DATE:	September 30, 2010
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Regulatory Analysis (Watts) Division of Service, Safety & Consumer Assistance (Vickery) Office of the General Counsel (Gervasi)
RE:	Docket No. 100288-TL – Petition of Quincy Telephone Company d/b/a TDS Telecom/Quincy, Smart City Telecommunications LLC d/b/a Smart City Telecom, GTC, Inc. d/b/a FairPoint Communications, Northeast Florida Telephone Company d/b/a NEFCOM, ITS Telecommunications Systems, Inc., and Frontier Communications of the South, LLC, for waiver of requirements of Rules 25-4.0185, 25-4.066, 25-4.070, 25-4.073, and 25-4.110(6), F.A.C., relating to service quality or in the alternative the waiver of Rules 25-4.0185, F.A.C., relating to service quality reporting, and 25-4.073, F.A.C., relating to answer time requirements.
AGENDA:	10/12/10 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brisé
CRITICAL DATES:			11/15/10 -- date by which rule waiver request must be ruled upon
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\100288.RCM.DOC

 

Case Background

            Quincy Telephone Company d/b/a TDS Telecom/Quincy, Smart City Telecommunications LLC d/b/a Smart City Telecom, GTC, Inc. d/b/a FairPoint Communications, Northeast Florida Telephone Company d/b/a NEFCOM, ITS Telecommunications Systems, Inc., and Frontier Communications of the South, LLC, are classified as small local exchange telecommunications companies (LECs), having had fewer than 100,000 access lines in service on the dates they were certificated by the Commission. They are  hereinafter referred to as “the Small LECs.”

            On May 13, 2010, the Small LECs filed a petition for waiver of the requirements of Rules 25-4.0185, 25-4.066, 25-4.070, 25-4.073 and 25-4.110(6), Florida Administrative Code (F.A.C.), relating to service quality, or in the alternative, a waiver of Rule 25-4.0185, F.A.C., relating to service quality reporting, and Rule 25-4.073, F.A.C., relating to answer times requirements.[1] By way of a Staff Data Request dated June 1, 2010, staff requested, among other things, that the Small LECs further demonstrate how the purpose of the statutes underlying those rules would be or had been achieved by other means if the Commission were to grant the rule waiver request. The Small LECs requested to meet regarding staff’s concerns, and a meeting was held on June 24, 2010, to discuss the matter. In attendance were staff, representatives of the Small LECs, and a representative of the Office of Public Counsel.

            On July 19, 2010, upon consideration of the concerns raised in the Staff Data Request and at the June 24, 2010 meeting, the Small LECs filed an amended petition for rule waiver, narrowing their request to a request for waiver of the requirements of Rule 25-4.073, F.A.C., relating to answer time requirements, and Rule 25-4.0185, F.A.C., relating to service quality reports. Notice of the amended petition was published in the Florida Administrative Weekly on August 6, 2010.  The comment period expired on August 20, 2010, and no comments were received.

This recommendation addresses whether the Commission should grant the Small LECs’ amended petition for rule waiver. The Commission has jurisdiction pursuant to sections 364.01(4), 364.03, 364.17, and 364.183(1), Florida Statutes (F.S.), as well as section 120.542, F.S.

Discussion of Issues

Issue 1: 

 Should the Commission grant the amended petition for waiver of the requirements of Rules 25-4.073 and 25-4.0185, F.A.C.?

Recommendation: 

 Yes, the Commission should grant the amended petition for waiver of the requirements of Rules 25-4.073 and 25-4.0185, F.A.C. (WATTS, VICKERY, GERVASI)

Staff Analysis: 

 Rule 25-4.073, F.A.C., entitled Answering Time, contains call answering time requirements for telephone utilities to answer basic customer calls to repair offices and requires that each company report its answer time performance pursuant to Rule 25-4.0185, F.A.C.  Rule 25-4.0185, F.A.C., entitled Periodic Reports, requires that the Small LECs file reports with the Commission demonstrating their level of compliance with quality of service standards, by filing the information required by Commission Form PSC/SSC 28 (10/09), entitled “Engineering Data Requirements,” on a semiannual basis.

The Small LECs point out that in 2009, the Florida Legislature amended Chapter 364, F.S., by limiting the Commission’s jurisdiction over the service quality of an ILEC to quality of service for basic local telecommunications service.[2]  Also in 2009, the Commission limited the application of several service quality rules to basic local telecommunications service as defined by Chapter 364, F.S.  Thereafter, beginning in January 2010, the amended rules require the large LECs to begin reporting service quality results under Rule 25-4.0185, F.A.C., for basic customers only.  By Order No. PSC-10-0077-PAA-TL,[3] the Commission interpreted “basic local telecommunications service” to mean a single residential line with no presubscribed interexchange carrier, consistent with section 364.02(1), F.S.

The Small LECs state that absent a waiver, the amended rules, together with the clarified definition of “basic local telecommunications service,” will require them to make Florida-specific modifications to internal operating systems or perform manual audits to collect and report basic-only data for service installation and repair. With regard to answer times, the Small LECs use integrated voice response systems that allow customers to transfer to a live attendant. The call routing systems used by the Small LECs do not distinguish between residential basic and non-basic customers, and they are not aware of a cost-effective solution to separate calls between residential basic and non-basic customers.

The Small LECs advise that as of January 31, 2010, they had the following numbers of residential access lines that meet the new definition of a basic service: TDS Telecom, 134; Smart City Telecom, 249; FairPoint 868; NEFCOM, 11; ITS, 93; and Frontier, approximately 23.  As a group, approximately 1,295 of the Small LECs’ total residential access lines (less than 2.2%) qualify as basic local telecommunications service subject to the Commission’s quality of service rules.  Moreover, the Small LECs state that because the number of their basic local residential service customers is small, the level of service activity for these customers is also low.  The Small LECs provided the results of a manual audit that they performed of residential installations and repairs from September – November 2009, showing a low level of service activity for these customers.  The Small LECs state that the number of basic local telecommunications customers and the low level of service activity for these customers do not justify modifying their call answering processes and data gathering systems to enable them to ascertain whether the Commission’s answer time rule has been met for basic local telecommunications customers or to prepare the periodic service quality reports required by Commission rule.

I.          Requirements of Section 120.542(2), F.S.

Section 120.542(2), F.S., provides a two-pronged test for determining when waivers and variances from agency rules shall be granted, as follows:

Variances and waivers shall be granted when the person subject to the rule demonstrates that the purpose of the underlying statute will be or has been achieved by other means by the person and when application of a rule would create a substantial hardship or would violate principles of fairness.  For purposes of this section, “substantial hardship” means a demonstrated economic, technological, legal, or other type of hardship to the person requesting the variance or waiver.  For purposes of this section, “principles of fairness” are violated when the literal application of a rule affects a particular person in a manner significantly different from the way it affects other similarly situated persons who are subject to the rule.

           

            A.        The Purpose of the Underlying Statutes

 

            The purpose of section 364.01(4), F.S., underlying Rules 25-4.073 and 25-4.0185, F.A.C., is to ensure that basic local telecommunications services are available to all consumers in the state at reasonable and affordable prices and to encourage competition through flexible regulatory treatment among telecommunications service providers. The purpose of section 364.03, F.S., underlying both rules, is to assure fair, just and reasonable rates and service and the provision and maintenance of suitable and adequate telecommunications facilities and connections for telecommunications services.

 

            With respect to the request for waiver of Rule 25-4.073, F.A.C., the Small LECs state that the goal of reasonable customer service will be achieved through the effect of competitive forces, and that section 364.01(4), F.S., empowers the Commission to facilitate the transition to a more competitive telecommunications marketplace. The Small LECs state they are subject to an increasing amount of competition from wireless and VOIP providers using a cable platform, and they state that these competitive pressures provide a real incentive for them to provide quality service, including answering customer calls in a timely manner.  Moreover, the Small LECs are not aware of any statute specifying that LECs answer phone calls from customers within a specific amount of time or directing the Commission to adopt a rule governing answer time.

            On August 16, 2010, the Small LECs filed their response to an amended Staff Data Request dated August 2, 2010, for additional information regarding the amended petition.  In that response, the Small LECs state that under the amended petition, the Commission would monitor customer service by considering the number of customer complaints registered against each of the Small LECs, and that reasonable customer service would continue to be measured relative to the Commission’s service quality rules, except for answer time.  The Small LECs note that they do not seek waiver of the requirements for installation or repair under the amended petition, and they recognize that providing quality service to their customers is an important factor in a competitive marketplace.

 

            With respect to the request for waiver of Rule 25-4.0185, F.A.C., the Small LECs propose that in lieu of filing periodic reports, customer service issues be addressed on an individual customer basis if and when a complaint is filed. The Small LECs believe that this approach will achieve the statutory goal of reasonable customer service without the expense associated with preparing and filing periodic reports. The Small LECs state that the level of customer complaints filed with the Commission is very low and demonstrates that operating on a case-by-case, individual complaint basis is a reasonable alternative to periodic reporting.  For the period from January 1, 2009 to December 31, 2009, the level of customer complaints in total, whether founded or unfounded, filed with the Commission against each of the Small LECs is as follows: TDS Telecom, 3; Smart City Telecom, 0; FairPoint, 8; NEFCOM, 1; ITS, 0; and Frontier, 0.  The Small LECs believe that the reporting requirements in the rule can be replaced with a commitment to work with the Commission on an individual customer complaint basis, thereby achieving the underlying purpose of the statutes that form the basis for the reporting rules.  Moreover, they do not believe that reporting combined residential basic and non-basic customers will provide the Commission with any relevant information as to whether they are meeting the quality of service standards for the lines subject to the Commission’s jurisdiction.

 

            B.         Substantial Hardship and Principles of Fairness

 

            The Small LECs assert that application of the answer time and reporting rules to the very small number of customers receiving basic local telecommunications service would be a substantial hardship because compliance would require Florida-specific modifications to internal operating systems in order to distinguish between residential basic and non-basic customers, or in the alternative, would require a manual review of potentially thousands of work orders to identify those that may fall under the definition of basic service.[4] Since fewer than 2.2% of residential customers are classified as “basic,” the Small LECs do not believe that the costs associated with modifying operating systems or conducting manual audits to prepare periodic reports is cost-effective.  Moreover, the Small LECs believe that the low level of service activity for these customers does not justify modifying their call answering processes and data gathering systems to enable them to ascertain whether the Commission’s answer time rule has been met, or to prepare the periodic service quality reports required by Commission rule.  The Small LECs believe that requiring them to comply with these rules for the very small number of basic service customers they serve would impose a financial burden on them relative to the amount of useful information that doing so will yield.

 

            Moreover, in their response to the amended Staff Data Request, the Small LECs state that they will be able to respond to staff data requests concerning new service orders and troubles for basic residential customers, but that in most cases required data collection will be done manually on an as needed basis and will be time-consuming and expensive.  They suggest that the need for such data requests should be limited to audits consistent with Rule 25-4.210, F.A.C., or if there is an increase in basic customer service complaints such that the Commission believes further review is necessary.

 

II.         Conclusion

 

            Staff notes that section 364.052(2)(b), F.S., requires the Commission to regulate the small LECs differently from the large LECs. That section requires the Commission to adopt, by rule, streamlined procedures for regulating the small LECs, and states that “[t]hese procedures shall minimize the burdens of regulation with regard to audits, investigations, service standards, cost studies, reports, and other matters, and the commission shall establish, by rule, only those procedures that are cost-justified and are in the public interest so that universal service may be promoted.”  Staff believes that granting the Small LECs’ petition for waiver of the requirements of Rules 25-4.073 and 25-4.0185, F.A.C., comports with the Legislature’s intent that the small LECs be afforded regulation different from that which applies to the large LECs.

            Rule 25-4.210, F.A.C., implements section 364.052(2)(b), F.S., and, among other things, prohibits staff from conducting a service evaluation of a small LEC more than once every four years, unless there is a compelling reason to do so.  Staff believes that granting the subject rule waiver request will further streamline the regulation of service standards for these Small LECs and will thereby also promote universal service. Approving the waiver does not diminish the Commission’s authority or ability to investigate or review any one of the Small LECs’ performance should circumstances dictate; i.e., by way of data requests regarding installation and repair.

            Staff recommends that the Commission should grant the Small LECs’ amended petition for waiver of the requirements of Rules 25-4.073 and 25-4.0185, F.A.C., because they have demonstrated that the purpose of the underlying statutes will be achieved by other means, and that application of these rules would create a substantial hardship.

 

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes, if no person whose substantial interests are affected by the proposed agency action files a protest within 21 days of the issuance date of the order arising from this recommendation, the docket should be closed upon the issuance of a consummating order. (GERVASI)

Staff Analysis: 

 If no person whose substantial interests are affected by the proposed agency action files a protest within 21 days of the issuance date of the order arising from this recommendation, the docket should be closed upon the issuance of a consummating order.