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AFFIDAVIT OF MICHAEL J. FRIDUSS
1. My name is Michael J. Friduss. My business address is 1555 Museum Drive, Highland Park, IL 60035. I am an independent consultant working with C.A. Hempfling & Associates, Inc., under contract with the Antitrust Division of the United States Department of Justice.
2. I received a Bachelor of Science degree in Industrial Engineering from the Illinois Institute of Technology in 1964 and a Masters degree in Management from Northwestern University in 1971.
3. I began my telecommunications career in 1964 as a Management Assistant for Illinois Bell Telephone Company ("Illinois Bell"). In this capacity, I filled a variety of non-management and management positions designed to familiarize me with all departments of the company.
4. From 1966 to 1969, I was a Manager in Illinois Bell's Plant Department. In this capacity, I supervised installation or repair operations in three different territories on the South side of Chicago.
5. In 1969, I was promoted to District Engineering Manager, responsible for the engineering and design of outside plant, also on Chicago's South side. In 1970, I was appointed District Plant Manager, responsible for installation and repair activities in Chicago's Hyde Park area. During my tenure in Hyde Park, I also headed an Operation Review team that assessed the quality and cost performance of each district in Chicago Operations.
6. I was promoted to Division ManagerCorporate Planning at AT&T in New York in 1973 and served through 1975. In this capacity, I headed a small group responsible for the study of the telecommunications interexchange industry at that time and what AT&T's future strategy should be in that segment of the industry.
7. In 1975, I returned to Illinois Bell as Division Plant Manager, responsible for installations and repair in the South suburban area. In 1978, I was named Division ManagerCorporate Planning for the company, responsible for Illinois Bell's planning and operations budgeting, including operations planning for the implementation of the FCC's Computer Inquiry II and divestiture.
8. In 1983, I was promoted to General ManagerDistribution Services, responsible for Illinois Bell's outside operations, construction, and engineering. In this capacity, I supervised 7,000 employees and a budget of $500 million.
9. In 1986, I was promoted to Vice PresidentPersonnel and Support Services for Michigan Bell and in 1989 was named Vice PresidentCustomer Sales and Service for the same company. In the latter role, I was chief operating officer of a company and a member of the Board of Directors, with responsibility for operations and sales, including 11,000 employees and expenditures in excess of $1 billion.
10. In 1992, I returned to Ameritech Services as Vice PresidentCustomer Service and Information Technology, responsible for the strategic and tactical direction of Ameritech's customer service and operations, as well as planning, building, and maintaining high quality and efficient computer systems (chief information officer). I retired from this position in 1993.
11. In late 1993, I formed MJ Friduss & Associates, consultants to the telecommunications industry. Our clients are carriers, primarily current and new local service providers, and small to medium-sized companies that provide hardware, software, and operating systems to those service providers. We are currently working with a number of firms in the areas of strategic planning, marketing, operations, customer services, and supplier management.
12. Additionally, I am Editor of the Friduss Report, a newsletter focused on carrier procurement processes.
SCOPE OF ASSIGNMENT
13. I have been asked by the Antitrust Division of the United States Department of Justice for my opinion regarding the appropriateness and comprehensiveness of the performance measures BellSouth proposes to provide to competitors and regulators. In particular, I have been asked whether these performance measures will reasonably depict the performance of wholesale functions BellSouth is obligated to perform pursuant to the competitive checklist of section 271 of the Communications Act of 1934 (as amended by the Telecommunications Act of 1996) and whether such measures will enable competitors and regulators to determine both the adequacy of BellSouth's performance and the parity of such performance when compared to BellSouth's retail operation.
14. The primary source upon which I relied for my analysis is BellSouth's section 271 application for South Carolina. I generally reviewed the application for any discussion of performance measures. Additionally, I have reviewed:
15. I have also attended meetings with BellSouth and several CLECs interconnecting with or negotiating to interconnect with BellSouth.
16. Additionally, I have reviewed performance measures proposed by other BOCs in various proceedings in other states.
17. Finally, in reviewing BellSouth's proposals, I have drawn upon my significant experience with quality performance standards. As a telephone company line manager and officer, my performance was judged, in part, by how well I met customer service objectives. Further, as a staff manager, I had responsibility for the development and implementation of quality performance standards.
PERFORMANCE MEASURES AND THEIR ROLE
18. The 1996 Act obligates incumbent local exchange carriers (ILECs), and thus BOCs, to provide requesting carriers with interconnection, access to unbundled network elements, and resale services. In fulfilling these obligations, BOCs will perform a variety of wholesale functions for competitors, many of which BOCs also perform in providing retail services. Some of these functions, however, will be new.
19. The ability to detect discrimination in the performance of these functions is dependent on the establishment of performance measures that will allow competitors and regulators to measure BOC performance. Thus, the development of appropriate measures is critical to establishing that the local market is a level playing field in the context of the 1996 Act. Further, on an ongoing basis, the measures must be able to assure that the local market remains open and that any BOC backsliding will be detected.
20. Performance measures, then, serve as criteria for indicating performance, including the performance of wholesale functions. Performance measures enable competitors and regulators to compare a BOC's performance of a function with that provided to a BOC's retail customer or make an assessment of such function in the abstract. For example, to measure how well a BOC performs the functions of provisioning resold local service, we can define a performance measure"average service provisioning interval"and use it to describe the BOC's performance and to compare it to the BOC's retail performance of the same function. In general, performance measures are used to determine quality, measuring how long an activity takes to complete (cycle time) and how well the activity is performed (reliability).
21. A performance measure may include an objective or target, such as the cycle-time measure "five days to complete an order," where overall the measure is a percentage of orders meeting or not meeting the target. A performance measure can also encompass a raw time interval, such as the average number of days to complete resale orders. In neither case, however, does the outcome of the measurethe percentage or cycle timeitself indicate "good" performance or "bad" performance. Thus, performance measures themselves are not the barometers of performance, but rather the yardsticks with which to measure such performance. Accordingly, my review is limited to the sufficiency of BellSouth's performance measures rather than the sufficiency of its performance.
22. The most competitively significant, and thus the highest-priority performance measures should be those that describe the end-to-end quality of service from the customer's viewpoint. Studies over the years have identified performance measures that correlate highly with the customer's perceptions of service quality, such as the percentage of repeat reports of trouble, while others have a lower correlation.
23. Finally, while performance measures are generally easy to identify, there is no universally accepted definition of what a measure proposes to reveal or specifically how to gather the necessary data that comprises the measure. For example, cycle-time performance measures are dependent on the specific definition of start and stop times, while reliability measures are dependant on the specific definition of what constitutes a failure. This affidavit does not attempt to specify these definitions. However, it is critical that BellSouth and interconnecting CLECs do so to ensure useful results. I have assumed that all parties will commit to reporting results that reflect the spirit, as well as the paper definition, of a performance measure. For example, in measuring the level of missed appointments, the result should be measured against the customer-requested due date; due date changes should only be considered where explicitly requested by the end user or explicitly agreed to by BellSouth and a CLEC.
24. As is discussed more fully below, my review of BellSouth's proposed performance measures includes an assessment of (1) the scope of the functions measured; (2) the specific definitions of the measures; (3) the value and applicability of the measures through the appropriate disaggregation of functions, markets, and products; (4) the stability of the measures; (5) the scaleability of the measures; and (6) whether the proposed measures will allow CLECs and regulators to compare BellSouth's wholesale and retail performance of the functions measured.
25. Over the past 120 years, telephone companies have developed extensive measures of customer service. These performance measures have generally served two purposes: (1) to allow for the comparison of performance between managers, territories, organizations, and companies, and (2) to provide regulators with indicators of potential problems. These measures cover all areas of customer-affecting performance, including customer care, provisioning, repair, billing, and network maintenance. Regulatory requirements notwithstanding, these performance measures comprise a key indicator of management success. Objectives are set, data is gathered, reports are published, and results become part of the corporate, organizational, and individual success determination.
26. Using performance measures, most state public utility commissions require achievement of certain levels or standards of performance for customer service. For example, the SCPSC requires results reported for the following:
27. The FCC requires the BOCs, GTE, and Sprint to submit quality-of-service data that is summarized annually in a report entitled "Quality of Service for the Local Operating Companies Aggregated to the Holding Company Level." Without specifying particular levels, the report includes the following performance measures:
28. Thus, to date local exchange providers have reported on a significant list of measures of their retail performance. Given the new wholesale role imposed on ILECs by the 1996 Act and the many new functions to be performed in that role, some new performance measures will be required to both accurately describe existing performance and depict performance of new functions.
29. Under the wholesale/retail model imposed on ILECs by the 1996 Act, there are two categories of measurements used to depict ILEC performance of a particular function: parity performance measurements and adequacy performance measurements. When a BOC's performance of certain functions for its retail units or "end user" customers is identical or analogous to the performance of those functions for competitors or their customers, parity performance measures apply. Parity performance measures are used to juxtapose performance results, such as comparing trouble report rates of a BOC's customers with those of a competitor's customers. Thus, parity performance measures are used for "apples-to-apples" comparisons and are most often applied in the resale environment, where the functions a BOC performs for a competitor's customers are almost identical to those performed for its own retail customers.
30. In contrast, adequacy performance measures facilitate the establishment of an objective or target pertaining to functions a BOC either (1) performs only for competitors, or (2) performs for competitors in a manner sufficiently different from that performed for the BOC itself such that a comparison is meaningless or unhelpful. Thus, adequacy performance measures apply in "apples-to-oranges" comparisons and facilitate a determination of whether CLECs are afforded a meaningful opportunity to compete. Adequacy measures apply primarily in the UNE environment.
31. Meaningful determinations of parity performance require "apples-to-apples" comparisons of the functions performed by a BOC. Where, for example, the same function is performed by different personnel, with different facilities, or for different customer classes or products, more refined comparisons are required. Thus, for example, the function of installing POTS service for consumer and business customers may be identical, but because business customers may be more sensitive to installation delays, a meaningful comparison may require juxtaposition of only business customer installation intervals.
32. There are two general categories of such further disaggregation. First, market parity refers to equality between appropriate customer groups. Customer groups may be broken out geographically or by class of service. Geographic market parity means comparing CLEC results to BOC results within the geography the CLEC has chosen to offer service. For example, if a CLEC offers resale service only in city A, a meaningful comparison may require the BOC to provide their retail results only for city A.
33. Class of service market parity means comparing CLEC results to BOC results within the classes of service the CLEC has chosen to offer. For example, if a CLEC offers service to small-business end users only, for purposes of comparison a BOC may have to provide its retail results for such small-business users.
34. A second category of disaggregation is product parity. Where the provision of different products to the same or different customer group requires use of different facilities, personnel, and so forth, meaningful parity comparisons may require disaggregation of performance results by the products offered by a CLEC. Product groups may further be broken out both by wholesale category and by specific products offered to end users. Wholesale categories include resale, UNE (possibly further broken out by loop-only, UNE combinations, and so forth), and facilities-based. Performance measures are required for each wholesale category. Specific products offered to end users include POTS, HICAP, Subrate, ISDN, or Centrex. For example, if a CLEC chooses to offer ISDN, a BOC could provide performance measurements that would allow for a comparison with their own ISDN retail product.
35. Once appropriate performance measures have been agreed to and the data gathered, the results must be formatted into reports and provided to CLECs and regulators. My review will include proposed report formats, report frequency, the appropriateness of result comparisons, report accuracy and completeness, and the availability of raw data.
36. Report format relates to how performance measure results are presented. Are they presented in tabular or graphical form? Are they readable and understandable? Can a CLEC or regulator determine whether parity has been achieved? Report frequency relates to how often reports will be provided. Report accuracy and completeness relate to the statistical validity of the proposed data. Appropriateness of result comparisons relates to the entities for which the data will be provided: BOC retail? BOC subsidiaries? the CLEC? all CLECs? other?
OVERVIEW OF BOC WHOLESALE FUNCTIONS
37. It is helpful to divide the functions BOCs will perform for CLECs under the 1996 Act into five primary categories: pre-ordering, ordering, provisioning, maintenance and repair, and billing functions. These categories describe the spectrum of functions through which CLECs acquire new customers, maintain facilities for them, and bill them. Within each category, performance measures identify the cycle time and reliability of each function. Performance parity is achieved if CLEC resale customers enjoy cycle time and reliability of functions equivalent to that experienced by the BOC's customers or its affiliates' customers. Performance adequacy is achieved if, for example, through the provision of network elements, CLECs are afforded a meaningful opportunity to compete.
38. Pre-ordering describes the initial process of a CLEC or BOC customer service representative obtaining information to place an order for new, additional, or changed service. Pre-order cycle-time performance measures generally refer to the reliability and response times of operations support systems (OSSs) that allow the representative to complete the service order with the customer on the line. Pre-order reliability performance measures refer to the accuracy and completeness of the data received. These pre-ordering functions are generally visible to the end user.
39. Ordering describes the process of the service representative transmitting the service order into the BOC's OSSs for facility assignment, database updates, switch updates, and dispatch of a technician, if required. For a CLEC, this includes successfully moving the service order across an agreed-upon interface into the BOC's OSSs. Ordering cycle-time performance measures refer to BOC response times for notices of order confirmation, jeopardy, or rejection. Ordering reliability performance measures refer to the accuracy and completeness of these notices, as well as the percentage of rejected orders. Ordering performance measures also address the percentage of service orders that "flow-through" from a service representative to completion if no technician dispatch is required or to the point of dispatch if dispatch is required. OSS availability and BOC service center answer time performance measures may also be considered to be part of the ordering process. Ordering is generally transparent to end users.
40. Provisioning involves the execution of a request for a set of products and services or unbundled network elements with attendant acknowledgments and status reports. Provisioning performance measures measure how quickly and well customer service orders are completed. Provisioning results are highly visible to end users and are critical to a determination of performance parity. Provisioning cycle-time performance measures refer to measuring the interval, from the end user's perspective, from order placement to order completion. Provisioning reliability performance measures refer to the accuracy of the work done (i.e., did the end users receive what they ordered) and to the quality of the work done (i.e., did everything work).
41. For purposes of this review, I have evaluated categories of repair and maintenance separately. Repair is the process by which end users report a case of trouble and the trouble is subsequently cleared. This process is highly visible to the end user and has a high correlation with the end user's perception of the service provider. Repair cycle-time performance measures depict the interval from end-user report to trouble clearance and notification. Repair reliability performance measures measure the quality of the repair operation.
42. Maintenance refers to how well the network itself is maintained, and associated performance measures generally refer to reliability rather than cycle time. The most visible performance measure is the mean time between troubles, often referred to as the trouble report rate. Other performance measures measure how well the BOC's switching and transmission elements are maintained.
43. Billing performance measures describe the speed, accuracy, and completeness of end-user usage data from the BOC to the CLEC. While the process may be transparent to the end user, the end product is highly visible.
44. There are several miscellaneous functions that must also be measured. These include toll and directory assistance operator services, directory listing, and 911 database updates.
REVIEW OF BELLSOUTH'S PROPOSED PERFORMANCE MEASURES
45. This part of the affidavit addresses the performance measures explicitly cited in BellSouth's application, performance measures included in existing interconnection agreements, performance measures included in BellSouth's SGAT, and performance measures not explicitly or implicitly cited by BellSouth that are important to measuring functions required under the 1996 Act. Section A discusses BellSouth's commitment to providing CLECs with services at parity with its retail operations and performance measures that will show such parity. Section B reviews all such measures under the assumption that they would be reported, as discussed more fully below, to both competitors and regulators on an ongoing basis. In particular, Section B addresses the proposed performance measures for each wholesale processpre-ordering, ordering, provisioning, repair and maintenance, and billingdescribed above. Sections C and D describe methods of disaggregating those performance measures to more accurately perform parity and adequacy assessments by market and product. Finally, Section E discusses the need for consistent and accurate reporting and highlights those measurements BellSouth has indicated will be reported to both competitors and regulators for purposes of this application.
46. Most of the resale performance measure examples discussed below are not new. Many are tracked and reported by BOCs for retail operations and are reported to state or federal regulatory bodies. At the same time, UNE performance measures, although similar to resale, measure the performance of wholesale functions that are new to the BOCs.
47. It is important to note that this affidavit is not an attempt to prescribe a model set of performance measures or an attempt to lay out a minimum set of performance measures that would meet the requirements of the 1996 Act. I discuss below historically and widely used, newly appropriate, or exemplary performance measures for each of the wholesale functions BOCs will perform under the 1996 Act, and variation from those discussed may be possible without necessarily impacting the ability to determine parity or adequacy of performance.
48. BellSouth's application for provision of in-region, interLATA service in South Carolina commits to equal quality of resale services and interconnection to new entrants and nondiscriminatory provision of unbundled elements (Stacy Performance Aff. ¶ 2). BellSouth further commits to "collect all necessary data to demonstrate this fact" (Stacy Performance Aff. ¶ 86). It expressly proposes to provide the measures discussed below, which are broken out by process.
49. BellSouth states that its existing performance measures are more than adequate to allow for the detection of "non-discrimination" and "meaningful opportunity to compete" standards (Stacy Performance Aff. ¶ 3). These measurements are portrayed as being developed in three different formats: initial measurements, historically used by BellSouth Telecommunications (BST) and applied to BST and CLECs; AT&T measurements, contractually agreed to with AT&T; and permanent measurements, based on the AT&T measurements but with additions. (Stacy Performance Aff. ¶ 16)
50. BellSouth Telecommunications has created a new and separate officer-level organization responsible for all operational aspects of provisioning and maintenance of services provided to CLECs. Two Local Carrier Service Centers (LCSCs), available 24 hours a day 7 days a week, have been established to provide contact points for CLECs ordering resale or UNEs. Further, a Customer Support Manager is assigned to each CLEC as a single point of contact for CLECs whose customers have operational issues not resolved by normal processes. (Stacy Performance Aff. ¶ 4)
51. BellSouth's SGAT filed with SCPSC contains a commitment to parity (SGAT § I. (I), (J)) but proposes no specific performance measures.
52. BellSouth has interconnection agreements with 83 telecommunications carriers in South Carolina. Two are included as exhibits to Stacy's affidavit: the agreements with AT&T and Time Warner. BellSouth reached agreement with AT&T on performance measures as part of their agreement and filed these measures with the SCPSC (Stacy Performance Aff. ¶ 28). The two companies have agreed to extend these measures to all nine BellSouth states. Further, BellSouth and Time Warner have agreed to performance measures in their interconnection agreement, executed on September 5, 1997 (Stacy Performance Aff. Ex. WNS-5). Both these interconnection agreements contain additional performance measures that have not been proposed in BellSouth's permanent measurements.
53. Pre-ordering: Pre-ordering performance measures revolve around the ability of a CLEC service representative to complete an order with an end user on line with at least the speed and accuracy of a BOC service representative taking a similar service order from a retail end user. Since CLEC service representatives will likely interface with BOC OSSs and with BOC service representatives, performance measures are needed to measure the cycle and reliability of both interactions. These measurements will ensure that BOC service representatives do not have an unfair advantage in creating a superior end-user perception of speed and efficiency. Typical pre-ordering performance measures include the following:
54. BellSouth has not proposed any pre-ordering performance measures in its permanent measurements, in its SGAT, or in interconnection agreements that I have reviewed.
55. Ordering: Ordering performance measures revolve around measuring the CLEC's ability to process end-user service orders placed with the BOC and delivered through the BOC's OSSs with speed and accuracy at least equal to the BOC itself. Ordering cycle time is primarily measured by the promptness of communications between the BOC and the CLEC. Ordering reliability is measured by the accuracy of the service order and by the success of order "flow-through." Typical ordering performance measures include the following:
56. BellSouth has proposed the following ordering performance measures:
57. BellSouth has not included the following ordering performance measures either in its permanent measurements or in interconnection agreements that I have reviewed:
58. Provisioning: Provisioning performance measures depict how quickly and how accurately end-user service orders are completed. Parity in performing provisioning functions results in CLEC customers receiving service with speed and quality at least equal to that received by BOC retail or subsidiary customers. Provisioning measures have a long and detailed history within the BOCs. They are used to review and compare manager performance, as well as required by state and federal regulatory bodies. Provisioning is a process highly visible to end users and, therefore, is a key determinant to CLEC success in the marketplace. Typical provisioning performance measures include the following:
59. BellSouth has proposed the following provisioning performance measures:
Where appropriate, BellSouth will disaggregate provisioning performance results into two sub-categories, non-dispatch and dispatch out.
60. BellSouth has not included the following provisioning performance measures either in its permanent measurements or in interconnection agreements that I have reviewed:
61. Maintenance: Maintenance performance measures depict two sub-processes:
(1) trouble reporting and clearance and
62. BellSouth proposes the following maintenance and repair performance measures:
Where appropriate, BellSouth will disaggregate maintenance and repair performance measure results into two sub-categories, non-dispatch and dispatch out.
63. The only maintenance performance measure BellSouth has not proposed in its permanent measurements or in any interconnection agreement is:
64. Billing: Billing performance measures measure the timeliness, accuracy, and completeness of end-user billing records and wholesale bills. These are measures of performance adequacy, important because, once provisioned, billing is the most frequent and visible contact an end user has with the provider. Typical billing performance measures include the following:
65. BellSouth has not proposed any billing performance measures in its permanent measurements. However, it includes the following in its interconnection agreement with AT&T:
66. BellSouth has not proposed any "Other" performance measures in its permanent measurements or in any interconnection agreements that I have reviewed. However, in its application, BellSouth commits to non-discriminatory access to 911 and E911 services and to maintaining its 911 database for CLECs on the same daily schedule it uses for its own end-user customers. It also commits to non-discriminatory access to Directory Assistance and other Operator Services call completion. (BellSouth Brief at 45)
67. Market parity: Market parity ensures that agreed-to performance measures present appropriate customer group comparisons between the BOC and CLECs. This requires the BOC to provide service to appropriate CLEC customer groups at least equal to that provided equivalent customer groups by its retail or subsidiary units. Customer groups generally fall into two categories: Geographic and Class of Service.
Geographic parity requires that performance measures be identified and measured where a CLEC markets their products. If a CLEC offers service to an entire BOC region, appropriate performance measures would compare CLEC results to total BOC results. If a CLEC offers service to smaller geographic areas, appropriate performance measures would provide comparative BOC results for those areas.
Class of Service parity requires that performance measures be identified and measured for end-user classes of service targeted by a CLEC. For example, if a CLEC targets only small-business customers, appropriate performance standards would provide BOC results for its small-business customers only for comparison purposes.
68. BellSouth proposes the following market disaggregation of its proposed performance measures results data:
69. Product parity: Product parity ensures that agreed-to performance measures present the appropriate comparisons on a product basis between the BOC and CLECs. This requires that the BOC provide service to CLECs at least equal to that provided by its retail or subsidiary units, measured for the products a CLEC offers to end users. Product parity includes two dimensions: (1) interconnection arrangement, and (2) products or product families within those arrangements.
70. BellSouth proposes the following product disaggregation of its performance measures results data:
71. Reporting requirements should ensure that performance measures are reported in a way that will allow CLECs and regulators to identify whether parity and adequacy have been achieved. Dimensions include (1) availability of data, (2) entities compared, (3) report frequency, (4) report accuracy, and (5) report format.
72. BellSouth clearly has committed to provide service to its CLEC customers in a non- discriminatory manner. It further commits to collecting all the necessary data and providing reports to demonstrate parity or adequacy of results.
73. BellSouth proposes a robust set of performance measures for the maintenance and repair process, but less robust measures for provisioning and ordering. No measures are proposed for pre-ordering or billing (although billing measures are included in its interconnection agreement with AT&T).
74. BellSouth's proposed market and product data disaggregation and their proposed performance measure reports and data availability are excellent.
75. Specific performance measures BellSouth should be required to provide include the following. "Include as an ongoing measurement" refers to performance measures included in interconnection agreements but not proposed as a permanent measurement. Critical measures are in italics, and bold face indicates additional emphasis:
76. On the basis of the above shortfall, I conclude that BellSouth has not provided sufficient performance measures in its application to make a determination of parity or adequacy in the provision of resale or UNE products and services to CLECs in the state of South Carolina.