CPUC allows AT&T, Frontier to tap dance their way out of fines for bad service

by Steve Blum • , , , ,

AT&T and Frontier Communications were fined $2.2 million and $823,000, respectively, by California Public Utilities Commission, for “chronic” service failure, primarily in rural California. Sorta. Kinda.

Well, not really.

At its meeting in Fresno last week, the CPUC voted unanimously to allow Frontier and AT&T to skip the fines, which were mostly for taking too long to restore telephone service for customers who experienced outages. In return, the companies promised to make “incremental” investments in improving service quality. The amount of those supposedly incremental investments are claimed to be twice the amount of the fines. Which is allowed under a baffling and irregular decision made two years ago by the commission.

The resolution regarding the AT&T fines noted the difficulty in figuring out what’s incremental and what’s money that would have been spent anyway. CPUC staff asked AT&T for list of what it planned to spend on “construction and rehabilitation projects”. AT&T responded with a list of repair work it was doing, rather than “planned projects focused on the rehabilitation of poor performing central offices”. That was because AT&T claimed not to know what it would have spent normally, because “they do not budget for specific projects; all project work is identified on a rolling basis and reprioritised based on the ability to reduce high maintenance costs”.

Translation: we can tell you anything we want and you have to believe us because you can’t prove differently.

After some back and forth, CPUC staff accepted AT&T’s story and recommended that commissioners accept AT&T’s claims and give the company two years to demonstrate “the results of their proposed projects to measurably improve service quality in its network”.

Frontier’s explanations are similarly wooly.

After the vote, which was on a consent agenda – a bunch of resolutions bundled together – commissioner Clifford Rechtscaffen said the policy of letting telephone companies fine themselves and keep the money needs a second look…

These are a set of resolutions we just approved under a new program we initiated a couple of years ago as an amendment to general order 133-D, and in particular they allow telephone companies who have been found to have violated our service quality requirements to substitute paying a penalty by making investments to improve service quality that are at least twice the amount of the penalty. I understand that this investment option was a creative way to try to address longstanding service quality deficiencies.

At the time the resolution was adopted a couple of commissioners expressed concerns and reservations about it, including commissioner Randolph, who asked the question of whether or not we would really be able to tell whether or not the investments that were made were incremental to what telephone companies would be doing in the normal course of business.

We’ve approved these three investment alternatives, but in practice we can now see that it is difficult, in fact, to determine whether or not the investments are incremental. This required a lot of staff time working with the companies to figure out what was new, what was not new and where the best places for the investments would be. I commend the staff for reaching good conclusions here. I continue to have some reservations about this option. I think we want to look carefully and see whether or not the investments really do improve service quality and whether or not this option makes sense in terms of our larger enforcement objectives.

The option doesn’t make sense. There’s no indication that either AT&T or Frontier offered any two year budgets, which is the only way to even begin determining whether their proposed spending-in-lieu-of-fines is, in truth, extra money on top of what they’d spend anyway. Or whether they’re just shifting money from one line item to another.

Letting Frontier and AT&T pay fines to themselves was a bad decision in the first place, and the details behind last week’s commission vote proves it.