By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
Jeanne Barker-Nunn averts her eyes as she pushes open the door to the room on the second floor of her St. Paul home. It's messy, she apologizes, her voice sheepish--she has just finished a major project. But even with books and papers stacked and strewn on every surface, including the floor, it's a lovely room: Sunlight filters through the windows, streaming past the crisp Mission furniture and alighting on the titles that line the walls on floor-to-ceiling bookshelves. The Columbia History of the World. The Chicago Manual of Style. A desk reference on geography. This office is the nucleus of the academic editing and consulting business--her baby, she calls it--Barker-Nunn launched in 1996, and has nurtured since then.
Barker-Nunn shuts the door and creeps back down the narrow staircase to the living room, settling into an armchair that seems to swallow her petite, 53-year-old frame. "It was as if someone walked into your office and stole all your business equipment," she says with a sigh. There is a weariness in her voice--which is otherwise calm, articulate, patient--as she recalls the 70 days last summer when, as she sees it, her little company was all but crushed.
She opens a file folder on her lap; it spills over with advertisements, faxes and e-mails, hastily scribbled notes. She shakes her head, and her pale corkscrew curls shift with the movement. "What a mess," she says, sorting through the papers. "It's symbolic of the whole thing."
Back on July 20, 1999, Barker-Nunn called U S West to order a new telephone. At that point she had separate lines for her home, business, and fax--and, she stresses, was happy with that arrangement. The business phone even had a distinctive ring, which alerted her, her husband, and their two sons to calls for J.B. Barker-Nunn & Associates. Still, she wanted to try U S West's Home Receptionist, a fancy piece of equipment that manages multiple phone lines at once.
The sales rep, Barker-Nunn recalls, immediately offered another pitch: Would she be interested in a connection that provided both high-speed Internet and telephone service? Web access would be fast and always on. She could be online and still get phone calls, all with one line, one bill, one account.
With the fastidiousness that had served her well in getting her Ph.D. in American studies, Barker-Nunn quizzed the rep on the details--for an hour. The digital subscriber line, or DSL, would not be complicated to install, she was told. It would simplify her life, and she would not lose any of the services she already had. Intrigued, Barker-Nunn signed up for the newfangled line. The next day, her business phone was dead.
Barker-Nunn's firm helps academics organize and write their scholarly papers. She uses her phone, fax, and e-mail to communicate with clients scattered around universities throughout the nation, and a cadre of consultants, many of whom also work out of their homes. "Having a telephone is very essential to life," she declares. "It's not a luxury anymore, especially if you're running a business. Screwing up someone's phone for 70 days is very much akin to saying you can't have heat for 70 days."
But that, she contends, is precisely what U S West did. The company goofed and disconnected her old phone line before setting up the new DSL service--which was supposed to be in place on August 3, two weeks after she placed the order. The installation actually took an additional two weeks because, Barker-Nunn was told, her order had been lost in the service department's computer.
Next, Barker-Nunn says she found herself spending nearly 12 hours configuring her system--and still calling on her own computer technician, who told her that U S West's various sets of instructions contradicted each other. When she complained about the problems, U S West representatives told her their computer records showed the snags had been fixed. Or they promised to call her back--and didn't.
The comedy of errors continued throughout the summer. Sometimes Barker-Nunn's phone went dead. Sometimes it was the fax or the e-mail. Sometimes callers to her office line were greeted by the irritating beep of the fax machine, or by a machine voice that asked them to redial. Sometimes their messages would go into a voice-mail box Barker-Nunn could not get to. There were days when she would get up in the morning, tiptoe into the office, pick up the phones to see which ones weren't working, then spend the day making calls on whichever line was still up.
She contacted vice presidents at the company. She pestered the Attorney General's Office. She called the Public Utilities Commission. Always she was told someone would look into the problem. Nothing ever seemed to happen. "I felt like I was working full time for U S West," she recalls.
Eventually, Barker-Nunn began to suspect that what she was dealing with was more than a run-of-the-mill snafu--that there was something more fundamentally wrong with U S West and the new service it had so aggressively pitched. In its rush to transform itself into a whiz-bang digital provider, the phone company seemed to have become unable to offer her the most fundamental of products--a dial tone. "They're so eager to bring you into the 21st Century and give you all these new services," Barker-Nunn says. "They couldn't get my phone working."
On a sunny spring day in May 1998, U S West's top executives ambled from their skyscraping corporate headquarters in downtown Denver to the nearby public library, where they unveiled the company's newest product, a DSL line called MegaBit Services. Reporters, customers, a handful of cute elementary-school-age children were on hand to listen to the speeches and test out the new high-speed connections. "Today there will be no more World Wide Wait," U S West CEO Sol Trujillo said.
By the company's accounts that day, the new service would serve as a catapult to a world where people would really start using the Internet from their homes--not just for the occasional e-mail, but for complicated graphics and audiovisual downloads. Imagine, the execs gushed, the possibilities for telecommuting, for home businesses, home schooling. It was the next big thing, a way for U S West to transform itself from stodgy Baby Bell to lithe New Economy participant. And the phone company was ready to push the new service, hard.
Within days of the Denver announcement, U S West struck a deal with Dell Computer to build MegaBit-compatible modems into new desktops. A massive marketing campaign was launched, with offers of discounts and free modems and cut-rate installation. By the end of May, MegaBit had been rolled out in 20 markets, including Denver, Phoenix, Tucson, Boise, Omaha, Salt Lake City, and the Twin Cities, with 20 more cities scheduled to be hooked up by the middle of 1998.
With a single move, U S West had entered the world's highest-stakes arena: providing high-speed Web access to the masses. In 1999 some 300,000 homes in the United States had DSL service, according to statistics gathered by the Yankee Group, a technology research firm based in Boston. That number is expected to triple this year and rise to 7 million by 2004.
U S West clearly is determined to get its piece of the pie. Even now, a feature story on the company's Web site is Trujillo's explanation of how the company is leading an Internet explosion. "We've been very focused on being first to market in broadband," the story quotes Trujillo as saying. "It's been a genuine transformation."
U S West's metamorphosis has taken place against a tumultuous background. Over the past few years, companies of every stripe have lined up to tap into the market for "broadband" connections--hookups that can move vast amounts of data, fast, through the lines already running to most people's homes. Through just one wire, a consumer can theoretically get phone calls, faxes, e-mail, movies. And the battle is over which wire, which company that consumer will choose. "Whoever gets to the customer first is going to keep them for a while, no matter how painful the installation," notes Beth Gage, director of consulting at TeleChoice, a DSL consulting company based in Washington, D.C.
For a while it looked as if traditional phone companies were going to be the only ones left out of the broadband game. Cable companies began offering high-speed connections through the coaxial wires heretofore used to deliver HBO and ESPN; new firms such as Covad, Rhythms, and NorthPoint provided DSL access using existing phone wires. But the U S Wests of the world, says Yankee Group senior analyst Matthew Davis, were reluctant to get on board: They had spent a decade developing ISDN, a high-speed technology that never really took off. They had also been selling T-1 lines--yet another, even faster kind of Internet connection--to businesses for fees as high as $1,000 a month, and they didn't care to cannibalize their sales with a cheaper alternative. (In the Twin Cities, U S West's DSL hookups currently cost $29.95 a month.)
Still, says Davis, when the Baby Bells finally jumped on the DSL train, "they were sincere about it. They would like to capture as much market share as they can. U S West got out early and they really aggressively marketed it and aggressively priced it."
But could they have been too aggressive? DSL is a complicated technology, notes Thomas Friedberg, a telecommunications analyst with the Denver consulting firm Janco Partners. Because of limitations on the wires and cables that carry phone lines today, only a quarter of U.S. homes are even theoretically eligible for the service, according to the Yankee Group's data. And many more may have to wait simply because the phone companies can't hook them up fast enough. "Everyone wants high-speed access," Friedberg explains, "and there's a lot of competition for people who can deploy this. It is a problem and will continue to be a problem."
Friedberg says he gives credit to U S West for rolling out DSL as fast as it did. "But they've advertised a lot more than they've been able to deliver."
Broadband may be a new technology for U S West, but customer-service problems have been with the company for a long time. For most of the Nineties, the company did battle with Minnesota regulators over what critics call one of the worst service records in the nation; there have been investigations, fines, promises made and broken. Now, with the dispute threatening to hold up U S West's plan to merge with another digital-access giant, the company has signed on to a settlement under which it once again promises to treat customers better.
Will the new deal help prevent nightmares like Jeanne Barker-Nunn's? "We made mistakes," U S West spokeswoman Mary Hisley says of that particular problem. "We didn't provide the quality of service we normally do....It was a complicated situation." Overall, Hisley says, U S West strives to provide excellent service in a challenging environment: "It's fair to say that customers have become more demanding in their expectations of services they receive from their telecommunications company," she notes. "We believe the vast majority of our customers are receiving high-quality customer service from us. [But] we've seen our business become much more complex, we've seen our business grow substantially. Things have become a lot busier for us."
There were so many people in the big conference room outside the Minnesota Public Utilities Commission offices in downtown St. Paul on February 29, stragglers had to sit in folding chairs at the edge of the chamber. Never mind that on the dais sat five men in suits, that at least half the attendees were tech analysts or lawyers, and that the topic was bone-dry: The 100-plus folks there were determined to hear the state Public Utilities Commission (PUC) debate U S West's future.
At issue was whether Minnesota should give the green light to a merger between U S West and a Denver-based telecommunications company called Qwest, which has built a high-speed, high-capacity data pipeline along railroad rights-of-way across the nation. The partners said their coupling would blend Qwest's fabulously new national fiber-optic backbone, designed for a world of data communication, with U S West's "last-mile" infrastructure--the coveted direct line into millions of homes.
But for the union to be consummated, the companies needed approval from the Federal Communications Commission (which signed off on the deal in March, with some restrictions); the U.S. Department of Justice, the Federal Trade Commission, and the Securities and Exchange Commission (which all cleared the deal last fall); both firms' shareholders (who voted in favor of the merger in November); and utility regulators in all 14 states of U S West's service region, which stretches from Washington to Minnesota, Montana to Arizona. The agenda for the February PUC meeting was to determine whether the merger would be in the best interest of the state's consumers.
As it turned out, the commissioners didn't spend all that much time discussing the merits of the deal. Instead, chairman Gregory Scott proposed that the matter be turned over to an administrative-law judge who could build a complete legal record of the case. Once that judge made a recommendation on the merger, the commission would take up the topic again.
Steve Davis, Qwest's senior vice president for government affairs, was appalled. Sending the case to a judge would delay a decision until August or September, he told the commissioners, holding up a deal the company hoped to complete by midyear. With all the other states on track to offer approvals by May, "we'll be waiting for this commission only," Davis said.
"And that's just fine with me," Scott rebutted, his voice truculent. "I'm not going to apologize to you for saying we need to take time to make a good decision. You're not going to put us in a position, with your demands on when you want to close, to make a decision that is not in the public interest."
Scott's motion passed three votes to two. And so Minnesota put the merger on hold--and plunked itself down squarely at the center of a battle over the shape of the digital universe.
The move didn't fail to rattle nerves back in Denver. In a news conference a couple of weeks after the PUC meeting, Nacchio said the delay in Minnesota was rooted in U S West's customer-service problems, and that the snag could become a threat to the merger. The comments came at a time of increasing discord between the two companies: Less than a fortnight before Nacchio's press conference, U S West CEO Trujillo had announced that because of disagreements with Qwest management, he would leave the company after the merger was completed.
Squabbling aside, however, Nacchio was on to something. While the PUC had expressed some trepidation about what kind of corporate citizen Qwest would be, most of the commission's concerns about the merger stemmed from the state's bumpy history with U S West.
Like the other local phone-service providers in the nation, U S West was spawned by the 1984 breakup of the "Ma Bell" telephone system. Cobbled together out of Mountain Bell, Northwestern Bell, and Pacific Northwest Bell, the company was at a disadvantage from the start: Its service area covered an immense territory yet contained only a tiny population compared to that of other Baby Bells.
But the firm soon distinguished itself from its peers in another area, says analyst Friedberg. "U S West has continually had the worst service record of the Baby Bells," he says. From the get-go, he maintains, management was interested in income and dividends--not customers. "They were not focused on providing quality telecommunications."
Data gathered by the California-based marketing company J.D. Power and Associates seem to bolster Friedberg's contention. Last summer the firm studied customer satisfaction with residential local telephone service. The report, based on responses from more than 12,000 households across the nation, found that among the 13 local service providers studied, U S West ranked third from the bottom, tying GTE, Ameritech, and Southwestern Bell. In addition, the study showed that 51 percent of U S West customers would switch providers if they had an alternative, substantially more than the national average of 45 percent.
In Minnesota, dissatisfaction with U S West has frequently attracted the attention of the Public Utilities Commission and the Department of Public Service--the two agencies charged with regulating monopoly companies that provide services critical to the state's economy, including the phone, gas, and electric utilities. In August 1994, after a summer of steadily rising complaints about U S West, the public-service department (which has since been folded into the Department of Commerce) began a probe into the company's service record in Minnesota.
Nearly a year later, the agency released a report detailing a variety of service problems, including poor response times to repairs, slow installations, lackluster attention to customer calls, and failure to report all of the customer complaints it received. The phone company's performance was in violation of state rules pertaining to quality of service; more important, the study declared, the state's standards--many of which had been developed in the 1960s and 1970s--were not sufficient to cover the technologies, possibilities, and expectations of the 1990s.
Once the public-service department issued its report, a comment period ensued, with other parties such as the state Attorney General's Office and U S West offering responses. In February 1996 the state agencies and the company came to an agreement on new standards for phone-service quality. According to that settlement, U S West could be fined anywhere from $100 to $5,000 a day if it didn't fix telephone outages within 24 hours; between $100 and $5,000 a day if it didn't answer customer calls within 20 seconds; and up to $750,000 a year if it had too many primary phone lines that took longer than 30 days to install.
In January 1999 that agreement was replaced by a system called the Alternative Form of Regulation pact, or AFOR--a deal billed as a new way for the state to monitor U S West's business. As part of that agreement, the state relaxed some of its rules about the pricing of certain phone services, and U S West promised to meet specific customer-service goals. If the company violated those standards, it would again face penalties between $100 and $5,000 per day.
Thus far, the agreements haven't seemed to have much effect on U S West. According to documents obtained by City Pages through a Minnesota Data Practices Act request, the number of complaints against U S West more than tripled in the three years after the original pact, rising from 115 in July 1996 to 358 in June 1999. In addition, in July 1996 the quarterly reports the company must file with the PUC showed 86 "held orders," or cases when a customer had to wait for a new phone line for more than a month. By December 1996 that number was down to just 10; as of June 1999 it had rocketed back up to 220.
U S West's goal for held orders is that there should be no more than approximately 115 each month. While the company acknowledges that it did not adhere to that standard for most of 1999, officials say this year it is meeting the objective. Though the company originally refused to open its recent service records to City Pages, saying that anything less than six months old was protected as a "trade secret," just before press time it provided service data through March. According to those numbers, held orders have been on a steady decline since November, with only 31 this past March. Complaints were down in November (to 173) but have risen again this year, reaching 300 in March.
The violations have cost U S West, the records show. Since 1995 the company has been fined nearly $6.4 million for failing to meet its minimum goals, according to commerce department records. Based on the firm's performance through September 1999, fines for that year would total another $4.5 million (the final figures have not yet been tallied).
Throughout the state's review of the proposed merger, U S West's chronic service problems have been a major point of contention. According to documents prepared by the commerce department, U S West offered regulators a lot of reasons for why it had failed to meet Minnesota's standards: Even the new rules were inadequate to measure the changing telecommunications industry, the company argued. Customer demand had been higher than forecast. A tight labor market had slowed hirings, which in turn delayed repairs on aging equipment, switches, and wires. And severe weather had made matters worse.
State officials, however, were not impressed. U S West, says Anthony Mendoza, the commerce department's assistant commissioner for telecommunications, has refused to make the kind of investments required to upgrade equipment, hire more customer-service reps, and the like. "They have not done it," he says flatly. "They have not allocated capital to these areas of concern." In comments on the merger sent to the Public Utilities Commission in January, Mendoza's department concluded that "U S West appears willing to pay certain levels of penalties rather than strive for a performance level that would meet its service-quality obligations."
Not so, says U S West's Hisley. "We very much want our service to be at a level that meets our expectations, our customers' expectations, and our regulators' expectations," she stresses. "We're working as hard as we can to make sure all of our service is at that level." In fact, Hisley says, during each of the past five years, the phone company has invested an average of $300 million in Minnesota, and much of that money has been spent to improve switching systems and lay cable to new developments.
Yet it doesn't seem to have been enough. As if to underscore the failure of previous agreements with the phone company, the commerce department and the Attorney General's Office on April 14 announced a new deal aimed at making sure customer service will improve if U S West and Qwest are allowed to merge. (The PUC was slated to consider how the deal will affect its review of the merger as City Pages went to press, on April 25.)
The settlement calls for the merged company to make at least $170 million in new investments in Minnesota over the next four years. U S West is supposed to hire additional customer-service representatives, buy new trucks and equipment, and add service and repair technicians. It's also expected to expand its DSL offerings to 13 cities in outstate Minnesota, and to engage in a massive grooming of its infrastructure. Finally, the deal provides for substantial fines should U S West fail to comply with the service standards set forth in the AFOR--anywhere between $15 million and $50 million per year.
"The penalties the company has agreed to in this settlement will make compliance with those standards critical, front-and-center for the company," says Assistant Attorney General Dan Lipschultz. By 2003, when the AFOR runs out (the settlement agreement will last one year longer), "we expect things to look very different than they do today." But when can consumers expect to see a real difference? "That," Lipschultz acknowledges, "is very hard to say."
The way analyst Thomas Friedberg sees it, the back-patting about a new era for U S West customers may be a bit premature. For starters, he contends, the settlement means nothing until the PUC approves it. "You had no parties who have jurisdiction in this matter agree to anything," Friedberg says. "It's completely meaningless until the fat lady sings."
And even if the PUC ratifies the deal, it's possible that U S West/Qwest could simply flout the new requirements, says Robert Johnson, executive director of Consumers' Voice, an Indianapolis-based advocacy group that focuses on local phone competition. Even the maximum fine of $50 million isn't much for a company that in 1999 had revenues of almost $13.2 billion.
With its higher penalties and incentives, Johnson says, the new settlement is "certainly the right direction." But, he cautions: "I see no reason that just because a company is in the process of a merger it has become a born-again consumer-priority entity. [U S West] is a company that doesn't seem to want to practice customer service in any meaningful way. Whether these penalties are enough to get the attention of a merged company when they clearly didn't before is something I can't judge."
In the long term, Johnson argues, the solution to the dilemma is increased competition for local phone customers, "so the company has no choice but to compete both on price and service. Clearly we're a lot farther away from that than consumers would like to see." (While the state's agreement with U S West and Qwest calls for penalties if the companies don't let competitors use their wires and switches, those competitors usually target small-business customers, not residential customers.)
"The marketplace will ultimately be the test," Johnson surmises. "That will be heard a lot more than penalties."
If things do change at U S West, it will be too late for Jeanne Barker-Nunn. Two months into her telephone saga, she says, the company finally acknowledged that what the customer-service rep had promised her--a package under which she would retain all the features of her phone system, and gain the advantages of DSL--was technically impossible. Instead, she got separate home, business, and fax phone lines; exactly what she'd had when the ordeal began.
Barker-Nunn also asked U S West to reimburse her for almost $18,000, the amount of money she calculated she had lost because her business was all but closed down by the phone problems. She had just completed a major advertising blitz seeking more university clients. She says she'll never know how many potential customers gave up on her because of the phone quagmire.
Five weeks after she sent in her claim, she received a terse response: The phone company offered her six months of free phone service. She contacted attorneys, who told her that the size of her claim was too small to make a lawsuit worthwhile. U S West has since offered her a settlement of $925.10, but Barker-Nunn has not yet accepted the money and says she may still bring a complaint in small-claims court.
"I had worked so hard to build this business from scratch," Barker-Nunn muses now. "It was like a baby. To have U S West come in and virtually destroy it in front of our face..." Her voice trails off. "I was so powerless. If U S West as a utility can screw you over any way they want and be protected by law, they should not be promoting themselves as a consumer company."
Friedberg, who once worked for U S West as a financial analysis director, would agree. There is potential, he says, for the company to turn itself around--but only if, after the merger, the new leadership realizes that consumers do matter. "[Qwest chairman] Nacchio and his team recognize that the way they can win big points is in overcoming U S West's 16 years of callous contempt for customers," Friedberg suggests.
Barker-Nunn sinks deeper into her living-room chair and chuckles, a bit wistfully. Sometimes, when she's watching TV with her sons, ages 14 and 11, a commercial for U S West will come on. Maybe there's a catchy tune playing, with quick-cut scenes of Western cities and red-rock canyons traversed by phone-company vans. Or maybe a grinning customer, giddily explaining how U S West's latest service plan has made it easier to stay plugged into a go-go-go world. Then comes the logo. And the familiar phrase: "Life's better here." The kids will look up at the screen. "Maybe where you are," they'll shout.