Reliable, Redundant and

Resilient? Presentation of Stefanie A. Brand, Director

New Jersey Division of Rate Counsel

to the National Association of State Utility Consumer Advocates

November 9, 2015 Austin, TX

Welcome to New JerseyPetrie Dish for the IP Transition

Densely populated, urban/suburban. New York suburbs

Suburban/rural, heavily wooded

The Shore – coastal, storm prone

Pinelands - very rural, protected

The “Lower Five” – rural, sparsely

populated

Densely populated, urban/suburban.

Philadelphia suburbs

History

• 1992 statute allowed ILECs to submit Plan for Alternate Regulation (PAR). N.J.S.A. 48:2-21.17, et seq.

• Statute allows Company with a PAR to seek to have services reclassified as “competitive,” removing them from rate regulation.

• 1993 – Verizon (NJ Bell) and Century Link got their PARs approved.

PAR-2

• Shortly after (still in 1993) Verizon seeks reclassification of most of its services. Request gets approved except for basic residential telephone and businesses with 5 lines or less.

• All other services and bundles are reclassified and removed from rate regulation.

• Commission maintains jurisdiction over terms and conditions of service, service quality.

Opportunity New Jersey

• As part of PAR-2 Settlement Verizon agrees to deploy broadband throughout the State.

• Cites this commitment as proof that the PAR will promote economic development (one of the statutory criteria).

• Board approves and requires “a commitment by NJ Bell to achieve ONJ in its entirety, including full broadband capability by the year 2010.”

The Telephone Company Goes into the Cable

Business• With the development of FIOS, Verizon moves

into the cable business. Seeks to avoid having to get a franchise in all 565 NJ municipalities. In 2006, they get a statute passed awarding a statewide franchise.

• Statute (N.J.S.A 48:5A-25.2) requires Verizon to lay fiber in a minimum of 70 municipalities in the state (all county seats and towns with a population density of more than 7,111 persons per square mile) within 6 years of date they first provide service.

History, cont.

• 2008 – VZ gets reclassification of all but residential and single line business lines.

• 2011 – VZ comes back for full reclassification. Case is tried in 2012 and then sits dormant.

• 2012 – VZ fails to meet ONJ deadlines. Wires all but rural areas. Mostly complies with availability of DSL. Commission issues Order to Show Cause. President says “One Hundred percent means One hundred percent.

Coastal Areas -2013

Sandy hits:

Portions of certain

coastal towns in NJ

and NY lose

their copper

Infrastructure.

Verizon announces

they will not fix it.

They offer customers

wireless Voice Link.

Voice link

A wireless box that Verizon markets as equivalent to wireline voice service.

Doesn’t work with certain equipment including alarm systems, fax machines,life alert buttons, certain medical equipment. Relies on wireless access. 36 hour battery backup.

Coastal areasDiscontinuation of Copper

Service• Verizon files Section 214 application at FCC

and state level to replace wireline service in coastal towns. AARP files petition in NJ for investigation, enforcement of COLR obligation. Petitions still pending.

• Customers in those areas object.

• Verizon backs off in NY and runs FIOS. In NJ they proceed because of access to cable which was rewired after the storm.

• Most NJ customers in those towns switch to cable. As a result, will lose service if they lose power in other storms.

Rural areasNo service, no choices

NJ is the most densely populated state, but its population is concentrated in the NY- Philadelphia corridor.

Large portions of the state are very rural. The Pinelands and the Highlands are protected areas.

Problems with Rural Service

• Copper wiring is often the only option for telephone service. No access to cable except in town centers. Spotty wireless service.

• Copper wires are not being maintained (except in Century Link service territory).

• Service via copper goes out when it rains.

• Service via cable (where available) goes out when power goes out.

• Service via wireless comes and goes.

Problems with Rural Service

• Rural areas are where Verizon failed to complete its Opportunity New Jersey obligation. NJ BPU excused Verizon from completing the ONJ obligation, so in these areas they will likely not be getting broadband.

• Rural areas do not meet the population density requirements for the Statewide Franchise.

• In 2015, Commission declares Verizon’s remaining services “competitive” based on the record developed in 2012. Swears that service quality oversight will continue but fails to exercise it and Stipulation says otherwise.

Implications in rural areas

• Horror stories:

• Nuclear plant evacuation drill cancelled because it was raining.

• Teenager in accident – couldn’t reach his parents. Phone was out and they didn’t know it. Police had to go bang on their door in the middle of the night.

• June 2015 “Bow Echo” Storm. Fallen trees knocked out power and severed fiber in two locations. Electric utilities had to rely on internal radios to restore service.

• Municipalities’ complaints to Commission have been ignored.

Urban/suburban areasForced Migration

• Where FIOS has been installed, Verizon is trying to force customers to fiber.

• Sent letters informing them of 30 day deadline to arrange switch over or service will be suspended in 45 days.

• Once suspended, can only call 911 or Verizon customer service.

• 14 days after suspension, will be disconnected.

Urban/Suburban areasForced Migration

• “Upgraded” fiber phone service is offered at existing price for unspecified period of time.

• Says DSL “High Speed Internet” will no longer work.

• Says Battery back up is required for it to work during power outage and that battery back up may not work with cordless phones.

• Says customers can switch to CLECS but then tells customers CLECs will also provide service via fiber – no last mile copper.

• Service is not FIOS, but of course they offer to sell you FIOS at a discount. Prices “may be lower or higher than what you currently pay.”

Urban/Suburban AreasForced Migration

• Claim that “Any devices that rely on your current voice service, such as facsimile, security alarms connected to a central station, or medical monitoring equipment will continue to work in the same way as they did over copper.”

• If a customer is “seriously ill,” they “will not cut off telephone service for “up to 30 days during such illness” provided you give them a doctor’s certification that you will be “endangered” if phone service is cut off.

Forced Migration

• Lots of customer complaints about timeframes. Customers feel bullied.

• Customers are confused about what service will be going forward – what devices will work.

• Customers do not want service that will go out when power goes out.

• Some that switch over have problems after.

• Some have actually been disconnected.

• Rate Counsel petition for Commission investigation has not been acted on. Included in comments to FCC on IP Transition.

Urban Areas

• Verizon was required to provide fiber to all county seats and densely populated areas. 70 towns.

• Executive Order on Multi-dwelling units (MDUs) calls for particular scrutiny to make sure they are wired.

• Hundreds of petitions for waivers of obligations to wire MDUs. Commission is routinely granting them with minimal investigation.

• Hundreds of petitions by customers asking for access to FIOS. Commission is holding these and not acting on them.

MDUs- Service Avoidance

• Supposed to get waiver only where landlord denies access or there is a logistical reason building can’t be wired.

• Problem in NY and PA as well.

• Letter from Mayors of 14 cities to Verizon complaining about failure to meet obligations for roll out of FIOS, failure to maintain copper system, forced migration to VoiceLink.

Where does this leave us?

Forced Transition: Customer Confusion, shutoffs, bullying.

Incomplete FIOS Roll out. MDUs left behind.

ILEC/Cable carving up territories. Forced migration to VoiceLink. No service in frequent storms.

No FIOS. No cable except in some town centers.

Poorly maintained copper. Spotty cell

service. No options. No competition.

Mostly served by Century Link - copper. No FIOS. Some cable.

No service in storms.

Lessons Learned

• Competition is an illusion. Few areas offer access to broadband through more than one company.

• Digital Divide is a reality. Many areas have no access to broadband and no prospect of access for the foreseeable future.

• Universal service is no longer assured. Copper system won’t be there to fall back on.

• COLR is not gone but appears to be forgotten.

Lessons Learned

• FCC plods along calling for an “orderly transition” to fiber. Issue general rules but no action on specific petitions.

• Companies are way out ahead forcing transitions and discontinuing service.

• Customers are confused, upset and without alternatives.

• Customers will be left with no service in power outages, with incompatible equipment, and no avenue for redress.

Reliable, Redundant and Resilient?

• Reliable: Only in areas where Cable or FIOS are present or where copper is maintained. Only when power is up. Large areas will not have access to fiber and will suffer with deteriorating copper. Wireless is not an adequate substitute.

• Redundant: Nope. ILECs and Cable are carving up territories, referring customers to their “competitors.”

• Resilient: Less so than before. Need to come to grips with fact that as we grow more dependent on communications, we will lose them in potentially more frequent storms.