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Missteps Rattle PacBell's New Internet Service


California's biggest phone company is mishandling one of the largest business opportunities in the telecommunications industry's history, failing to efficiently deliver high-speed Internet access to excited consumers and disaffecting tens of thousands in the process, according to public records and state regulators. Consumers who ordered the service from Pacific Bell are fuming over no-show installers, "lost" orders, and broken promises in the wake of a six-week systems meltdown at a company affiliate. PacBell not only neglected to inform customers about the extraordinary internal chaos it was experiencing, but the company only briefly halted its multimillion-dollar television and print advertising campaign for its digital subscriber line service, known as DSL. The flap has aroused anger among customers, thousands of whom still face weeks-long delays in getting service, and has affected several competitors and their customers who rely on the company's phone lines. State regulators, drawn in by skyrocketing complaints, have begun monitoring the situation. "By any reasonable measure, this has been an utter disaster. They have no clue what's going on, and their systems are breaking down," said John Navas, who owns a communications consulting firm and filed a complaint about PacBell's service with state regulators. "I got disgusted. I have finally had it with Pacific Bell, and I'm going to be moving on." DSL allows users to access the Internet at high speeds over their regular phone line without disrupting voice calls. It has become a critical and lucrative market for phone companies, who want to book the extra revenue and beat out cable companies selling a rival Internet service. Up to 9.3 million U.S. households will be DSL subscribers by 2003, representing billions of dollars each year in monthly fees, researchers estimate. While the ordering problems have been largely worked out, troubles remain with computer systems that handle phone-line testing, equipment inventory, installation appointments, billing and other tasks. Customers are feeling the pain in the form of double-billing errors, conflicting information about DSL availability, delayed installation and repairs and poorly trained technicians. Company executives acknowledge there are widespread problems and say they are working to fix them. The company has hired more employees, fixed many technical glitches and has begun offering some customers compensation in the form of free service for a few months. "Most of the orders, particularly in June and early July, were not flowing through the system completely. . . . They were getting stuck," said Michael Coe, a spokesman for SBC Communications, PacBell's parent. "Everything is significantly better, but we still need to improve." The company's missteps have affected at least 45,000 customers in California and thousands more in seven other states, many of whom have yet to receive the service they ordered as long ago as May. Fed-up consumers have been complaining to state regulators in droves. At the end of July, PacBell DSL customers had lodged 692 complaints with the California Public Utilities Commission, up from 162 for all of 1999. Complaints about all other DSL providers totaled 78 by the end of July, up from 49 for all of last year. "It was a real mess in May and June. . . . They were advertising a service that they were not in a position to provide in a timely manner," said PUC Commissioner Carl Wood, who has met with PacBell and the affiliate created to handle DSL service. But the PUC has little authority to act on service issues related to DSL, which is a premium offering and not directly regulated by state or federal agencies, Wood said. "It's extremely frustrating to have to give you these very lame answers . . . but we don't have either rules or enforcement mechanisms in place to deal with these things," Wood said. "My role right now is really to keep badgering them about it and to let them know that I'm watching the situation closely." PacBell's DSL troubles started at the end of May, when PacBell and its sister companies shifted their DSL Internet access operations to a newly created company, SBC Advanced Solutions Inc. Federal regulators mandated the switch in late 1999, when they approved the merger between SBC Communications and the Midwest phone company Ameritech. The move was designed to make sure PacBell and SBC's other phone company subsidiaries don't favor their own DSL business over rivals, such as Covad, Flashcom and others, who use PacBell phone lines for their own service. But when SBC activated Advanced Solutions units in California, Nevada, Texas, Oklahoma, Missouri, Kansas, Arkansas and Connecticut over Memorial Day weekend, there were immediate problems with equipment shortages, software glitches, and too few employees with too little training. SBC had only a few months to prepare for the changeover, but critics say the situation was made worse by a backlog of orders and the company's refusal to tell customers about the situation or to sufficiently reduce its advertising. Advanced Solutions officials won't say exactly how many DSL orders were delayed, purged or otherwise fumbled. When asked about a specific number, Advanced Solutions Chief Financial Officer Zeke Robertson said: "All of them that were in the pipeline during that time," including orders from competing Internet service companies. He later estimated that the number amounted to about 3% of the company's nationwide DSL orders so far this year. Advanced Solutions' troubles lasted more than 40 days, and PacBell had begun booking orders at a rate of 1,500 to 2,000 a day in California. Using the more conservative 1,500 rate and adjusting for weekends, at least 45,000 DSL orders were bungled in California alone. Competing Internet service provider EarthLink said Advanced Solutions' computer troubles prevented it from processing DSL orders for about 10 days. Advanced Solutions also lost all the customer orders from EarthLink and others that had been on hold at PacBell pending the installation of more DSL "ports" or other equipment. EarthLink had to resubmit orders using its own customer records, said Mike Lunsford, the company's executive vice president for broadband services. PacBell has been leading the charge into the DSL market, accounting for the majority of SBC's 435,000 high-speed access customers. At the end of July, PacBell had almost 300,000 DSL subscribers, a more than eightfold jump over July 1999, when PacBell had just 34,000 customers using DSL. But the rush to sign up customers could backfire if it severely tarnishes the company's reputation on the way. Many PacBell customers have been further irritated by the recent launch of another aggressive promotion for PacBell DSL--this one offering new customers a discounted Compaq computer with their fast Internet connection for $59.99 per month over two years. The base-level service costs $40 a month. The new campaign, arriving on the heels of the crippling technical breakdown, is indicative of the phone company's relentless push to sign up more customers even when its network and staff cannot handle the load. Robertson says the company tried to lessen the stress of the transition by stopping the DSL advertising during June and changing its installation appointments to 30 days from the order date. The unit also hired more than 2,000 new employees in California, and has begun sending out trucks to test phone lines in advance of installation appointments to reduce the chances of an unsuccessful customer visit. Newly available "self-installation" kits also could ease the staffing crunch. "The creation of [Advanced Solutions] has been quite a strain," Robertson said. "We put these things together in a very rapid time frame, and we didn't do very well at making sure all of that worked." Critics said the crisis stems from the company's determination to lock up a large share of DSL customers in one-year contracts to keep them from signing up with competitors. In spite of it all, PacBell's subscriber ranks continue to swell, and its order lines remain jammed. For PacBell, that's proof that most of its customers are happy with the service. For others, it illustrates the public's lack of choice and a strong demand for high-speed Internet access. "The marketing is still running out of control, the salespeople are working all out, and the poor [systems] guys are somehow supposed to make it all work," said Navas, the consultant. "But what they are selling is speed, and that is so awesome compared to a dial-up modem that it almost overwhelms any other consideration."

-- Doris (, August 30, 2000

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