ORDER NO * * * * * * * * * * * * * * * In this Order we approve Verizon Maryland LLC s ( Verizon ) Revised

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1 ORDER NO IN THE MATTER OF THE COMMISSION'S CONSIDERATION OF THE MARYLAND CARRIER-TO- CARRIER GUIDELINES, PERFORMANCE STANDARDS AND REPORTS; AND THE PERFORMANCE ASSURANCE PLAN OF VERIZON MARYLAND INC. IN THE MATTER OF APPROPRIATE FORMS OF REGULATING TELEPHONE COMPANIES BEFORE THE PUBLIC SERVICE COMMISSION OF MARYLAND CASE NO CASE NO Issue Date: October 8, 2015 In this Order we approve Verizon Maryland LLC s ( Verizon ) Revised Maryland Performance Assurance Plan ( Revised Maryland PAP or Revised PAP ), amending it to permit the Maryland Public Service Commission s ( Commission ) Technical Staff ( Staff ) to audit the Company s data and reporting in order to determine whether Verizon is accurately reporting service quality data. We further accept Staff and Verizon s November 2014 Letter of Understanding, which resolves a number of outstanding issues in or related to Case Nos and 9133, including resolution of Staff s October 2009 Petition for Investigation Regarding Verizon s Compliance With its Performance Assurance Plan ( PAP ) ( Staff s October Petition ) 2 and issues relating to Verizon s Alternative Form of Regulation (or AFOR ). 3 1 Formerly Verizon Maryland Inc. 2 ML No Petition for Relief Pursuant to Verizon Maryland Inc. s AFOR ( Verizon s Petition ). (ML No ).

2 Additionally, with regard to Case No. 9133, we grant Staff s request to withdraw its January 2013 Request for Clarification Regarding Retail Reporting, 4 specifically a request for clarification regarding reporting requirements pertaining to Verizon s annual operational plan and monthly service quality reports. We also grant Verizon s request to withdraw, in part, its October 2011 Petition for Relief Pursuant to Verizon Maryland Inc. s AFOR ( Verizon s Petition ). 5 A. Verizon s Revised Maryland PAP On December 22, 2014, Verizon filed its Revised Maryland PAP. The purpose of these guidelines is to address service quality measurements and standards that apply to the Company s provisioning of wholesale services and network elements to competitive local exchange carriers ( CLECs ), particularly with regard to Section 271 of the Telecommunications Act of 1996, 47 U.S.C Staff had previously recommended that the use of certain statistical tests and scoring changes that could affect the issuance of penalties be examined within a carrier working group, and also had recommended a mandatory periodic audit. In its December 2014 Comments, however, Staff states that it 4 Staff s January 2013 Request for Clarification. (ML No ). (Staff agreed that once Verizon met the specified metrics under Paragraph 4(a-b) of the AFOR, the Company s special crediting obligations under those provisions were eliminated. However, Staff maintained that a similar sunset provision applied to the Company s annual operational plan and monthly service quality reports pursuant to Paragraph 52 of the AFOR.) 5 Also referred to as Verizon s October 2011 Petition Regarding Force Majeure Events Relief. (ML No ). 6 Verizon December 22, 2014 Case No Filing at 1. Measures and standards are set forth in the Carrierto-Carrier Guidelines Performance Standards and Reports ( C2C Guidelines ), and the Performance Assurance Plan [PAP] is intended to help ensure adequate wholesale service to CLECs using some of the measures and standards in the C2C Guidelines. Id. Verizon further explains: The C2C Guidelines is a consolidated document for the states in which the Federal Communications Commission ( FCC ) authorized Verizon s incumbent companies to provide long distance service under Section 271. Verizon notes that the C2C Guidelines are based on industry working group collaboration. Id. 2

3 is no longer of the opinion that either the examination of statistical methods or scoring changes are required. Staff still believes that audits, as needed, should be required. 7 Staff notes that after discussion with Verizon, a revised audit provision has been incorporated into Verizon s Revised Maryland PAP which permits examination of data accuracy through a formal audit at Staff s request. 8 Specifically, the Revised PAP states that: The Commission may audit Verizon s data and reporting, in whole or in part, to assess whether Verizon is accurately recording and reporting CLEC and Verizon service quality data. Such audits shall be initiated by Order of the Commission or at the request of Commission Staff. Staff agrees to request an audit no more frequently than every three years. The audits shall be performed, at the Commission s discretion, either by the Commission Staff or an independent auditor, selected by the Commission and paid for by Verizon. 9 Accordingly, Staff recommends adoption of Verizon s Revised Maryland PAP, noting that comments have been filed on all aspects of the plan except the revised language regarding Data Accuracy and Audits. 10 B. Verizon s AFOR Service Quality Obligations In 2010, the Commission issued Order No accepting a modified AFOR for Verizon. Among the terms of our February 2, 2010 Order, Verizon is subject to a new Service Quality Plan that makes available up to $6 million per year in credits for customers who experience out-of-service ( OOS ) conditions or missed repair or new installation appointments when Verizon misses an agreed-upon OOS metric or the COMAR repair or 7 On December 23, 2014, Staff filed Comments in Support of the Revised PAP. See ML No Id. at Verizon Revised Maryland PAP APPENDIX F Sec. I.C.2 at On December 23, 2014, Staff requested that the Commission direct Verizon to refile its C2C Guidelines (originally filed on February 22, 2011) to reflect the Company s new name and to show an effective date consistent with the effective date of the Company s PAP. Verizon filed revised C2C Guidelines on July 30, 2015, which were approved by the Commission on September 3,

4 installation missed appointment metrics. Verizon remained subject to the Plan until it met the OOS and missed appointment metrics for four consecutive quarters. Paragraphs 3 and 4 of the AFOR require Verizon to issue special service quality credits to residential customers: (i) for each quarter in which Verizon fails to clear less than 80% of residential voice OOS network trouble reports on a statewide basis within 48 hours or failed to clear at least 95% of residential OOS network troubles on a statewide basis within 96 hours and (ii) for each month the Company failed to meet the standard for Appointments Missed in COMAR (C) or COMAR (C). 11 Except with respect to certain proxy metrics, Paragraph 5 of the AFOR provides that if Verizon meets the metrics under Paragraph 4(a-b) for four consecutive quarters, its crediting obligation thereunder will cease. 12 This provision is referred to in Verizon s Petition as the Graduation Provision. Additionally, Paragraph 7 of the AFOR provides that Verizon may petition the Commission for relief from the crediting obligations of Paragraph 3 (on a case-by-case basis) in the event of acts of God or similar exigent circumstances, such as terrorist attacks, work stoppages, or intentional or negligent acts of the customer or third parties to damage Verizon s equipment or facilities. 13 Staff notes that in Verizon s Service Quality Report for the third quarter of 2012, filed on November 15, 2012, the Company stated that since it had met its metrics for four (4) consecutive quarters, the special crediting obligation under Paragraph 4 [of the AFOR] have ceased. Therefore, pursuant to the Commission s approval and Paragraph 52 of the AFOR, Verizon stated that it will cease filing the annual operational plan and monthly 11 Order at 16-17; Verizon s Petition at Verizon Petition at Order at 16; Verizon s Petition at 2. 4

5 operational and performance reports under the AFOR. 14 Staff and Verizon s Joint November 2014 Letter of Understanding address these issues. C. Staff and Verizon s November 2014 Letter of Understanding Resolving Outstanding Case No and 9133 Issues In their November 2014 Letter of Understanding, Staff and Verizon proposed settlement with regard to a number of outstanding issues in or related to these cases. The items which Staff and Verizon agree to settle include: a) Staff s January 2013 Request for Clarification Regarding Retail Reporting; b) Verizon s October 2011 Petition Regarding Force Majeure Events; 15 and c) Staff s October 2009 Petition for Investigation of Verizon s Compliance with its Performance Assurance Plan. 1. Staff s January 2013 Request for Clarification Regarding Retail Reporting Verizon agrees that it will, on a voluntary basis, provide Staff with monthly reports showing its retail service quality performance for March 2014 through October 2014 and file with the Commission (on a proprietary basis and independent of any docketed case) monthly reports showing its retail service quality reports for November 2014 through December Based on Verizon s commitment to provide these reports, Staff agrees to withdraw (without prejudice) its request for clarification pertaining to this issue Staff January 2013 Request for Clarification for Verizon s Filing Requirements. (ML No ). 15 See ML Nos , and Staff filed comments and reply comments in support of granting Verizon the limited relief requested by the Company. 16 Staff formally requested to withdraw its January 2013 Request for Clarification Regarding Retail Reporting on December 4, While withdrawing its request for clarification, Staff notes that it continues to support Verizon s request for limited relief from certain crediting obligations due to force majeure events during the third quarter of

6 2. Staff s October 2009 Petition for Investigation Staff agrees to withdraw its October 2009 Petition. In its Petition, Staff requested that the Commission: (1) initiate an investigation regarding Verizon s Maryland PAP compliance; (2) issue a show cause order addressing why Verizon should not be found to have violated the terms of Commission Order No and subsequent orders; (3) levy sanctions against Verizon for the Company s alleged failure to comply with a lawful Commission Order; and (4) issue an order directing Verizon to cease enforcing provisions of its Wholesale Advantage Service Agreements with CLECs which violate Order No Pursuant to their November 2014 Letter of Understanding, Staff and Verizon stipulate that [i]n light of the retail service quality reports that Verizon will provide [as discussed above], and in the context of changes in the wholesale telecommunications market over the years, Staff agrees to withdraw its October 2009 Petition Verizon s Petition Regarding 2011 Force Majeure Events Verizon and Staff stipulate that in light of the Company s subsequent graduation from crediting obligations on a then-prospective basis (even without regard to the third quarter of 2011) Verizon s Petition with respect to graduation became moot. Therefore, Verizon seeks to withdraw its Petition in part, to the extent that it pertained to graduation. However, Verizon maintains that its Petition is not moot as to retrospective credits for the third quarter of 2011; that is, the Petition is not moot with respect to Verizon s request to forgo having to pay special credits under AFOR Paragraph 3 for its 17 Staff s October 2009 Petition and Verizon s response were considered during the Commission s November 20, 2009 Administrative Meeting. The matter was taken under advisement. 18 Staff formally filed its request to withdraw its October 2009 Petition on December 23,

7 results in the third quarter of Staff supports Verizon s request for relief from payment penalties relating to underperformance during the third quarter of In its October 2011 Petition, Verizon claimed that it failed to meet certain service quality requirement due to the unprecedented confluence of force majeure events during August and September Verizon states that those events included a work stoppage, an earthquake, a hurricane and a tropical storm, all occurring over a period of weeks. 22 The Company emphasizes that since the implementation of the AFOR it has exhibited a significant level of improvement in its service results, and that it made every effort to ensure that service was restored quickly following the 2011 force majeure events. Therefore, Verizon requests that the Commission grant relief by permitting the Company to forgo paying penalties for its third quarter 2011 OOS and September 2011 repair appointment results. Moreover, the Company requests that it be permitted to remove the third quarter of 2011 from the calculation of consecutive quarters under Paragraph 5 of the AFOR. Staff supports Verizon s Petition, to the extent that it is not moot. In its comments on this issue, Staff found that an econometric analysis of the impact of the force majeure events demonstrated to a degree of statistical significance that force majeure events of August and September 2011 negatively affected Verizon s service quality results, and Staff recommended that the Commission grant Verizon s Petition with respect to payment of penalties and the calculation of consecutive reporting for the third quarter of Staff/Verizon November 2014 Letter of Understanding at Id. 21 ML No Id. Verizon claims otherwise: excellent service quality results in the ten months leading to the events, as evidenced by its monthly and quarterly filings. Id. 7

8 The Communications Workers of America ( CWA ) requested that the Commission hold evidentiary hearings in order to more fully assess Verizon s work stoppage and labor-force related claims. 23 The Maryland Office of People s Counsel ( OPC ) also requested evidentiary hearing as it relates to Verizon s petition to forgo payment penalties for underperforming during the third quarter of OPC argues that because Verizon has thrown multiple variables into the stew including work stoppage, possible incidences of sabotage and an earthquake, evidentiary hearing are needed in order to determine what impact the weather alone may have played in Verizon s reliance upon the force majeure clause. 24 Commission Decisions Verizon s Maryland PAP was first approved by the Commission in 2002 and was again approved in Since then, the Verizon New York PAP, the guidelines upon which the Maryland PAP is based, has been updated, revised, and modified several times. However, until now, PAP revisions had not been adopted in Maryland. With Verizon s revision of its PAP to permit Staff to audit the Company s data and reporting in order to determine whether Verizon is accurately reporting service quality data, and Staff s acceptance of this revision, absent objection from any other interested party, Verizon s Revised Maryland PAP will be approved CWA urged that the Commission should not allow Verizon to graduate in its service quality metrics by excluding a quarter for which the Company has provided unsubstantiated charges of sabotage and disruption caused by a labor dispute. (ML No ). 24 OPC Comments at 4. (ML No ). 25 Verizon s Maryland PAP is largely modeled the guidelines adopted by the New York Public Service Commission with regard to the Company s New York affiliate (Verizon New York). Staff notes that Verizon s PAP has stood the test of time, and recommends that the Company s Revised Maryland PAP be approved. 8

9 Additionally, Staff and Verizon have worked diligently to resolve a number of other outstanding concerns relating to monthly reporting by the Company pertaining to retail service quality performance, crediting obligations based on force majeure events during the third quarter of 2011, and alleged violations of terms set forth in Commission Order No (and related orders). As described in their November 2014 Letter of Understanding, Verizon worked cooperatively with Staff to update its Maryland PAP and its C2C Guidelines resulting in a Revised Maryland PAP that Staff supports and recommends that we approve. We accept Staff and Verizon s November 2014 Letter of Understanding as it relates to Case Nos and 9133 and permit Staff to withdraw (without prejudice to either party) its January 8, 2013 Request for Clarification in Case No (ML No ) pertaining to the Company s Third Quarter 2012 quarterly service quality report. With regard to this matter, Verizon agrees to provide monthly reports showing its retail service quality performance for March 2014 through October 2014 and will file with the Commission (on a proprietary basis) monthly reports showing its retail service quality reports for November 2014 through December We grant Staff s request to withdraw its October 2009 Petition. Staff and Verizon agree that in light of the service quality reports that Verizon will provide and in the context of changes in the wholesale market over the years, no investigation as previously requested by Staff is required Pursuant to Staff and Verizon s November 2014 Letter of Understanding, Verizon s commitment to provide these reports is subject to any relevant change of law. In December 2015, either Staff or Verizon may seek to revisit to what extent, if any, such reporting should continue. 27 For instance, Verizon s obligation to provide unbundled network element services platforms ( UNE-P or UNE-Platform, i.e., a combination of UNEs that allow end-to-end service delivery without any facilities) [one of the issues for which Staff sought investigation] was eliminated by the FCC as of March Verizon and CLECs entered into commercial agreements beginning in 2005, as they were encouraged by the FCC to do. Therefore, at least one aspect of the request for investigation pertained to a service that the FCC no longer 9

10 Finally, with regard to Verizon s request for relief from penalty payments for service quality underperformance during the third quarter of 2011, we (a) accept the withdrawal of Verizon s Petition as to the graduation issue as moot, and (b) we grant Verizon s request permitting the Company to forgo paying penalties for its third quarter 2011 OOS and September 2011 repair appointment results. We agree that under the quarterly approach to measuring service quality, the third quarter of 2011 should be excluded from evaluating consecutive quarters because the Company s service quality during that quarter was adversely affected significantly by force majeure events, events beyond the Company s control. We find that including the third quarter of 2011 is not representative of the Company s overall performance and does not assist the Commission in analyzing Verizon s service quality under normal conditions. In addition to Verizon s comments, Staff conducted comprehensive econometric and regression analyses that demonstrated the statistical significance of the negative impact of these force majeure events upon Verizon s third quarter 2011 OOS and September 2011 repair appointment results. Staff s analysis of the seism (impact of strike and earthquake) revealed that there was statistically significant evidence that the number of network troubles per 100 lines increased due to the strike and the earthquake. 28 Similarly, Staff s analysis of the storms variable shows that there was statistically significant evidence that the number of network troubles per 100 lines increased requires Verizon to provide. See e.g., Verizon s Supplemental Brief (in response to Staff s October 2009 Petition) dated January 10, 2010 at 3-4 (ML No ). 28 Staff Comments at 13. (ML No ). 10

11 significantly due to Hurricane Irene and Tropical Storm Lee in August and September We find Staff s analysis of these variables persuasive and supportive of Verizon s request for relief. Accordingly, we grant Verizon s request for relief from penalty payments for service quality underperformance during the third quarter of Conclusion For the reasons set forth herein, we grant the relief requested by Staff and Verizon in their November 2014 Letter of Understanding regarding Staff s January 2013 Request for Clarification Regarding Retail Reporting, Verizon s October 2011 Petition Regarding Force Majeure Events, and Staff s October 2009 Petition for Investigation of Verizon s Compliance With Its Performance Assurance Plan. Additionally, as discussed herein, we approve Verizon s Revised Maryland PAP, and we grant Verizon s request for relief permitting the Company to forgo penalties for its third quarter 2011 OOS and September 2011 repair appointment results. IT IS, THEREFORE, this 8th day of October, in the year Two Thousand Fifteen by the Public Service Commission of Maryland, ORDERED: (1) That following 30-day notice and opportunity for comment period, and absent objections from any other interested party to the revised PAP regarding data accuracy and audits, Verizon s Revised Maryland PAP shall be deemed approved. Absent comments opposing Verizon s Revised Maryland PAP, the Company shall file a compliance filing within 45 days of this Order implementing its Revised Maryland PAP; 29 Id. 11

12 (2) That Staff and Verizon s November 2014 Letter of Understanding as it relates to Case Nos and 9133 is accepted, and Staff s request to withdraw its January 8, 2013 request for clarification in Case No (ML No ) pertaining to the Company s Third Quarter 2012 quarterly service quality report is granted; (3) That Staff s request to withdraw its October 2009 Petition for Investigation Regarding Verizon s Compliance With its Performance Assurance Plan is hereby granted; (4) That (a) Verizon s request to withdraw its Petition as to the graduation issue is hereby moot, and (b) that the Company s request permitting the Company to forgo paying penalties for its third quarter 2011 out-of-service and September 2011 repair appointment results is hereby granted. By Direction of the Commission /s/ David J. Collins David J. Collins Executive Secretary 12