to establish and
enforce quality standards."

In other action, the MPSC slapped Ameritech with a $1.5 million fine for not
clearing up a customer’s credit record, which caused her employment and credit
problems. Ameritech spokesman Mike Barnhart apologized for the problem and
acknowledged the company failed to follow through on clearing the woman’s
credit. But he says the company believes the fine is too steep and an appeal is
being considered.

Righting the Wrongs

To fix the problems, Ameritech undertook a six-month initiative to improve
installation and repair times throughout the region. Ameritech’s Mueller says
that despite efforts to upgrade service, "results are not showing up fast
enough for our customers or for our company."

"We expect customers quickly to begin seeing service quality
improvements," says Mueller, who was named to the top job in a corporate
shakeup unveiled a day after Ameritech service was assailed at a Sept. 6 hearing
in Chicago.

Ameritech is adding 562 technicians to its work force of 26,000 in the region
by the end of the year, and has plans to add another 3,300 technicians next
year.

The company is shifting 615 network technicians in the region from
construction to installation and repair work.

In addition, other SBC companies are sending 343 network employees to the
Ameritech region, where they will work to restore installation and repair QoS
levels.

Mueller expects the order backlog for technician visits will be eliminated,
and that Ameritech technicians will respond to 95 percent of out-of-service
repair calls within 24 hours.

Ameritech also has promised to provide credits equal to the average monthly
service charge for any residential customer who is out of service for more than
48 hours after reporting trouble, and to any who wait more than seven calendar
days for installation of basic telephone service.

In addition, Ameritech will continue its ongoing network enhancement program
by:

Forcing the Issue

But SBC/Ameritech’s attempts to address its service quality levels "are
wholly insufficient," the regulators say.

The SBC/Ameritech QoS program has three flaws. First, it falls short of
meeting existing minimum service quality standards in place by many of the state
commissions in Ameritech’s region. It doesn’t compensate customers–including
retail, wholesale and CLECs–who have been inconvenienced. Finally, it
"assumes that a refund equal to the basic monthly service charge is
appropriate compensation for its inability to provide minimum levels of service
to consumers."

The commissions have ordered SBC/Ameritech’s senior management team to devise
a better plan. The commissioners will convene a public joint forum on the
situation, allowing SBC/Ameritech executives a chance to respond to the
regulators’ concerns.

Initial reports are positive that regional regulatory work can work. State
regulators in Ameritech’s region are hoping for the same outcome.

"The customers in the SBC/Ameritech operating territory demand better
service from their incumbent local exchange telecommunications carrier, and it
is our hope that this joint forum will present an opportunity to take the first
step toward meeting these demands," the regulators said.