The purpose of Title 35-A is to ensure that there is a regulatory system for public utilities in Maine that is consistent with the public interest and with other requirements of law and to provide for reasonable licensing requirements for competitive electricity providers. The basic purpose of this regulatory system is to ensure safe, reasonable and adequate service and to ensure that the rates of public utilities are just and reasonable to customers and public utilities. 35-A M.R.S.A §101.
It is this statutory mandate that guides the Commission with regard to the regulation of service quality for public utilities, including telephone utilities. If the Commission finds that a telephone utility is failing to meet its obligation to provide reasonable and
adequate service, after a proper investigation is conducted pursuant to 35-A M.R.S.A. § 1303 and a finding of inadequate service is made, the Commission may by Order
establish or change terms, conditions, measurement, practice, service, or acts as it finds just and reasonable. 35-A M.R.S.A. § 1306
Though the definition of “telephone utilities” includes ILECs, CLECs, and IXCs, in practice, the Commission regulates the service quality only of ILECs because these carriers are providing basic dial tone service, own the majority of telecommunications plant necessary to provide dial tone service (and allow competitors to provide service), and have the obligation to provide service to all customers within their franchise territories. Further, in some portions of the state, there may be little or no competition for dial-tone service; consequently, the dependability of an ILEC’s service is paramount. If the Commission becomes aware of potential problems with service
quality provided by an ILEC, it may open an investigation to determine if the ILEC is meeting its statutory obligation to provide “reasonable and adequate service.”
The Commission has adopted a “hands off” approach with respect to the service quality of CLECs and IXCs based on the premise that if one carrier fails to provide reasonable and adequate service, a customer can simply choose another
carrier that provides better service quality. In this manner, competition is substituted for regulation. Further, in the case of a CLEC, the customer always has the option of obtaining service from the ILEC, which must accept all customers.
As discussed above, in addition to the regulation of service quality pursuant to 35-A M.R.S.A §101, the Commission may also regulate the service quality of an ILEC through an AFOR. The only telephone utility in Maine that operates under an AFOR and an appurtenant SQI is FairPoint-NNE. FairPoint-NNE’s SQI contains 14 metrics that cover the various aspects of its service. Each metric has a benchmark that is based on historic performance. FairPoint-NNE’s actual annual performance for each metric must be equal to or better than the baseline or it will incur an obligation to pay a customer rebate for that metric. FairPoint-NNE’s present SQI contains 14 metrics which measure, among other things, whether FairPoint-NNE’s installation and repair
appointments are kept in a timely manner, whether FairPoint-NNE’s customer service representatives promptly respond to service and outage calls, and the overall volume of customer complaints.
Under its SQI, FairPoint-NNE may incur a maximum total rebate obligation of $1.135 million for each metric (except for the Service Outage metric, which is subject to a maximum of twice that amount $2.27 million) and a maximum rebate liability of $12.5 million. FairPoint-NNE’s SQI will expire on July 31, 2013 along with its AFOR.
Verizon also operated under an AFOR from 1995 through the time of the merger with FairPoint in 2008. Verizon’s initial SQI was established as part of its first AFOR in 1996. The Commission continued the SQI with several modifications in 2001.
FairPoint-NNE, and Verizon before it, each failed to consistently meet their respective SQIs while operating under their AFORs. Verizon missed the benchmarks for six metrics in 2002/03, five metrics in 2003/04, two metrics in 2004/05, three metrics in 2005/06, and six metrics in 2006/07. In addition, Verizon did not meet the benchmark for the Residential Troubles Not Cleared Within 24 Hours metric during any year of the second AFOR. As a result of failing to meet several of the benchmarks, Verizon paid a rebate to customers each year of the Second AFOR. Under FairPoint- NNE’s AFOR, the company missed 2 metrics in 2007/08, 12 metrics in 2008/09, 10 metrics in 2009/10, and four metrics in 2010/11.24 The missed metrics in 2010/11 were Customer Trouble Reports Rate per 100 lines; Repeat Trouble Reports Rate per 100 lines, Duration of residential Outages; and PUC Complaint Ratio. FairPoint-NNE has paid a rebate to customers each year of its AFOR.
24
The 2007/2008 SQI year ran from July 1, 2007 through July 31, 2008 – a 13 month period - due to the merger between Verizon and FairPoint. The merger was approved by the Commission on February 1, 2008. Nine months (July 2007 through March 2008) of that SQI year were under Verizon operation, and four months (April 2008 through July 2008) were under FairPoint operation. However, FairPoint paid the full penalty amount for that year. Subsequent SQI years run from August 1 through July 31 of the following year.
Annual SQI Customer Rebates 1995/96 $134,566 Verizon 1996/97 $220,211 Verizon 1997/98 $79,147 Verizon 1998/99 $455,243 Verizon 1999/00 $0 Verizon 2000/01 $0 Verizon 2001/02 $524,905 Verizon 2002/03 $876,670 Verizon 2003/04 $576,404 Verizon 2004/05 $639,127 Verizon 2005/06 $711,657 Verizon 2006/2007 $1,274,471 Verizon 2007/2008 $401,114 FairPoint-NNE 2008/2009 $8,021,257 FairPoint-NNE 2009/2010 $9,125,984 FairPoint-NNE 2010/2011 $592,41525 FairPoint-NNE
25 This amount reflects the first year where the “multiplier” component of the SQI rebate formula has
been made unenforceable pursuant to section 3.2 of the Resolve. Section 3.2 states “The commission may not enforce provisions of any order establishing an alternative form of regulation pursuant to Title 35- A, chapter 91 that impose on an incumbent local exchange carrier multiplier penalties for repeated failures to meet service quality index performance standards with respect to any actions, inactions or other performance of that carrier occurring after July 31, 2010.” Because 2010/2011 was the third year in a row that FairPoint missed the particular metrics that resulted in a rebate, the rebate amount would have been $1,777,245, absent the prohibition on enforcement of that provision of the AFOR by the Resolve.