NOTICES
Monitoring and Enforcement of Network Modernization Plans; M-00051872
[35 Pa.B. 5209] Public Meeting held
August 11, 2005Commissioners Present: Wendell F. Holland, Chairperson; James H. Cawley, Vice Chairperson, dissenting statement follows; Bill Shane; Kim Pizzingrilli; Terrance J. Fitzpatrick
Verizon Pennsylvania Inc. Petition and Plan for Alternative Form of Regulation under Chapter 30; 2000 Biennial Update to Network Modernization Plan (Amendment to NMP); P-00930715F0002
Verizon Pennsylvania Inc. Petition and Plan for Alternative Form of Regulation under Chapter 30; 2000 Biennial Update to Network Modernization Plan (Petition For Reconsideration of May 15, 2002 Order); P-00930715
Structural Separation of Bell Atlantic-Pennsylvania, Inc. Retail and Wholesale Operations; M-00001353
Tentative Order By the Commission:
The Monitoring and Enforcement of Network Modernization Plan docket at M-00051872 is intended to develop appropriate monitoring and enforcement procedures in incumbent local exchange carriers' (ILECs) network modernization plans consistent with the provisions of the new Chapter 30, commonly known as Act 183. 66 Pa.C.S. §§ 3011--3019.
Briefly, at our Public Meeting of March 23, 2005, the Commission had before it a proposed Tentative Order setting forth the details for an audit of the Network Modernization Plan (NMP) of Verizon Pennsylvania Inc. (Verizon PA) in response to a previous order entered September 17, 2003, at the previously captioned P-00930715F0002 and P-00930715 dockets. Because of the enactment of Act 183, however, which occurred after we announced our intent to audit Verizon PA's NMP, we concluded that further evaluation was necessary to determine the best way to fulfill our statutory role of monitoring and enforcing ILECs' compliance with the NMP provisions of Act 183. At the March 23, 2005 Public Meeting, therefore, we approved an Order that was entered on April 15, 2005, at the immediately previously cited dockets and at M-00051872 that directed the filing of comments by interested parties on all relevant issues relating to the development of a useful, comprehensive and appropriate NMP monitoring and enforcement program in accordance with Act 183.
Among the comments received from interested parties, Verizon PA and Verizon North Inc. (collectively, ''Verizon'') offered an alternative plan to pay for their NMP audits whereby the companies would not object to paying for outside consultants to perform the audits if the outside consultants were paid from the approximately $1 million then still in the ''Escrow Fund'' established by the Commission's April 11, 2001 Order in the previously captioned Verizon PA Structural Separation proceeding at M-00001353 (April 11, 2001 Order).
After reviewing this proposal, including how the Escrow Fund monies have been spent in the past and the proposed usage for the remaining amount, and in consideration of Verizon's proposal to apply any remaining funds toward their NMP audits, we are initially persuaded that this proposal is reasonable and should be accepted by this Commission, subject to the requirement that Verizon will make up any funding shortfall if the Escrow Fund is insufficient to cover the full cost of the Verizon NMP audit(s) now or in the future.
However, because the Escrow Fund was originally created to facilitate the Commission's analysis of metric reports, some interested parties could contend that the Commission should not, in effect, expand the purpose of the Escrow Fund to permit the use of these monies for an NMP audit. Alternatively, others could observe that both uses of the Escrow Fund relate to and directly facilitate the Commission's technical ability to monitor Verizon's compliance with its obligations under the Public Utility Code and Commission orders.
Therefore, before issuing a Final Order addressing the nature, extent and funding of any monitoring and enforcement program that may be needed to verify independently each company's network deployment as reported in its NMP updates, and consistent with the mandate of 66 Pa.C.S. § 703(g), we seek comments on Verizon's alternative funding proposal to use the Escrow Fund created by our April 11, 2001 Order; Therefore,
It Is Ordered That:
1. The Secretary serve a copy of this Tentative Order on all incumbent local exchange telecommunications carriers, on all parties to the Structural Separation proceeding at M-00001353 and the Performance Metrics and Remedies docket at M-00011468, the Office of Consumer Advocate, the Office of Small Business Advocate, and the Pennsylvania Telephone Association and also cause a copy of this Order to be published in the Pennsylvania Bulletin.
2. An original and 15 copies of any comments by interested parties shall be filed with the Secretary within 10 days of publication in the Pennsylvania Bulletin on the issue of NMP audit funding using the Escrow Fund established by this Commission in its April 11, 2001 Order at M-00001353.
3. Any money remaining in the Escrow Fund as of June 30, 2005, and for which there are no further contractual obligations during fiscal year 2006, shall remain unspent pending a Final Order in this matter.
4. The contact persons for this matter are Dennis Hosler, Bureau of Audits, (717) 772-0312, Lou Samsel, Bureau of Fixed Utility Services, (717) 787-5164, and Carl S. Hisiro, Law Bureau, (717) 783-2812.
JAMES J. MCNULTY,
Secretary
Dissenting Statement of Vice Chairperson
James H. Cawley
Public Meeting August 11, 2005; AUG-2005-L-0079*
Monitoring and Enforcement of Network Modernization Plans; M-00051872
Verizon Pennsylvania Inc. Petition for Alternative Form of Regulation under Chapter 30; 2000 Biennial Update to Network Modernization Plan (Amendment to NMP); P-00930715F0002
Verizon Pennsylvania Inc. Petition and Plan for Alternative Form of Regulation Under Chapter 30; 2000 Biennial Update to Network Modernization Plan (Petition For Reconsideration of May 15, 2002 Order); P-00930715 Before us for disposition is the Staff recommendation on the development of appropriate monitoring and enforcement procedures for the incumbent local exchange carrier (ILEC) network modernization plans (NMPs), consistent with the provisions of Act 183 of 2004 or the new Chapter 30 law, 66 Pa.C.S. § 3011 et seq. The Staff report and recommendation correctly concludes that the Commission possesses the requisite authority under the Public Utility Code to perform an investigative-type audit for the independent verification of an ILEC's reported progress in implementing its Commission-approved NMP, and to require the ILEC in question to pay for such an audit.
However, the Staff recommendation defers the implementation of any such NMP auditing activity for Verizon Pennsylvania Inc. (Verizon PA) and Verizon North Inc. (Verizon North) until after their respective biennial reports are respectively filed on June 30, 2007 and March 31, 2007. I believe that since the Staff has concluded that the Commission possesses the requisite statutory authority to proceed with ILEC NMP audits, and to order affected ILECs to bear the costs of such audits, the delay for proceeding with an audit of at least the Verizon PA NMP implementation until 2007 is unwarranted.
It is an established fact that since the original 1994 Commission approval of Verizon PA's (then Bell Atlantic-Pennsylvania, Inc.) Alternative Regulation and Network Modernization Plan at Docket No. P-00930715 under the preceding version of the Chapter 30 law, Verizon PA's NMP has not undergone a comprehensive and independent audit. Although certain aspects of Verizon PA's NMP implementation and broadband deployment and availability were tested in an evidentiary adjudication before this Commission in 2003, the Commission still stated the following:
In light of our disposition reached on the above issues, it is imperative that this Commission and the public have the assurance that Verizon PA will work toward meeting the requirements established herein. As such, it is necessary for this Commission to have confidence in the facts related to Verizon PA's network modernization filings as well as to have appropriate enforcement tools readily available should non-compliance become an issue. We are of the opinion that this information will be beneficial with regard to other Chapter 30 companies' network modernization filings as well.In order to accomplish this, we shall direct the Bureau of Audits, in conjunction with the Law Bureau and the Bureau of Fixed Utility Services, to prepare, within sixty days after the date of entry of this Opinion and Order, a recommendation to the Commission detailing the nature and scope of an appropriate audit plan regarding the network plans of Verizon PA and other Chapter 30 companies. The recommendation shall address the appropriate reporting process, auditing procedures and types of information that Chapter 30 companies would need to file with the Commission so that the progress of each Chapter 30 network modernization plan can be adequately tracked and independently verified.Verizon Pennsylvania Inc. Petition and Plan for Alternative Form of Regulation under Chapter 30; 2000 Biennial Update to Network Modernization Plan (Amendment to NMP), Docket Nos. P-00930715F0002 and P-00930715, Order entered September 17, 2003, at 76 (September 2003 Order--Non-Proprietary Version, emphasis in italics added).
Almost two years have passed since the Commission first expressed its concrete intention to proceed with the independent audit and verification of Verizon PA's NMP implementation. Verizon PA is currently operating under an Amended NMP that this Commission approved under the statutory framework of the new Chapter 30 law. Petition for Amended Network Modernization Plan of Verizon Pennsylvania Inc., Docket No. P-00930715F1000, Order entered May 20, 2005. However, Verizon PA's Amended NMP does not substantively change the Company's compliance benchmarks that have been established in its earlier NMPs approved by the Commission with or without modification. See generally September 2003 Order. Thus, for a period of eleven (11) years the implementation of Verizon PA's NMP has not been independently tested, examined, and verified through a comprehensive Commission-directed and supervised audit. Rather than proceeding with such an independent audit forthwith, the majority of the Commission is willing to wait for an additional 2-year period before engaging in this necessary endeavor.
I believe that the decision to postpone the independent audit of Verizon PA's NMP to 2007 will deprive this Commission of the opportunity to effectively exercise its enforcement powers that the new Chapter 30 law has vested to this independent regulatory agency. It is imperative that the Commission establish a baseline assessment of Verizon PA's original and Amended NMP implementation and compliance obligations through a comprehensive and independent audit. This independent audit and baseline assessment could have included Verizon PA's Fifth Biennial Update to its NMP that was submitted to the Commission on or about June 30, 2005 at Docket No. P-00930715. The related audit activities could have included the verification of Verizon PA's compliance with the directives of the Commission's September 2003 Order. Furthermore, these audit activities could also have been used to train the Commission's own Staff in the compliance evaluation of Verizon PA's subsequent biennial Amended NMP updates. The development of the related Staff expertise would have been used for the in-depth evaluation of biennial reports from other ILECs with Commission-approved amended NMPs.
The independent audit could also have examined and independently verified Verizon PA's response times to requests for broadband facilities and services throughout its service territory and its various urban, suburban, and rural exchange areas. It must be understood that the past and ongoing deployment of broadband facilities in and of itself does not necessarily translate to the readily accessible availability of broadband services. For example, the presence of dark fiber in Verizon PA's network does not provide broadband services until the dark fiber links become lit and activated through the attachment of the appropriate electronics.
The new Chapter 30 law has permitted ILECs that operate under Amended NMPs and price stability mechanism--price change opportunity (PSM/PCO) formulas--including Verizon PA--to avail themselves of annual revenue and rate increases through the statutory specification of the productivity offset value at 0% or 0.5% depending on the ILEC's rural or non-rural classification and its chosen amended NMP option. See generally 66 Pa.C.S. § 3015(a)(1). However, the new Chapter law also contemplates revenue and rate refunds and additional penalties if an ILEC fails to meet its interim and final Commission-approved amended NMP commitments and compliance obligations. 66 Pa.C.S. § 3015(a)(2). This stat-utory enforcement mandate to this Commission cannot be meaningfully and timely exercised unless the Commission is capable of policing the ILECs' amended NMP implementation and compliance obligations. I fear that, without the utilization of timely, comprehensive, and independent audits of the ILECs' amended NMPs, this Commission will be unable to meaningfully and timely exercise its policing functions entrusted to it by the General Assembly under the new Chapter 30 law.
In summary, I believe that the need of an independent verification of Verizon PA's NMP implementation and compliance requires that we proceed with the appropriate audit forthwith rather than waiting for two more years until 2007. I also agree with the Staff's assessment that the cost of the related audit activities be borne by Verizon PA pursuant to 66 Pa.C.S. § 516, and that such cost should not be offset by monies in the ''Escrow Fund'' established by the Commission through its April 11, 2001 Order in the Verizon PA Structural Separation proceeding at Docket No. M-00001353.
Therefore, for these reasons I dissent.
[Pa.B. Doc. No. 05-1756. Filed for public inspection September 16, 2005, 9:00 a.m.]
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