Colorado Public Utility Commission Workshop: Overview of Liberty’s Analysis

1. Colorado Public Utility Commission Workshop: Overview of Liberty’s Analysis November 10, 2009 Denver, Colorado

2. Liberty’s PAP Experience • 271 Testing • PID audit for ROC test • Members of current Liberty team participated in other aspects of ROC test and in numerous non-Qwest tests • PAP Audits • PAP/PID audits for the ROC • Numerous audits of other RBOCs’ PAPs • PAP Reviews/Evaluations • Advice/support at the time of the 271 application process • Recent proposed Verizon PAP changes in MD

3. ROC PAP Review Process • Liberty was engaged by Colorado and 10 other commissions • Industry Participation • Qwest agreed only to provide data and answer questions about the data; did not provide information on PAP experience or proposals for PAP modifications • 14 CLECs responded to Liberty questions about PAP experience, generally supporting continuance and the PAPs with minimal changes, and provided a few proposals for minor modifications • Liberty analyzed Qwest data, other publicly available data, and CLEC input • Liberty provided draft report for staff review and to Qwest and CLECs for accuracy review

4. Liberty Data Analysis • Obtained historical data from Qwest: January 2004 through October 2008 • Payment history • PID measure results • Concentrated on recent history (beginning January 2007) • Later obtained payment data from November 2008 through March 2009 to test conclusions • Analyzed trends • Payments • Volumes • Performance

5. Total Tier 1 and Tier 2 PaymentsAll 14 States

6. Total Tier 1 and 2 Payments Colorado

7. Total Tier 1 Payments by PID DomainAll 14 States

8. Total Tier 1 Payments by PID Domain Colorado

9. Total Tier 2 Payments by PID Domain All 14 States

10. Total Tier 2 Payments by PID Domain Colorado

11. Ordering Volumes: All States

12. Ordering Volumes: Colorado

13. Lines in Service: All States

14. Lines in Service: Colorado

15. General Observations About Trends • Payments • Generally decreasing since 2004 • Principal reasons: volumes, improved Qwest performance, reduced number of CLECs • Faster reduction in Tier 2 payments (large drop-off in CO after 2006) • MR payments are now generally the largest • Volumes • Disappearance of TRO/TRRO-related products (UNE-P and Line Sharing) • Gradual reduction in resale • Stand-alone LNP now dominant • “Other,” primarily unbundled loops, still significant • Qwest performance • General reduction in measure failures • Payments significantly affected by low transaction volumes

16. Low Volume Effects • Analysis of 2004 through 2008 payments shows that, per unit of volume, payments are higher but failure rates are lower. • These effects are apparently not due to lower performance, but due to statistical errors. • Type I error, which favors CLECs, occurs when a process is in parity or above benchmark on average, but falls below in a month (and requires payments) due to low volume rules or statistical variation. • Type II error, which favors Qwest, occurs when a process is out of parity or sub-benchmark, but in which payments do not occur because of low volume rules or statistical variation. • Low volumes increase the two types of statistical error; original design of tests envisioned sample size around 140, where these error rates would be balanced. • Special low-volume rules were added to PAPs to address cases where the sample size is very small, but don’t fully correct errors.

17. Analysis Conclusions • PAPs are still valuable • CLEC transaction volumes have decreased and changed in composition, but still significant • Payments still significant, particularly for Tier 1 MR measures • Although competitors have entered the market that depend less on Qwest’s wholesale products and services, many CLECs still depend crucially on these products and services • Despite past changes (e.g., CPAP Three-Year Review), additional changes are warranted • Remove additional PIDs; make some additional PID changes • Remove additional low-volume products • PAP structure changes to correct for low-volume effects • Liberty took conservative approach – if the PAPs are working, don’t make major structural changes; most proposed PID structure changes suggested by industry

18. Recommendations • Recommendation #1: Aggregate low-volume transactions. • Proposed scheme to aggregate over CLECs and months depending on transaction volumes • Should reduce Type I and II errors • CLEC aggregation already used in special situations in Qwest PAPs • Recommendation #2: Add PO-9, PO-19, PO-20, and Collocation measures to Reinstatement/Removal list. • PIDs included based on multiple criteria • Liberty considered payment history, volumes, and importance of measured process to carriers • Recommendation #3: Make other PAP-affecting PID changes. • Use OP-5T instead of OP-5A and OP-5B in PAP • Replace ISDN-BRI as a retail analog

19. Recommendations (cont.) • Recommendation #4: Eliminate additional low-volume products for OP and MR PIDs • DS-3 loops • UDIT above DS-1 • 4-Wire Non-Loaded loops • Loops with Conditioning (OP only) • ISDN-capable Loops (OP only) • Recommendation #5: Made additional PID changes (diagnostic only, no immediate PAP impact). • Limit MR-4 to service-affecting troubles • OP-4 sub-measure to track expedited orders • MR-7 sub-measure to track chronic troubles • OP-3 sub-measure to track coordinated appointments met

20. Recommendations (cont.) • Recommendation #6: Add provisions to fund PAP administration if Special Fund insufficient. • Could use language similar to that for Independent Monitor in CPAP Section 10.5: “When there are insufficient funds in the Special Fund for this purpose, Qwest shall advance the necessary funds.” • Recommendation #8: Restore Tier 1B, Tier 1C, and Tier 2 to the CPAP. • Tier 1A is largely restricted to OP and MR performance measures for unbundled loops and interconnection. • Including Tier 1B restores performance measures for other products (e.g., Resale, Interoffice Transport, some aspects of LNP). • Including Tier 1C restores BI performance measures. • Including Tier 2 restores gateway and call center performance measures (e.g., GA, PO-1, OP-2, MR-2) and Work Completion Notification Timeliness (PO-6).

21. Recommendations (cont.) • Recommendation #9: Make other CPAP-specific changes. • Restore ADSL-capable loops as product; removed after Three-Year Review when volumes were very low – volumes are now substantial. • Remove UNE-P products; no longer relevant after Triennial Review. • Recommendations #7 and 10 not applicable to Colorado.

22. Qwest CPAP-2 Proposal: Liberty Comments November 10, 2009 Denver, Colorado

23. CPAP -2 General Structure • No self-executing penalties • A monitoring mechanism with “triggers,” based on CLEC aggregate results, for Qwest to take action to resolve problems • Lowest level of action is not triggered until after 3 months of missing a performance standard • Highest level of action is not triggered until after 7 months and mainly provides escalation of Qwest management involvement • In contrast to CPAP-2, Qwest’s commercial agreements appear to provide for some level of bill credits for missing performance targets • Standard is considered met if z-score can’t be calculated – the practical result is that Qwest will pass many low volume measures no matter how poor the performance • Uses only 6 performance measures • Loosely related to existing PIDs but with significant changes • Monthly results but only reported quarterly • Excludes important products (e.g., xDSL capable loops, ADSL loops, LIS trunks, residential resale)

24. CPAP- 2 Performance Measures • FOC – Firm Order Confirmation Timeliness • Related to current PO-5 • Excludes ASR orders • Excludes orders that flow through Qwest’s systems • Primarily restricted to manually processed FOCs when orders received electronically • Restricted product set (basic 2-wire loops and DS1 loops and EELs) • Loosened standard for manually processed FOCs: 72 hours instead of 24-48 hours • ICOM – Installation Commitments Met • Related to current OP-3 • Eliminates MSA/Zone and dispatch/non-dispatch categories • Restricted product set (basic 2-wire loops and DS1 loops and EELs) • Loosened standard: benchmark of 80%; currently 90% for most of these products, parity for DS1 loop

25. CPAP -2 Performance Measures (cont.) • INST – Order Installation Interval • Related to current OP-4 • Excludes ICB orders • Eliminates MSA/Zone categories • Restricted product set (basic 2-wire loops and DS1 loops and EELs) • Loosened standards: from benchmarks to parity with retail products with low volumes (ISDN-BRI, DS1 private line) and hence unlikely to allow statistical tests • TR – Trouble Rate • Related to current MR-8 • Excludes NTF and TOK troubles • Excludes installation and repeat troubles • Restricted product set (basic 2-wire loops and DS1 loops and EELs) • Loosened standard: benchmark of 5% instead of parity

26. CPAP -2 Performance Measures (cont.) • TREI – Troubles Restored within Estimated Intervals • Related to current MR-3 and MR-5 • OOS troubles reported separately only for loops less than DS1 level • Eliminates MSA/Zone categories • Restricts to troubles reported during normal business hours • Excludes NTF and TOK troubles • Restricted product set (basic 2-wire loops and DS1 loops and EELs) • Loosened standards: benchmarks instead of parity • MTTR – Mean Time to Restore • Related to current MR-6 • Eliminates MSA/Zone categories • Restricts to troubles reported during normal business hours • Restricted product set (basic 2-wire loops and DS1 loops and EELs)

27. Key Missing Performance Measures • Provisioning • Hot cut performance (OP-13) • Delay days (OP-6) • Number porting timeliness (OP-8) • Work completion notice timeliness (PO-6) • Maintenance and Repair • Installation troubles (OP-5A) • Repeat troubles (MR-7) • Billing • Timeliness (BI-1) • Accuracy (BI-3) • System Interfaces and Call Centers • Gateway availability for pre-ordering/ordering (GA-1and GA-8) and repair (GA-6) • Pre-order responsiveness (PO-1) • Provisioning (OP-2) and repair (MR-2) call center responsiveness