SBC takes 1-2-3 punch from regulators

WASHINGTON, D.C. - State and federal regulators are carrying through on threats to make SBC Communications pay for chronic service problems in the Midwest, but user advocates say they're still waiting to see whether the fines will do any good.

Just before Christmas, officials hit SBC and its Midwestern subsidiary, Ameritech, with three financial penalties for poor service. The Federal Communications Commission fined SBC $6.1 million for failure to install local services within agreed-upon dates and related matters in the Ameritech states. The FCC added an $88,000 technical fine for "willfully" misstating benchmarks in performance reports to the FCC.

Even though the $6.1 million penalty was a record federal fine for a local carrier, the Illinois Commerce Commission went much further, forcing Ameritech to issue $30 million in customer credits for missing installation and repair intervals during the summer and fall.

Fines were based on promises SBC agreed to in October 1999 when it took over Ameritech. Technically the federal penalties were based on installation intervals SBC was supposed to maintain under the merger agreement with competitive local exchange carriers (CLEC). But sources say the missed CLEC intervals parallel delays in business and residential service that caused the FCC to write SBC in October threatening enforcement action (see story).

Jonathan Goldman, policy director for the Illinois Citizens Utility Board, a user watchdog panel, says the state selected the $30 million figure because an Ameritech employee once alleged service problems in Illinois would cost that much per year to fix and the telco would rather pay lesser fines than invest in the upgrades.

As a result, Goldman was unimpressed by the FCC penalties. "I think [SBC] can afford the $6.1 million," Goldman says. "It doesn't have much of an impact at all." Previously, the FCC's largest local-carrier fine came in March, when it forced Verizon - then Bell Atlantic - to cough up $3 million for lost CLEC orders in New York due to back-office glitches (www. nwfusion.com, DocFinder:2454).

SBC and Ameritech officials say they have indeed taken full notice of the regulators' actions. James Shelley, Ameritech's president of external affairs, conceded in a statement accompanying the Illinois fine that the telco missed agreed-upon service levels in recent months. "We're fixing the problem by training new technicians and investing over $100 million to enhance our network and better serve our customers," Shelley said.

But users and analysts complain that even as SBC brought in new field technicians during the fall, it continued to lose employees with a buyout plan in which they could add five years to their length of service and five years to their age to reach retirement levels quicker.

An SBC spokesman confirmed the so-called Five-Plus-Five plan but says it only applied to management employees. Outside observers say the plan was still damaging to customer service. "It included the management ranks for the field personnel, which means it was basically their most experienced field personnel," Goldman says. "So it's a net loss."

The fines come at a sensitive time for SBC. The firm, traditionally one of the telecom industry's most reliable profit performers, issued a rare downward earnings adjustment in December, partially citing a "late start" in the rollout of DSL remote terminals in the Ameritech region. It also has two long-distance applications - for Kansas and Oklahoma - due for a final FCC ruling later this month.

FCC order
Lists what SBC has to do.

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