As appeared in U.S.News and World Report, July 29, 1996 (813 words)

All tied up in knots

Consumers are strung out because the quality of their local phone service is deteriorating

BY WARREN COHEN

Like many residents of Hoffman Estates, a Chicago suburb, Teresa Ziakas was annoyed when the local phone company changed her area code. She was further peeved when she learned that Ameritech, Illinois's major phone-service provider, had incorrectly billed her for local calls. But the Tupperware saleswoman really flipped her lid when she contacted Ameritech for help. Ziakas called the company at least 10 times, asking representatives to remove the unfair charges. After three months, with an overdue bill of $800, she finally reached someone who credited her account.

Ziakas and other consumers across the country are becoming increasingly frustrated with deteriorating local phone service. Their ire is mostly directed at the Baby Bells, who control the vast majority of local telephone business. A U.S. News analysis of local Bell phone markets nationwide shows that the consumer-complaint rate has climbed 20 percent since 1991; in 1995, the complaint rate reached a five-year high. Declares Kenneth McClure of the Missouri Public Service Commission: "A lot of state commissions are concerned about the decline in quality."

State officials are responding to the service problems by hitting local phone companies with fines and penalties. Most states expect telephone customer service representatives to answer a call within 20 seconds. Tennessee consumers complained that BellSouth frequently violated this standard, one reason the state has slapped the company with $132,894 in fines over the past four years. Even if a phone company answers its repair line, there's no guarantee the work will be done quickly. Many states require that at least 85 percent of broken lines be fixed within 24 hours. In Colorado, U S West averaged a repair rate of 36 percent, and the state charged the company $5.3 million. The Baby Bells are also having trouble installing new phone service. In New York, NYNEX met its target for installations 81 percent of the time during the first quarter of 1995; for the same period in 1996, the rate dipped to 64 percent. For this and other service failings, New York ordered the company to rebate $61 million to consumers.

Not all local service problems are of the Baby Bells' making. Getting efficient directory assistance, for example, is often troublesome. In the past, the Bells provided long-distance directory assistance for AT&T. But since AT&T has subcontracted some of that work to a private firm, callers looking for a number in New York may be speaking to an operator in Arizona who isn't familiar with the area.

Costs. Customer problems have marred the once sterling service reputations of the local phone companies. Underlying the difficulties is the cost-cutting that has consumed the Baby Bells. States used to regulate phone companies' profits. With earnings capped, there was no incentive for the Bells to control costs; expenses could be recouped with hikes in phone rates. But to create an environment that fostered competition, a majority of states decided to control phone rates instead. With rates frozen, the companies' profitability became dependent on their efficiencies, and a major wave of cost-cutting ensued. Since 1990, the Baby Bells have shed nearly 105,000 positions. These cutbacks may be a reason for the decline in customer service.

New demand for phone lines has also put a burden on the Bells. Phone lines, which once grew around 2 percent a year, expanded by 3.9 percent in 1995 because of housing starts and a surge in fax lines and Internet connections. This increase pressured the Bells to re-engineer their internal systems. U S West had 560 service centers across its 14-state region with three different software systems; now the company has just 30 service centers. During the transition, U S West admits, customer service suffered. "Anybody who tells you that you can redo a system without glitches is out of touch with reality," says Tom Bystrzycki, executive vice president of operations for U S West Communications. "But no matter how hard we ran the old systems, we couldn't have come up with the performance we'd have to have now for our kind of growth."

Repair. With service problems on the rise, the Bells are trying to improve their performance. Ameritech realized that in shrinking its payroll too many service people took early retirement. The company lost 3,000 employees from its network services division. To compensate, Ameritech rehired 1,200 technicians and added 1,000 temporary hires. Says Tom Richards, president of Ameritech's network services: "We think we have the right kind of focus to get customer service back to where our customers want it to be."

Upgrading customer service is crucial in the changing telecommunications world. New legislation will permit long-distance and cable companies to challenge the Baby Bells, which means consumers will be able to switch phone providers if the Bells don't deliver better service. That prospect should prod local phone companies in ways that consumer complaints and state penalties have not.

Phone hang-ups

Telephone complaints per 100,000 access lines in 1995 U S West 126.2
NYNEX 104.3
Ameritech 96.0
Pacific Telesis 54.7
Bell Atlantic 42.4
BellSouth 35.4
SBC 31.4
Note: Numbers not available for Arizona, Colorado, Louisiana, Maryland, Pennsylvania