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Carrots and Sticks

CPUC Service Quality Rules Need Teeth, Say Public Advocates

California’s inadequate enforcement of telecom service quality perpetuates inequity, said Small Business Utility Advocates regulatory attorney Itzel Hayward at a California Public Utilities Commission workshop Thursday. A public advocates panel asked the CPUC for stronger penalties against carriers and to apply plain old telephone service (POTS) quality rules to VoIP, broadband and wireless services. Commissioner Darcie Houck urged parties in docket R.22-03-016 to “think outside the box.”

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The CPUC is weighing whether to change its 2016 enforcement framework under General Order 133-D, which includes a mechanism that lets carriers avoid paying fines by promising to invest twice the amount. Also, the commission is considering applying its metrics and enforcement to technologies besides landlines. Industry balked at both concepts (see 2305190045).

With a “dramatic shift from POTS to wireless” and VoIP as primary communication methods, the CPUC is “considering how best to ensure that communication service quality requirements are appropriate and applied to the appropriate technologies,” said Houck. “Network performance is critical to ensure that people around the state can connect to emergency services in times of need. Moreover, as we settle into the new normal following the changes wrought by the COVID-19 pandemic, it’s clear that consistent access to wireless service and VoIP are increasingly essential for Californians.”

This discussion is a necessary one to ensure that Californians have access to reliable telecom services,” said Commissioner John Reynolds. The commissioner asked how the CPUC can be sure it’s measuring the right aspects of service to get customers the service quality they expect.

California’s “current system has failed to prevent … inequity from taking root and flourishing,” Hayward told the commission. “Such a state of affairs is in stark contrast to the commission’s … environmental and social justice action plan,” which is meant to address communities with predominantly people of color and less income. “The quality of service received by a community should never hinge on the racial or socioeconomic profile of the community or its businesses,” said Hayward. If California fails to change its penalty mechanism, "we’re tacitly endorsing the continuation of these disparities."

Allowing carriers to invest in networks in lieu of paying fines can exacerbate disparities between served and unserved communities because providers tend to prioritize spending in higher income areas, Hayward said. “This inadvertently provides them with an avenue to reinforce their existing biases and profit-driven strategies.”

Allegations that AT&T bases investments on demographics "don't show up in the numbers,” Regulatory Affairs Director Joshua Mathisen said on a later panel.

Existing penalty mechanisms are “not working right now,” and allowing investment in lieu of penalty isn’t producing desired outcomes, said Lucas Duffy, a regulatory analyst with the CPUC’s independent Public Advocates Office. Weak enforcement means insufficient incentives to improve service, said Duffy. Raise fines and don’t give carriers a grace period for noncompliance, he said. Also, customers should be compensated at least $5 each day they don’t have service, said the PAO official: The commission previously mandated that in the Frontier Communications bankruptcy proceeding, he said.

The CPUC can keep fines at a reasonable level for companies working in good faith to address service-quality gaps, said Center for Accessible Technology Legal Counsel Paul Goodman. But for those acting in bad faith, make it “financially unviable” not to address problems, he urged. "It has to hurt." It’s better to have one or two companies providing excellent service in an area than to have six with bad service, he added. Allowing companies to invest rather than pay penalties hasn’t created jobs, said Goodman. If the CPUC keeps that mechanism, it should force companies to pay as much as it takes to fix problems rather than capping the amount at twice the penalty, he said.

"We’re grappling with how to balance where we need to use carrots and where we need to use sticks," Houck responded to advocates. “I know there was a big focus on … whether the penalties were enough and whether the in-lieu investment is working or isn’t working, but I also think … we’re going to need to think outside the box and come up with some creative ideas.”

Charter Communications outside counsel Zeb Zankel asked if advocates were aware of anything on the record showing problems with VoIP services. Hayward told the Jenner & Block attorney she wasn’t. Goodman responded that state metrics shouldn’t distinguish among different technologies since customers see both traditional and VoIP as simply voice.

Service-quality metrics should apply to wireless, VoIP and broadband in addition to POTS, Duffy said earlier in the workshop. In 2022, 86% of Californians’ 911 calls were wireless, he said. Also, Duffy cited an FCC report saying there were 45.1 million California wireless subscribers in 2021, compared with 8 million VoIP and 3.7 million POTS subscribers. “Right now, only those 3.7 million POTS customers have service-quality protections of any kind.”

Carriers presented after our deadline at the Sacramento workshop. Industry discouraged CPUC changes in presentations distributed beforehand. “The record indicates regulatory intervention is not necessary,” said AT&T slides. “Continuing enforcement that requires incremental network investment rather than paying fines to the General Fund better supports customers and communities.” Frontier urged the CPUC to focus on rehabilitation, not retribution.

No need has been shown for VoIP service quality regulation, said the California Broadband and Video Association. Consumers vastly prefer wireless to VoIP for voice and it isn’t true that VoIP companies have a “relatively high number of outages,” said the cable association's slides. Continue to allow companies to invest rather than pay fines, it said: “Unlike fines, investment directly addresses the source of the quality issues.”