The Final CWA Petition To Rehear Verizon Incentive
Communications 80 Pine Street,
37th Floor Morton Bahr LawrenceMancino
Workers of America New York, New York 10005
President Vice President
AFL-CIO, DISTRICT 1 212-344-2515 District
- OFFICE OF THE VICE
August 29, 2002
Honorable Janet H. Deixler
York State Public Service Commission
Three Empire State
Albany, NY 12223-1350
- Re: Case 00-C-1945
Dear Secretary Deixler:
Enclosed please find an original and
twenty-five (25) copies of the Communications Workers of America’s
Petition for Rehearing Case 00-C-1945. The Commission’s Order Instituting
Verizon Incentive Plan that was issued and effective on February 27, 2002.
This petition is being sent to parties by e-mail without the attachments
and by U.S. mail with attachments.
- Respectfully submitted,
Kenneth R. Peres, Ph.D.
CWA District One Research
cc: Active Parties
STATE OF NEW YORK PUBLIC SERVICE
on Motion of the Commission
to Consider Cost Recovery by Verizon
to Investigate the Future Regulatory Case
REHEARINGKenneth Peres, Ph.D.
Communications Workers of America,
Research Director, District
80 Pine Street, 37th Floor
York, NY 10005
August 29, 2002
COMMUNICATIONS WORKERS OF AMERICA
- Introduction 1
II. The VIP Fails to Deter Verizon’s Reduced Investment in Work
and Infrastructure And Fails to Serve the Public Interest
- Downsizing Threatens Verizon’s Competitors Despite Provisions
- of the VIP 7
- Verizon’s Practices Erode Network Reliability and Increase Risks
- Public Safety and Security Despite the Provisions of the VIP 11
- i. Increased Risk to New York’s E911 System 12
- ii. Decreased Network Reliability and Increased Risk of
- "Network Events" 16
- Downsizing Affects Economic Development Adversely 18
- Workforce Reductions Were Announced Soon After The
- Implementation of the VIP’s Relaxed Service Standards 20
- Downsizing Will Have A Significant Deleterious Impact on
Verizon’s Network Infrastructure and Service Quality Performance 21
- Verizon Operations Report Admits That the Reduction in Force
- Poses Significant Risks to the Public 21
- Downsizing Degrades Verizon’s Central Office and Switch Equipment
- Downsizing Reduces Verizon’s Installation and Repair Performance
- Downsizing Leads to the Further Deterioration of Outside Plant 27
- Poor Condition of Outside Plant Facilities 27
- Lack of Preventive Maintenance 28
- Significantly Reduced Rehabilitation & Capital Program 29
- Band Aid Fixes to Long Term Problems 29
- The Effect of the 2002 Downsizing on Outside Plant is Similar
- to the Crisis Situation During the Early 1990s 31
IV. Past Experience Has Proven That Significant Reductions In
Adversely Affect Service Quality And Network Infrastructure
V. Conclusion 37
Verizon Operations Report
Attachment 2: Verizon’s Deteriorating
Infrastructure – Examples from Manhattan,
Brooklyn, Queens, Bronx,
Westchester, Nassau, and Staten Island
NEW YORK STATE
on Motion of the Commission
to Consider Cost Recovery by Verizon
to Investigate the Future Regulatory Case
PETITION OF THE COMMUNICATIONS WORKERS OF AMERICA FOR
On February 27, 2002, the
Public Service Commission (PSC) issued the Order Instituting Verizon
Incentive Plan (VIP). The PSC adopted the VIP – in part – because it
believed it would protect the public interest.
- We find the terms and provisions of the Joint Proposal, in the
context of our wholesale rate decision issued in January 2002, to
provide a proper balancing of the interests of customers, competitors,
the incumbent, and the economic development of New York State to
produce just and reasonable rates with a guarantee of safe and
adequate service… and… to create the framework and conditions to
allow and encourage all forms of competition in New York.
However, the conditions under which the PSC made these statements
have been altered radically. The VIP may not be able to guarantee "safe
and adequate service" or "encourage … competition."
In May, Verizon New
York, Inc. (Verizon) announced that it would reduce its work force by more
than 2,000 non-management employees. This reduction in force could include
the layoff of all or some of these workers as early as September 2002.
This downsizing occurs after Verizon had already reduced its force by
approximately 3,000 workers through early retirement and attrition since
the end of 2001. Thus, after the latest cuts, Verizon will have reduced
its non-management workforce by almost 5,000 workers or 15.5% over an
eight-month period and by 6,780 or 20% over a 20-month period.
critical issue facing consumers, businesses, the general public and the
PSC is that this particular reduction in force entails a significant
decrease in the construction, maintenance, monitoring, testing and
rehabilitation of the company’s infrastructure. The major consequences of
these actions include the following:
risks to public health, safety and security due to the rising probability
of network outages and the understaffing of the E911 system –particularly
sensitive concerns given September 11, 2001;
competition due to the deterioration of Verizon’s infrastructure upon
which competitors – especially resellers – depend and a decline in the
quality of services delivered to wholesale as well as retail customers;
affecting economic development especially in relation to the deterioration
of the company’s network infrastructure.
The Communications Workers of
America, AFL-CIO (CWA) bases these conclusions on two new sets of
information. First, following the reduction in force announcements CWA
came into the possession of an internal Verizon document entitled
"Northeast Network Operations: 2002 Budget Initiatives: Executive Summary"
(the Verizon Operations Report included as Attachment A). This report
identifies the cost saving initiatives associated with Verizon’s reduction
in force and admits that the impacts will have "significant risks and
consequences" for the public.
CWA also interviewed a number of company
technicians who corroborated the fact that the initiatives described in
the Verizon Operations Report are being implemented and are having an
adverse impact already. The interviewed technicians who work in the
company’s central offices, network operational centers, and the field are
qualified especially to report on the company’s initiatives and their
impacts. The combination of the Verizon Operations Report and the
interviews verify the components of the reduction in force and identify
the immediate and long-term impacts on both the public and Verizon’s
Based on this new information, the CWA requests
that the PSC rehear Case 00-C-1945, the Verizon Incentive Plan, or in the
alternative, open a new proceeding to investigate the impact of Verizon’s
reduction in workforce and capital expenditures on public health, safety
and security, competition, service quality and economic development. The
Commission should also require Verizon to produce the full Verizon
Operations Report and any other similar documents; the detailed budgets
for 2002 and 2003 and any internal evaluations of the impacts on the
company’s infrastructure and service quality; and current forecasts for
We recognize that this petition is filed beyond the 30-day period
specified in the Public Service Law. However, the law allows the PSC some
- After an order has been made by the commission… application [for
rehearing] must be made within 30 days after the service of such
order, unless the commission for good cause shown shall otherwise
direct; and the commission shall grant and hold such a rehearing
if in its judgment sufficient reason therefore be made to appear
The PSC should grant the petition because the new information was
only available after the 30-day period for filing a petition for rehearing
had lapsed. During the proceeding, Verizon did not publicly share with any
of the parties to the case the fact that it would reduce its workforce
significantly much less recognize the consequences of such an action. This
downsizing was announced in May, significantly beyond the end of the
thirty-day period. CWA obtained the Verizon Operations Report weeks after
the downsizing was announced. Finally, the CWA was only able to determine
that Verizon was actually implementing the initiatives associated with the
downsizing after interviewing the technicians over the past few
This entire set of new information provides a firm rationale
for the PSC to order a rehearing because it could alter the basis upon
which the PSC – and other parties – reached their decisions in this case.
Verizon’s ability to implement the reduction in force while recognizing
its significant deleterious impacts calls into question the ability of the
VIP to protect public health, safety and security; encourage competition;
enhance economic development; and insure the adequacy of the company’s
infrastructure and its staffing levels.
Under the VIP, the PSC reserved the
authority to act if it determines that
- … intervening circumstances have such a substantial impact as to
render… this Plan unreasonable, unnecessary or insufficient for the
continued provision of safe and adequate service by Verizon-New York.
Should the Commission exercise this authority, Verizon has the right
to withdraw from this Plan.
A rehearing would provide the PSC with the evidence to determine if
CWA is correct in its assertion that the downsizing will compromise the
company’s ability to provide "safe and adequate service." If the PSC
decides not to rehear the VIP, then in the alternative, it should open a
new proceeding. It is critical that the PSC addresses the specific risks
to the public interest posed by Verizon’s reduced investment in workforce
II. THE VIP FAILS TO DETER VERIZON’S
INVESTMENT IN WORKFORCE AND INFRASTRUCTURE
AND FAILS TO
SERVE THE PUBLIC INTEREST
Verizon assured the PSC that the
VIP’s objectives and penalties would protect the quality of services and
levels of investment required to maintain the company’s
- … the purpose of the service quality provisions of the [Verizon
Incentive] Plan is to provide a bulwark against service deterioration
from the current appropriate service quality levels.
Furthermore, the company stated that the pressures of competition
would insure high quality service.
- … the Joint Proposal reflects the fact, which this Commission has
long recognized, that competitive forces rather than regulation can
and should be relied on to discipline the market and the industry, and
to create better, more targeted, and more flexible incentives for
improving service, choice and prices.
The company also stated that the condition of the company’s network
and outside plant would ensure efficient and reliable service now and in
- the substantial capital investments that Verizon NY made in
network and outside plant improvements over the course of the PRP will
ensure continued service efficiency and reliability in the future.
In its summation, the company urged the PSC to approve the VIP.
- This Plan assures that customers will have access to high-quality
services at affordable prices, providing customers stability and
continuity for the term of the Plan. At the same time, the Plan
provides Verizon NY with the flexibility it needs to compete in
today’s market and with the incentives to continue to invest in New
The staff of the Department of Public Service also reassured the PSC
that the VIP would protect service quality and infrastructure.
- The Retail Service Quality and Infrastructure components of the
- ensure that Verizon will not be able to sacrifice good service
quality to recover its competitive losses and/or enhance its earnings.
The Commission approved the VIP, in part, based on such assurances and
a review of the record generated during the proceeding.
- Based on the evidence in this record, we adopt the terms of the
Verizon Incentive Plan contained in the Joint Proposal.
Unfortunately, the VIP provisions for service quality benchmarks and
penalties, infrastructure investment and the supposed stimulus of
competition have not deterred Verizon from implementing a reduction in
force that includes cutbacks in monitoring, testing, construction,
preventive maintenance and plant rehabilitation.
contradict the promises and statements Verizon made during the VIP.
Verizon is aware that its reduction in force poses very significant risks
to the public. Verizon calls this "risk management." The Verizon
Operations Report admits that its planned reduction in force will result
in the following:
risks and consequences" to the public;
resources will be available to meet requirements…"
the risk of a Network Event [the failure of a switch] during higher
traffic periods"; and
increase the probability of multiple Network Events at the same point in
time [t]hus making resolution of such events more difficult than they are
Verizon’s practices increase risks to public safety and
security, reduce service quality, erode system reliability, and threaten
A. The Downsizing Threatens Verizon’s Competitors Despite the
Provisionsof the VIP
Verizon faces a relatively high level of competition in New York.
Competitive Local Exchange Carriers (CLECs) serve approximately 3.3
million access lines in New York or approximately 27% of Verizon’s local
access market. In its VIP testimony, Verizon specifically referred to the
supposed beneficial impact of competition. "The most obvious reason why
competition will force Verizon NY to maintain good service quality is that
it will lose customers to its competitors if it does not." This scenario
assumes the somewhat idyllic view of competition contained in many
textbooks: a significant amount of competition between many different
firms such that no one firm can dominate the market will generate high
quality and low priced goods and services. However, recent events
demonstrate that the actual functioning of unregulated or even partially
regulated markets – such as the energy and telecommunications industries –
can fail to achieve the policy expectations that are based on
Verizon’s actions following the VIP contradict Verizon’s assurances
given during the VIP. Since the VIP was approved it has become clear that
Verizon is instituting a downsizing policy that, by its own admission,
degrades services and network reliability.
- Our plan will require reducing commitments to other Departments,
lowering Provisioning on time Objectives and Increasing Repair Time
Commitments as well as other time and work reducing actions. We can
and will meet our Budget requirement, however it will dramatically
alter the way we have done business in the past. The ability to
provide timely service at all cost will not be in the realm of
possibility any longer.
- The above actions pose a medium risk to the Network with an
expected increase in FCC reportable and Customer Complaints… These
actions will significantly increase the probability of multiple
Network Events at the same point in time. Thus making resolution of
such events more difficult than they are today.
Verizon has implemented practices that reduce service quality despite
the existence of the highest level of competition in the history of the
local New York telephone market.
Verizon is responding to the market
place by eroding service quality and directly hurting its competitors. As
will be detailed in the next part of this Petition, Verizon is cutting
support services in its Wholesale division, increasing installation and
repair times, reducing facilities needed for repairs and installations,
increasing the probability of network events, and even degrading the
company’s engineering prints. These actions will punish Verizon’s
competitors. The CLECs rely on Verizon’s services in order to stay in
business. Most of the competitors lease portions of Verizon’s network
(called unbundled network elements or UNEs) at wholesale rates and combine
them with their own equipment to offer services to their retail customers.
These CLECs also rely on Verizon to complete installations and make
repairs if a problem arises in Verizon’s network. Even the CLECs that have
their own switches (facilities based carriers) rely on Verizon’s UNEs in
order to lease a distribution network to connect their customers to their
switches. Thus, all CLECs are dependent on the condition of Verizon’s
network to be able to provide basic local telephone service.
Verizon can benefit from these cutbacks because they hurt the CLECs in
three ways. First, the quality of wholesale services delivered to the
CLECs will suffer making it more difficult for the competitors to conduct
their business in a profitable manner.
Second, Verizon’s cutbacks ironically can provide the motivation for
CLEC customers to return to Verizon. As will be explained in Part III,
Verizon’s cutbacks in workforce and construction result in poorer service
quality delivered to CLEC customers. However, these customers do not know
that Verizon, not the CLEC, actually provides these services. After all,
the CLEC markets itself as the service provider and the customer pays the
CLEC for the services. The CLEC’s reliance on Verizon is hidden from view.
Thus, when service deteriorates, the customer blames the CLEC. Poorer
service could, at some point, motivate the customer to return to Verizon –
not knowing that Verizon’s service is, most likely, just as bad.
Finally, the general erosion of Verizon’s service creates another
somewhat perverse benefit. As a condition for its entry into the long
distance market, Verizon must provide "parity," the same quality of
service to its wholesale customers as to its retail customers. By reducing
service to all customers, Verizon’s downsizing allows it to retain its
position in the long distance market at the same time that it cuts
internal costs and hurts the competition. Yet, the monetary sanction
provisions of the Verizon Performance Assurance Plan (PAP) would not deter
such service degradation so long as the CLEC customers receive a level of
service equivalent to that provided to Verizon’s retail customers.
Verizon’s current attitude towards the threat of competition is
illustrated by its decision to place limits on its "winback" program. This
program was designed to recapture and retain former customers that had
moved to the CLECs. Previously, Verizon made a point of providing "gold
plated" service to the customers – especially large businesses – that
returned to Verizon from a competitor. Indeed, the "winback" program was
focused on these customers to make sure they were satisfied. This was a
rational response by Verizon to competition. Now, as indicated in the
Verizon Operations Report, the "winback" services delivered to these
customers are being curtailed. The threat of competition clearly is not
forcing Verizon to maintain service quality to the customers that have
proved most sensitive to competition.
The Verizon Operations Report along with reports from technicians in
the field show that the company has decided that the pressures to reduce
costs are stronger than any regulatory or competitive incentives to
improve service. The Verizon Operations Report specifically identifies
"Budget Targets for 2002" as the driving force behind the downsizing even
though there will be an "increase in work volume." Thus, just a few short
months after the adoption of the VIP, competition and the possibility of
penalties have failed to induce Verizon to provide the resources needed to
maintain or improve service. The company’s practice of budget cuts has
overwhelmed the promised beneficial impact of competition and VIP
penalties. Verizon’s practices already have called into question staff’s
belief that the VIP will "ensure that Verizon will not be able to
sacrifice good service quality to recover its competitive losses and/or
enhance its earnings."
- Verizon’s Practices Erode Network Reliability And Increase
- Public Safety and Security Despite the Provisions of the VIP
The VIP established a series of service quality benchmarks and
penalties to insure that Verizon would provide high quality service over a
three-year period. The service quality benchmarks are based on annual
averages to be reviewed twelve months after the plan is adopted (February
28, 2003) at which time any penalties would be assessed. In this sense,
the VIP is reactive, not proactive. The VIP review process may be too late
especially considering the risks to public health, safety and security
posed by Verizon’s reduction in force. Once trained workers have been
severed from the company, any subsequent rehiring efforts would not remedy
degraded service quality in a timely manner. New hires would lack the
experience and training possessed by the workers who had been severed.
Thus, assuming that the VIP service quality sanctions were triggered at
the end of the first year of the plan, poor service would continue to
plague customers over the second year - even if the company attempted to
hire more workers.
The VIP requires Verizon to file annual construction budgets that
identify service-related investments and meet with staff on an annual
basis to provide an overview of its construction budget with emphasis on
service quality improvements and increased network reliability. The VIP
also requires Verizon to inform the PSC staff of its intention to
implement practices or standards related to network reliability consistent
with "post-9/11 best practices" and to cooperate in the development of
data concerning service outages.
These VIP "informational" requirements
may not be sufficient to protect public health, safety and security given
the risks associated with Verizon’s downsizing. The "Description of
Cost-saving Initiatives" contained in the Verizon Operations Report
concludes with the following ominous statement:
- These actions will significantly increase the probability of
multiple Network Events at the same point in time. Thus making
resolution of such events more difficult than they are today
The VIP mandated annual review of construction budgets would not
provide the detail needed to determine the actual condition of the
company’s outside plant, central offices and switches. Yet, it is crucial
that the PSC gather such detail in order to protect the public proactively
against the risks associated with Verizon’s "cost saving
Unfortunately, the consequences of such Network Events
are much greater now than before September 11, 2001. If allowed to
continue, the deterioration of Verizon’s network at this time could prove
i. Increased Risk to New York’s E911 System
protection against the failure of the E911 system and switch outages may
not be adequate. Under the VIP, Verizon will have to pay $100,000 for each
major service interruption that results from Verizon having an "actual
level of diversity less than the level Verizon certifies annually as
existing in the Signaling 7 (SS7) or Enhanced 911 (E911) networks" after
July 1, 2002. However, the prospect of such a penalty did not stop Verizon
from instituting cost saving initiatives that "significantly increase the
probability of Multiple Network Events at the same point in time thus
making resolution of such events more difficult than they are today."
Furthermore, the possibility of a VIP penalty is not preventing Verizon
from cutting the workforce needed to properly monitor the E911 equipment
so that it will function properly and be fixed quickly. The deleterious
impact on E911 has been corroborated by technicians and internal company
e-mails, as will be discussed later in this petition. Clearly, Verizon’s
practices are not consistent with the VIP’s directive that Verizon "…
assure reliability, consistent with post-9/11 best practices."
Both CWA technicians and internal Verizon memos reveal how the
company’s reduction in force poses, in the words of the Verizon Operations
Report, "significant risks and consequences" for the public. E911 is an
enhanced version of the 911 Emergency Hotline. With E911, the police
operator who answers the line not only hears the voice at the other end
but can also read the name and address of the caller on her computer
The primary equipment that enables New Yorkers to have E911
service is owned and maintained by Verizon. It consists of two switches
either of which is capable of handling all the 911 calls. The advanced
E911 computer equipment enables the following:
city can interact with the E911 system, such as putting in emergency
messages and "viewing" the operators who are answering the 911;
answering operator can read the "E" or "enhanced" part of the 911 system,
which indicates who is calling and the address of the telephone being used
without the caller having to speak; and
technician is able to manually change the calls from the Brooklyn switch
to the switch in Manhattan should the need arise.
The E911 system is housed in three locations: two have switches that
direct the 911 calls to the police operators. The two switches have
technicians on hand only from 8:00 AM to 12:00 Midnight. The third
location is the Automatic Identification Unit (AIU) equipment at 375 Pearl
Street in Manhattan. Prior to June 1, 2002 a central office technician was
assigned on site to monitor and maintain the AIU equipment at 375 Pearl
Street. Since June 1, in response to the downsizing, Verizon removed the
technician from the AIU equipment. The responsibility for that equipment
is now with a technician assigned to an office located on Broad Street – a
twenty-minute walk from Pearl Street.
To make matters worse, the AIU equipment cannot be monitored for
problems from a remote location, as can most other Verizon switches.
Verizon will only know about a failure after the police report the problem
to the company. Then, to fix the problem, a technician must be dispatched
from Broad Street. The technicians at Broad Street have not received any
special training on the 911 system, which differs from the equipment upon
which they usually work. Thus, an outage could mean that 911 will no
longer be "enhanced" – if the caller cannot speak, emergency services will
not be able to send aid. Further, no worker will be present to fix any
problem immediately because a technician will have to be dispatched from
an office 20 minutes away.
Internal company documents reveal that E911
has experienced problems since the company decided to reduce E911 staffing
levels on June 1. An e-mail sent on June 14, 2002 stated the
- As discussed, recent organizational changes that have moved
responsibility for the AIUs that serve NYPD 9-1-1 to the network field
group have complicated our ability to respond [to] these high
priority troubles for this [NYPC] customer.
- Earlier today, the AIU service on the Manhattan side went into
an "unknown state" at approximately 9:20 am. A field dispatch
to the Pearl St. AIU location took more than 30 minutes. Personnel
had to travel to Pearl from another location. Until recently,
maintenance responsibility for the AIU resided with a network group
located in the Pearl St. building. Dispatch was almost immediate in
- I’ve asked the managers of both the old and new groups to advise
their management that the NYPD is extremely irate with the
additional time required to get our people in place to switch their
service to backup.
- I’m told Inspector Gangone of the NYPD is calling for a meeting
for an explanation [emphases added].
Past experience shows that such lack of staffing can be fatal. On
Super Bowl Sunday in 1999, the Brooklyn 911 switch went down because the
facility lost electricity. One man died, even though technicians were able
to restore service within thirty minutes. When the switch crashed, the
City responded by moving all its operators to One Police Plaza. However,
the 911 calls were still going to the empty operator stations in
technician trained in the 911-system was working that shift. She was able
to manually move the calls to One Police Plaza. That function could only
be performed through the computers at 375 Pearl Street.
calls went through 911 for thirty minutes. Should 911 go down again,
Verizon will not have the technicians on hand to repair the problem within
thirty minutes. Indeed, it will take at least 20 minutes for a technician
to even begin to work on the problem because the technician assigned to
the equipment is located at another office. The lack of monitoring will
create additional delays because Verizon cannot notify the technicians
until the company is alerted by the New York City Police that there is a
problem in the first place.
technicians assigned to handle the 375 Pearl Street equipment since June
1, 2002 have not been trained in 911. A technician without specific 911
training could not resolve a problem as quickly as the trained,
experienced technician did in 1999.
If the E911 computers and machinery work perfectly all the time, then
Verizon will have managed the risks posed by downsizing and saved money.
However, computers and machinery require constant maintenance and
monitoring. Without properly trained technicians to monitor and maintain
its E911 equipment, Verizon is putting the health, safety and lives of New
Yorkers at risk.
ii. Decreased Network Reliability and Increased Risk of "Network
The Verizon Operations Report repeatedly refers to the
increasing risk of a "Network Event." Such Network Events can be caused by
the failure of a switch in the Central Office or by cable failures in the
In the first six months of 2002, Verizon reduced its capital
expenditures by $803 million or 56% compared to the first six months of
last year. Due to cuts in construction budgets and workforce, Verizon
basically has abandoned both its rehabilitation and preventive maintenance
programs. Furthermore, the company has directed technicians to fix only
those problems for which they were dispatched and to ignore any other
problems that they may notice. The company also has reduced the
"mechanized analyses and tracking tools" previously available. For
example, the Verizon Operations Report specifically refers to a cost
initiative to "Reduce Audit and Preventive Maintenance Routine Frequency."
The Report also states that "if work is for [a] non-revenue producing
function or not funded by the Capital Program it will not be performed"
and that the "engineering program will halt." By allowing its outside
plant to deteriorate further, Verizon will impact service quality
adversely. During a 1990 proceeding, Staff offered detailed testimony
revealing the correlation between deteriorating conditions of the
company’s outside plant and declining service quality.
CWA represented technicians explained how Verizon has increased the
risk of a failure of a switch and provided a recent example of such an
outage. The equipment that provides dial tone and enables the customer to
direct the call by dialing a telephone number is called a "switch." Each
switch handles three or four exchanges that contain 30 – 40,000 telephone
lines. The switches are located in a field central office. In the past,
technicians were assigned to the field central offices to monitor,
maintain, and upgrade the system as well as to provide service to new
The reliability of the entire system was ensured by duplication. Each
switch is internally duplicated. If one section of the switch does not
function, the other or duplicate section provides service. In the past,
monitoring was also duplicated. The switches were monitored directly at
the field central office as well as remotely at a Network Operations
Verizon’s downsizing is undermining the system of network reliability.
As previously explained, Verizon is no longer providing the technicians or
the funding to repair the duplicate sections of its switches. Verizon also
is removing technicians from its field central offices. After the August 1
downsizing, technicians might not be present at the field central offices
even during high traffic periods from 8:00 AM to 5:00 PM. If no one is
manning the central office when a switch problem occurs, then the
technicians at the remote monitoring center will be relied upon to notice
the problem. If the problem cannot be fixed remotely through software,
then a technician will have to be dispatched to the location.
The consequences of Verizon’s policy of understaffing already have been
revealed. On May 24, 2002, a "Network Event" occurred in Manhattan because
Verizon refused to properly staff the 36th
Street Central Office. Previously, two technicians were assigned to
perform such tasks as switch upgrades. One technician would conduct the
upgrade and the other would monitor the switch. In this way, a problem
would be caught before the switch could crash. Verizon is no longer taking
such precautions because of its reduction in force. During the 12:00
midnight to 8:00 AM shift on May 24th
Verizon assigned only one technician to perform a software upgrade on the
switch located at the 36th Street Central
Office. The switch crashed while the technician was performing the
upgrade. As a result, 40,000 customers did not have telephone service for
13 hours. This outage would not have occurred had Verizon properly staffed
C. Downsizing Affects Economic Development in New York
The critical importance of a high quality
telecommunications network and services is not difficult to imagine. The
flow of commerce depends on the ability of companies and consumers to be
able to use phones to transact business and make routine appointments.
Verizon’s downsizing with the associated cost cutting initiatives will
affect adversely the quality of the entire telecommunications system and
the specific quality of installation and repair services. The downsizing
increases the probability of the number, frequency and duration of network
failures. Time, of course, is money. Many businesses will not be able to
make money during the time their phone lines are not functioning because
of network outages, poor outside plant conditions, the lack of facilities
or longer waits for installations and repairs.
Employers are doubly affected by a decline in service performance.
First, increased amounts of staff time will be spent dealing with
installation/repair problems and decreased productivity and/or sales as a
result of communications systems that are unavailable. Second,
productivity is reduced when workers feel they must use office time to
deal with the hassle of installation delays or service quality problems
related to their home line. Indeed, an increasing number of businesses
rely on the ability of employees to telecommute, including the ability to
make voice, data, and facsimile communications from home without
productivity being diminished by worse telephone service.
Even employees who do not telecommute are increasingly expected to have
access to sophisticated telecommunications equipment at home so that once
home from work they can check data and transactions being made in their
employer’s international markets in time zones on the other side of the
globe. Furthermore, business location decisions are influenced by the
quality of a community’s infrastructure that includes the condition of its
telecommunications system and the availability of telecommunications
The degradation of Verizon’s network infrastructure and
service quality caused by downsizing will be felt across the entire
state’s economy. Missed repair appointments, the lack of timely
installation of additional lines, or increased service outages will create
economic problems beyond those experienced by individual businesses and
residential consumers. The success of New York’s economic development
depends in part on the quality of our telecommunications infrastructure
and services. Verizon’s downsizing places that economic development at
D. Workforce Reductions Were Announced Soon After The
of the VIP’s Relaxed Service Quality
Verizon’s reduction in force should be understood in the
context of the VIP’s change of the service quality standards and penalties
applied to Verizon. From September 1995 through February 2002, Verizon’s
service quality performance was evaluated according to specific standards
contained in the Performance Regulation Plan (PRP). For the three-year
period starting in March 2002, Verizon will be evaluated according to the
service quality standards contained in the VIP. In many important
instances, the VIP standards are less stringent.
Verizon reduced its
workforce commitments soon after the more "relaxed" VIP standards became
effective. For example, technicians reported that Verizon immediately
reduced the size of the workforce assigned to Sundays after the VIP
eliminated Sundays and holidays from the calculation of the
"out-of-service over 24 hour" standard. Technicians even stated that
managers boasted that the reduction in the Sunday workforce was the direct
result of Verizon’s "victory" in having the PSC adopt the VIP. Verizon
also announced its intention to abolish 175 operator jobs after the VIP
eliminated the "directory assistance answer time performance"
Finally, the VIP’s change in performance levels may also have
had an impact on Verizon’s decision to reduce significantly the number of
workers assigned to capital construction, preventive maintenance and plant
rehabilitation. The VIP objective for Customer Trouble Report Rate was set
at a level that allows Verizon to incur 1,445,344 more customer trouble
reports than last year before any VIP penalty would be imposed. This
represents a 49% increase in customer trouble reports over the 2001
III. DOWNSIZING WILL HAVE A SIGNIFICANT
IMPACT ON VERIZON’S NETWORK INFRASTRUCTURE
A. Verizon Operations Report Admits That The Reduction in
Poses Significant Risks to the Public
The Verizon Operations Report
states that the goal of the reduction in force plan is to "reduce
expenses" and "meet budget targets for 2002." Verizon acknowledges that
these goals are difficult to meet because "work volume will continue to
grow but at a slower rate." The company recognizes the problem created
when a reduction in force is implemented in the face of an increase in
- Our ability to handle a continued increase in work volume while we
reduce Force will require a different approach as to how and when we
perform work and what work will actually be completed. Our [reduction
in force] plan will require reducing commitments to other Departments,
lowering Provisioning on time Objectives and Increasing Repair Time
Commitments as well as other time and work reducing actions.
- We can and will meet our Budget requirement, however it will
dramatically alter the way we have done business in the past. The
ability to provide timely service at all cost will not be in the realm
of possibility any longer.
The Verizon Operations Report contains a section entitled
"Description of Cost Saving Initiative[s]" that itemizes fourteen
initiatives and identifies the following specific impacts:
risk of and frequency of Network Events." This impact refers to the
failure of a switch. Each time a switch goes down approximately 40,000
customers are without service.
Outages. The company admits that 40,000 customers will spend more time
without service each time a switch fails.
the time between equipment inspections and Preventive Maintenance
activities." The company recognizes that a
reduction in testing and maintenance will increase the probability of
Increase." This impact refers to an
increase in the "mean time to repair" (MTTR), i.e., the average time it
takes a technician to repair a problem with a customer’s service.
‘no facilities’ conditions. The Verizon Operations Report states that the
company will not have the specific "facilities" such as copper pairs that
are needed to install a new line or repair a trouble; in other words,
technicians will not be able to complete their work for
complaints." The company recognizes that
poor service will lead to more complaints by customers.
Provisioning on time performance." This
refers to an increase in the time it takes to install or "provision" new
Increase." The company admits that the
downsizing will result in an increasing backlog of uncompleted
installation orders so that customers will have to wait longer.
Rebates." The company recognizes that it
will have to rebate more money to customers because it will take much
longer to fix out-of-service troubles.
Performance Results. " The company admits that the downsizing will erode
customer service across the board.
The CWA interviewed a number of technicians around the state to
determine whether the Verizon Operations Report was a valid description of
actual company initiatives and their impacts. The interviewed technicians
included central office technicians who maintain and operate the company’s
equipment in the central offices such as the switches that reroute all
voice and data traffic; frame administrators who oversee the connections
that link customers sending and receiving voice or data communications
over the network; construction technicians who install and replace the
outside cables and other equipment that carry data and voice traffic from
the company switches to the home or business; and field technicians who
install and repair telephone service for customers.
affirmed that each of the 14 initiatives itemized in the Verizon
Operations Report are being implemented. Both the Verizon Operations
Report and the reports from the technicians conclude that Verizon’s
reduction in force substantially increases risks to the public and the
entire Verizon infrastructure. The following sections will describe in
more detail the components of Verizon’s cost saving initiatives and their
impact on the company’s inside plant, outside plant and overall
installation and repair performance.
B. Downsizing Degrades Verizon’s Central Office and Switch
Verizon is not performing necessary maintenance work
because of the reduction of the workforce. CWA-represented technicians
explained the impact of a number of the "cost saving initiatives" listed
in the Verizon Operations Report.
is reducing "audits and preventive maintenance." Frequent testing and
preventive maintenance of the company’s infrastructure are required to
keep a complex telecommunications system running efficiently and
regularly. However, Verizon is cutting back. For example, Verizon no
longer repairs the major reliability system built into a switch. Each
switch has duplicate sides to insure that it will continue to function
even when one side goes down. However, Verizon is not fixing the duplicate
system. It is not repairing the side of the switch that fails, as long as
the other side functions. This practice, among others, "increases risk
of frequency of network events [switch outages] [emphasis
the past, technicians performed tests and other activities that could
cause switch outages during "safe time" windows in the middle of the night
when traffic was relatively light so that an outage would cause the least
disruption to service. Now, Verizon plans to perform such work outside of
these "safe time" windows so that it does not have to staff the midnight
to 8:00 AM shift. Verizon admits that the reduction of "safe time" windows
"increase[s] risk of a "network event" during higher traffic periods
is deferring activities that are required to keep its network running
smoothly and regularly. In the past, Verizon made sure that its equipment
was running in a balanced manner so that specific circuits were not
regularly running high traffic. Circuits tend to burn out more often if
they regularly run high traffic. Such "office balancing" is not being
practiced. Verizon also is deferring other important maintenance work. For
example, previously workers would either rehabilitate old cable or put
customers onto new cable during off-peak hours. Now, workers are directed
to put customers on new cable only after the existing cable deteriorates
to such an extent that reported troubles increase significantly.
is not staffing the Central Offices with frame administrators. Field
technicians increasingly rely on frame administrators to locate the
facilities needed to install a line – a vital service given the company’s
chronic deficiency of good copper pairs. By understaffing the frame
administrator position, Verizon forces customers to wait a longer for
does not clean up the frames in many of its central offices. Frame
administrators cannot reach a customer’s telephone line in some Central
Offices because there are too many wires wrapped around the frame.
Technicians refer to some of these conditions as "waterfalls" because the
unnecessary wires are profuse and free flowing. This condition exists
because Verizon eliminated the "disconnect team" – those frame
administrators who removed all of the dead wires to prevent this
condition. Now, thousands of useless wires prevent good service.
company has cut overtime expenses and eliminated "call outs for minor
alarms and non-service affecting troubles." In the past, the company would
call out workers (call off-duty workers to return to work) as needed to
address problems caused by "minor" alarms and such non-service affecting
troubles as preventive maintenance. Such "call-outs" would insure that
minor alarms would not turn into major switch outages. The Verizon
Operations Report admits that this initiative to end call outs increases
the duration of outages and repair times and leads to more customer
C. Downsizing Reduces Verizon’s Installation and Repair
CWA technicians confirmed the Verizon Operations
Report’s explanation that other "cost saving initiatives" associated with
the downsizing will increase the amount of time it takes for technicians
to install new service or repair troubles on existing lines.
"Demand Work" from Construction. Previously, technicians and/or engineers
would place new orders, called Demand Work, when faced with a shortage of
"facilities" – the copper pairs needed to connect the office or home with
Verizon’s network. The company has now eliminated demand work due to the
downsizing and associated cost saving initiatives. Instead of constructing
new facilities, the company is forcing technicians and customers to wait
until existing facilities become available. This cost saving initiative
"increase[s] ‘no facilities’ conditions" [emphasis added].
Technicians report that this initiative is exacerbating the current
crisis level scarcity of clean copper pairs causing even further delays in
the installation or repair of customer lines.
related to installations and repairs are not being properly maintained. In
the past, the company invested in a huge program to update records. Now
the company is cutting such investments. The Verizon Operations Report
states that "if work is for non-revenue producing function[s] or not
funded by the Capital Program [which has been significantly reduced] it
will not be performed" [emphasis added]. The company admits
that under this initiative the "Engineering Program will stop."
Consequently, the engineering prints that identify the location of cables,
facilities, and manholes will be corrupted. These work prints comprise a
schematic of the company’s network and inform technicians about the
location of cables, facilities, feeders, manholes, etc. Technicians rely
on these work prints to properly and efficiently install or repair
has eliminated installation commitments for 8:00 AM. Previously, customers
were given 8:00 AM commitments to make sure access lines were installed in
the morning. Now, the company is making commitments starting two hours
later at 10:00 AM. This new practice "will adversely effect… on time
provisioning" i.e., installation [emphasis added].
will be a "backlog increase" of uncompleted installations. This is the direct result of understaffing,
lack of facilities, and poor record keeping.
company is reducing "support on switched access services" in its
Wholesale, Enterprise, and Business/Retail divisions." Support services
include those workers in central offices who assist field technicians in
their duties to install lines or fix troubles. Verizon is now reducing the
number of technicians who test and trouble shoot the switch to determine
the location of a trouble. It should be noted that the Wholesale Division
oversees the services delivered to the company’s competitors, called
Competitive Local Exchange Carriers or CLECs, which rely on Verizon’s
company formerly gave customers a commitment to repair troubles within 24
– 48 hours and to install service within 5 business days. However, as part
of the downsizing, these commitments are being extended out in time. CWA has received reports that the company is
giving installation commitments of up to 4 weeks to customers.
will no longer provide services for "hot cuts" and "win backs" before 8:00
AM or after 5:00 PM. "Hot cuts" refer to
those instances where CLECs have won over former Verizon customers and
need to have the access line transferred to their switch without
interrupting service. "Winback" refers to former CLEC customers who have
returned to Verizon. Previously, Verizon prioritized service to the "hot
cuts" and the "win backs." Now, services for these customers will be
provided only within the 8:00 AM to 5:00 PM window. The Verizon Operations
Report states that this cutback in service will result in "customer
admits that insufficient resources will be available for Customer Services
(field operations) and the Network Operations Centers that control the
switches. The Verizon Operation Report succinctly states that, as a result
of the cost saving initiatives "… insufficient resources will be
available to meet requirements" [emphasis added]. In other words,
Verizon’s overall ability to service its customers from both the switch
and the field will be impaired. The Verizon Operations report describes
the impact of this company practice as "lower Performance
D. Downsizing Leads to the Further Deterioration of Verizon’s
CWA technicians report that Verizon has not invested
enough capital to maintain its outside plant at a level that can
reasonably be expected to meet the needs of the company’s customers.
Outside plant comprises the equipment necessary to provide telephone
service to the customer from the central office including such items as
poles, cables, terminal boxes and wires. Specifically, Verizon is not
replacing defective plant, maintaining existing plant, or supplying enough
facilities to fix on-going problems.
Instead of fixing problems Verizon relies on short-term, stopgap
solutions. In many areas, Verizon’s outside plant is inadequately
protected from the weather, rodent damage or vandalism. For example, the
company will cover a cable splice or terminal with a plastic tarp instead
of a proper weather sealed enclosure. Another popular band-aid is that
rather than provide a clean copper pair to install a new line or replace a
defective pair, the company instead will use a special device to "split"
an existing pair that serves one customer so that it now can serve up to
eight separate customers. Though these temporary fixes may save money in
the short term, they generate many more problems over time as will be
discussed below. The cuts in Verizon’s construction budget and the
transfer of the technicians who previously built and restored the outside
facilities exacerbate the already deteriorating condition of the company’s
i. Poor Condition of Outside Plant Facilities.
Verizon has cut its construction budget significantly. In the first half
of 2002, Verizon reduced its capital expenditures by $803 million or 56%
compared to the first half of last year. Verizon also has transferred many
workers out of construction across the entire state. In many instances,
Verizon has halted construction work. CWA represented technicians from
around the state are beginning to catalogue the poor condition of
Verizon’s outside plant. Attachment 2 contains just a few examples
of the deteriorating condition of Verizon’s outside plant in Manhattan,
the Bronx, Brooklyn, Queens, Nassau, Staten Island and Westchester. CWA is
in the process of collecting data from other Locals around the state.
Problems identified by technicians so far include the following:
boxes and terminals are in poor condition and, in some cases exposed to
the weather and passers-by thus presenting a possible health and safety
hazard for the public, let alone damage to the company’s
cables can be unlashed, i.e., not secured so that they represent a
potential health and safety hazard.
often are covered with rubber boots that are prone to leaks, rodent damage
and vandalism that increase the risk of cable failures.
increasingly rare replacement of poles, cables and terminals creates
safety hazards and increases the possibility of cable failures.
hang off poles creating safety hazards and increasing the risk of cable
are placed but not spliced. In these cases, engineers wrote up new jobs,
construction placed the cable but the company refused to assign workers to
complete the job thus increasing the risk of cable failure for customers
who needed the new cable in the first place.
increasing backlog of pending construction work orders since more and more
blocks and cables need to be replaced.
lack of clean pairs forces workers to remove only the defective part of a
pair and replace it with copper from somewhere else which destroys the
continuity of the pair and makes it less efficient, durable and
ii. Lack of Preventive Maintenance.
Preventive maintenance is
important to maintain the integrity of the company’s network. It minimizes
the effects of accelerated wear on physical plant due to exposure to the
environment through routine use. The Staff of the Department of Public
Service has long recognized that "To be successful, a major component of a
preventive maintenance program must include the expeditious repair or
replacement of poor plant conditions… The preventive maintenance programs
a utility undertakes must address problems found in the field not only in
a reactive manner but also through a proactive approach to minimize future
The Verizon Operations Report states that the company’s reduction in
force plan will "reduce... preventive maintenance" and "lengthen the time
between equipment inspections and preventive maintenance activities."
Verizon’s downsizing will not allow for the "expeditious repair or
replacement of poor plant conditions" that, as previously mentioned, Staff
described as a criterion for a successful preventive maintenance program.
In fact, technicians report that they have been directed to stop
conducting proactive preventive maintenance and fix problems only after
they occur. Such policies could prove disastrous when combined with the
problems associated with switches and central offices that were previously
iii. Significantly Reduced Rehabilitation & Capital
Rehabilitation programs allow the company to reduce
long-term maintenance costs and improve the quality of service to its
customers. Technicians report that Verizon significantly cut its capital
construction budgets and basically shut down rehab activity including the
block rehab program. Indeed, technicians report that they have been
directed to stop conducting any proactive maintenance in their daily
duties and to fix problems only after they occur.
iv. Band Aid Fixes to Long Term Problems.
Verizon does not
supply enough clean copper pairs to enable technicians to properly install
new customer lines or replace defective pairs on existing customer lines.
Instead of supplying clean copper pairs, Verizon utilizes a "short term"
technological fix in order to get customers back in service quickly. The
technology involves installing a special piece of equipment called an AML
(asynchronous multi-line) or DAML (digital asynchronous multi-line). The
AML/DAML splits in half an existing copper pair that services one customer
so that it can service two customers at the same time. With an AML/DAML
the company can use an existing pair rather than replace the defective
pair or install a new pair. The AML/DAML saves the company money because
it does not have to incur the expense of obtaining clean copper pairs or
running new cable.
However, the AML/DAML quick fix causes many problems. The AML/DAML
technology adversely affects customers because it can compromise the use
of faxes and modems. In addition, many AML/DAML boxes are in poor
condition and not properly covered so that wires are exposed (see
Attachment 2). This represents a hazard to workers and customers because
the AML/DAMLs run on 135 volts.
AML/DAMLs also cannot support DSL service. This not only deprives
customers of an important and ever more popular service but it also
deprives the company of an important source of revenue. This is especially
ironic since Verizon uses the decline in revenue as a rationale for its
downsizing. Yet, in this case, Verizon’s own shortsighted decisions have
reduced its revenue stream. Also, competitors seeking to provide DSL to
Verizon’s voice customers via line sharing cannot do so where an AML/DAML
exists on a customer’s loop. Use of these temporary fixes therefore
interferes with CLEC efforts to compete with Verizon in the DSL
AML/DAMLs were initially considered to be a temporary fix. The
technology allowed the company to get customers back in service quickly
and to buy some time to install clean copper pairs later. However, Verizon
has transformed a temporary fix into a long-term practice. CWA Locals
report a significant number of AML/DAMLs: 50,000 in the Bronx, 30,000 in
Brooklyn and 8,000 in Nassau County.
- v. The Effect of 2002 Downsizing on Outside Plant Is Similar to
- Situation During the Early 1990s
The current state of affairs is reminiscent of the scenario in the
early 1990s. At that time, a "moratorium" enabled NYNEX (the former parent
of the local New York Telephone Company) to divert money to its
unregulated operations. The resulting lack of investment in rehabilitation
and plant maintenance led to a significant degradation of the company’s
infrastructure. At that time, the staff of the Department of Public
Service recognized the problems.
- Staff claims that the company has not devoted enough resources to
- rehabilitating those [outside plant] facilities (which connect
subsribers’ Premises with the company’s local central offices), and
staff also faults outside plant maintenance.
The condition of the company’s plant eroded to such an extent that
in 1992 the Department of Public Service conducted an "Audit of New York
Telephone’s Outside Plant Operations." The audit reiterated staff’s
position that the poor condition of outside plant was due to a lack of
resources devoted to plant rehabilitation and preventive maintenance. For
example, the audit referred to the lack of an adequate number of trained
workers assigned to the Rehab program.
- To implement the Rehab program and at the same time perform
quality assurance and conduct preventive maintenance, New York
Telephone [NYT] must allocate an adequate number of qualified, trained
personnel to these activities. Staff observed several indications that
a lack of human resources in both the engineering and construction
workforces may be hindering these outside plant activities… the
Company had an insufficient number of engineers to effectively
implement the company’s capital program… Furthermore, the quality of
contractor engineering was often poor… NYT also experienced staffing
and quality problems with the Company’s craft workforce.
- Compounding this potential problem was the fact that during the
audit, the Company instituted two workforce reduction programs. As a
result of these programs, NYT’s management workforce was cut by 5% and
the craft workforce was reduced by 8%.
The situation reached such a crisis that in 1996, the PSC required
the company to invest $1 billion over five years to fix these problems and
improve the infrastructure as a condition for PSC approval of the Bell
In 2002, Verizon is resurrecting the same failed
strategy as it reduces its workforce and cuts its construction budgets to
such an extent that maintenance and rehab programs are barely functioning,
if at all.
- IV. PAST EXPERIENCE HAS PROVEN THAT SIGNIFICANT
REDUCTIONS IN FORCE ADVERSELY AFFECT SERVICE QUALITY AND NETWORK
Over the past seven months, Verizon New York has reduced its
non-management force by more than 4,000 workers through early incentive
packages and attrition. Verizon still is in the process of eliminating the
rest of the 2,000 jobs it identified in May. When this downsizing stage is
finished, Verizon will have reduced its New York workforce by
approximately 5,000 or 15.5% over eight months and by 6,750 or 20% over 20
The phone company has a poor track record with such large
reductions in its work force. In 1990, the company, then called NYNEX,
reduced its workforce by 3,200 workers or 8%. This reduction in force also
was accompanied by a significant deterioration of the company’s
infrastructure. The staff of the Department of Public Service repeatedly
warned the Commission about the deleterious impact of such downsizing in
its testimony in Case 90-C-0191 and its 1992 Outside Plant Audit.
Notwithstanding staff’s warnings and management’s promises to improve the
situation, the company continued to reduce its investments in workforce
and infrastructure. Over the five-year period extending from December 1990
through December 1995, the company reduced its non-management workforce by
5,000 or 15%.
The company provided a familiar rationale for its reduction in force.
In January 1994, the chairman of NYNEX, William Ferguson, made the
- NYNEX has to continue to drive our costs down in order to be able
to compete in this increasing competitive market…
- The re-engineering will save NYNEX $1.7 billion a year by the end
of the program in 1996.
- I recognize that this is painful for all the people of NYNEX…
There is simply no alternative to the success of our business. This
reduction in force is the result of dramatic changes in technology,
customer needs, and public policy.
By 1995, the adverse affects of the downsizing on service quality
and network infrastructure reached such a critical point that the PSC took
action. The PSC mandated the following initiatives in order to make sure
the company increased its workforce and investment in
Performance Regulation Plan included a series of penalties to be levied
against Verizon if it failed to attain specified service quality targets.
In the first year of the PRP (September 1995 through August 1996) Verizon
had to pay $71.5 million in penalties because it failed to reach its
service quality targets.
a condition of the Bell Atlantic-NYNEX merger, the PSC required the
company to make a commitment to "hire between 750 and 1,000 additional
employees prior to December 31, 1997, for the purpose of addressing
service quality problems…"
another condition of the Bell Atlantic-NYNEX merger, the PSC required the
company to make a commitment to "invest an additional $1 billion in
service-related infrastructure improvements over the next five (5) years,
including at least one-half of the amount within the next two (2) years on
capital projects to improve service quality throughout New York State,
particularly in areas where service quality is currently most
significantly below standards."
In 1996 and 1997 the company increased
its non-management force by 4,200 workers. Service quality performance
only started to improve after the company increased its workforce and
infrastructure investments. As a result, the company’s PRP penalties
Just as in the early-1990s, the company now is
seeking to rationalize the downsizing by referring to economic conditions
and increased competition.
- …competition. technological/product substitution… structural
changes in the telecommunications industry… and regulatory actions…
adversely affect the company’s business condition, reduce demand for
the company’s services, revenues and workload, and directly reduce the
need for employees.
Despite such claims Verizon NY still obtained more than $4 billion
in revenue and $174 million in operating income for the first half of 2002
and paid $32 million in dividends to its parent company Verizon
Management is optimistic about the overall
prospects for Verizon Communications and its consolidated operations. Ivan
Seidenberg, the CEO of Verizon, stated the following.
- Due to the long-term strength of our business model, Verizon is
uniquely positioned to mitigate the effects of technology substitution
and competition that have produced an ongoing, anticipated shift in
our traditional revenue base.
- The solid foundation that Verizon has built on operational
excellence and execution continues to withstand these turbulent times.
Despite such optimism, Verizon NY is now implementing the same
shortsighted policy as it did in the early-1990s in order to save a
fraction of a cent on the dollar. CWA has estimated that the elimination
of 2,000 jobs will save the company approximately $42 million for the
balance of 2002 or just 0.5% of Verizon New York’s projected 2002 revenue
of $8 billion.
Verizon’s management apparently has not learned the
lessons of its ill-fated downsizing of the 1990s. These lessons were clear
enough for the Wall Street Journal to use the company’s downsizing as an
illustration of "dumbsizing."
- Even greater than the rehiring expense is the blight on Nynex’s
reputation for customer service – right when its core market is
opening up to competition for the first time. ‘Their past
reputation for customer service is their key competitive
advantage,’ says Joe Kraemer, a management consultant at the A. T.
Kearney subsidiary of Electronic Data Systems Inc. in Roslyn, Va.
‘But they’ve put all that at risk just to gain a few cents per
share in a given quarter. It’s just plain dumb’ [emphasis added].
- A Nynex spokesman acknowledges that customer service has suffered
from the cutbacks and says the company is now hiring hundreds of
workers to improve it. ‘Did we make some mistakes in offering our
early-out program prematurely?’ says Arnie Eckelman, its executive
vice president for quality. ‘In some cases, yes. But it was based on
an assumption that service demand wouldn’t grow as fast as it
has.’ [emphasis added]
The company created many service quality and infrastructure
problems when it reduced its workforce by almost 20% from 1990 through
1995. Similar problems can be expected following its current workforce
reduction of almost 20% over a much shorter 19-month period. This
particular reduction in force especially is troubling because it is
associated with decreases in construction, preventive maintenance,
rehabilitation, and the monitoring and testing of the company’s network
infrastructure. Just as in the mid-1990s, the downsizing places the
company’s own well being at risk from PSC penalties, labor shortages,
rehiring costs, and damage to its own competitive reputation by eroding
the quality of services delivered to its customers. More importantly, the
current reduction in force places the public at risk because of the
increasing probability of switch failures, the erosion of the company’s
outside plant, reduced service quality performance, and adverse impacts on
competition and economic development. While Verizon’s management may be
willing to take the risks associated with the reduction in force, the PSC
In regard to telephone
companies, the ultimate objective of the PSC is to insure safe and
adequate service at reasonable cost to the public. The Public Service Law
states that each telephone corporation must provide adequate facilities
and instrumentalities to provide service in the State of New York.
- Every… telephone corporation shall furnish and provide with
respect to its business such instrumentalities and facilities as
shall be adequate and in all respects just and reasonable
In addition, the PSC is charged with the power to make sure that a
telephone company provides adequate service that is safe and secure for
- The Commission shall have general supervision of all…
telephone corporations… and the manner in which their lines and
property are leased, operated or managed, conducted and operated
with respect to the adequacy of and accommodation afforded by their
service and also with respect to the safety and security of their
lines and property… [emphasis added].
Following the Public Service Law, the PSC approved the VIP because
it determined that it promoted the public interest.
- Based upon the evidence in this record, we adopt the terms of the
Verizon Incentive Plan contained in the Joint Proposal. We find the
Plan will result in the continued provision by Verizon of safe and
adequate service at just and reasonable rates, and that its terms will
significantly enhance the conditions for local telecommunication
competition in New York.
However, this Petition offers new evidence that was neither made
part of the VIP proceeding’s record nor available publicly within 30 days
of the VIP proceeding. The new evidence demonstrates that Verizon’s
downsizing and associated cost saving initiatives produce significant –
and admitted – risks to public health and safety, network reliability and
security, competition, service quality performance, and the condition of
outside plant. The new evidence calls into question the basis upon which
the PSC determined that the VIP would provide safe and adequate service
and enhance competition and economic development.
The PSC should grant this Petition and rehear Case 00-C-1945 or, in the
alternative open a new proceeding in order to determine the impact of
Verizon’s reduction in workforce and capital expenditures on public
health, safety and security, competition, service quality and economic
development. The Commission should also require Verizon to produce the
full Verizon Operations Report and any other similar documents; the
detailed budget for 2002 and 2003 and any internal evaluations of the
impacts on the company’s infrastructure and service quality; and current
forecasts for 2003.
The consequences of inaction could be substantial. Verizon
management has instituted practices with substantial public risks. For
example, any deterioration of network reliability in this day and age
increases the public security risks affecting the lives of millions of New
Yorkers. Yet, the company admits that its practices "will significantly
increase the probability of multiple Network Events at the same point in
time thus making resolution of such events more difficult than they are
today." Technicians have also detailed the ways in which company practices
are compromising system reliability including understaffing and cutbacks
in monitoring, testing, rehabilitation, and preventive maintenance of the
company’s switches, other equipment and outside plant.
Verizon management calls its policy "risk management." In this case,
the private decisions of Verizon’s management are placing the public
interest at risk. The PSC should not accept the same risks as Verizon. The
PSC is the only public agency charged with the responsibility of
protecting citizens against the risks that Verizon is forcing them to
assume. Recent events have illustrated how the public was forced to bear
significant costs when regulatory agencies overseeing energy,
telecommunications, and securities have allowed private firms to take
substantial public risks. The PSC should grant this petition so that it
can develop a complete record in this case and utilize all the available
evidence to determine whether the VIP adequately protects the public
Kenneth R. Peres, Ph.D.
Director, CWA District One
80 Pine Street, 37th Floor
New York, NY 10005
E-Mail: [email protected]
Dated: August 29,