STATE OF VERMONT
PUBLIC SERVICE BOARD
Joint Petition of Verizon New England Inc.
d/b/a Verizon Vermont, Certain Affiliates
Thereof and FairPoint Communications, Inc.
For approval of asset transfer, acquisition of
Control by merger and associated transactions
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Docket No. 7270
SURREBUTTAL TESTIMONY OF
W. Curtis Mills, Jr.
ON BEHALF OF
THE DEPARTMENT OF PUBLIC SERVICE
August 10, 2007
Summary: Mr. Mills’ surrebuttal testimony addresses points raised in the FairPoint
and Verizon rebuttal testimony related to FairPoint’s planned integration of Verizon’s
business and operations, the related implementation of new front and back-office
systems, and the planned conversion of the Verizon systems and customer data to
FairPoint’s systems. In addition, Mr. Mills recommends several conditions which the
Board should apply if it determines that the acquisition is to be approved.
A. IDENTIFICATION AND QUALIFICATION OF WITNESS
Q.
What is your name and business address?
A.
My name is W. Curtis Mills, Jr. and my business address is 4080 McGinnis Ferry Road,
Suite 1303 Alpharetta Georgia 30005
Q.
Are you the same W. Curtis Mills, Jr. who filed direct testimony on behalf of The
State of Vermont Department of Public Service on May 24, 2007 in this proceeding?
A.
Yes.
Q.
Mr. Mills, on whose behalf are you testifying in this proceeding?
A.
My testimony is presented on behalf of The State of Vermont Department of Public
Service.
B. PURPOSE OF SURREBUTTAL TESTIMONY
Q.
Mr. Mills, what is the purpose of your Surrebuttal Testimony?
A.
My surrebuttal testimony provides the Vermont Public Service Board (Board) with a
response to portions of the rebuttal testimony of FairPoint Communications, Inc.
(FairPoint) and Verizon New England, Inc. (Verizon).
Specifically, my surrebuttal
testimony addresses points raised in the FairPoint and Verizon rebuttal testimony related
to FairPoint’s planned integration of Verizon’s business and operations, the related
implementation of new front and back-office systems, and the planned conversion of the
Verizon systems and customer data to FairPoint’s systems. In addition, I recommend
several conditions which the Board should apply if it determines that the acquisition is to
be approved.
Surrebuttal Testimony of W. Curtis Mills, Jr. (on behalf of Vermont Depart of Public Service)
August 10, 2007
Page 1
C. SUMMARY OF TESTIMONY
Q.
Please provide a summary of your Surrebuttal Testimony.
A.
My surrebuttal testimony addresses rebuttal testimony by Verizon witness Mr. Stephen E.
Smith, FairPoint witness Mr. Michael Haga, FairPoint witness Mr. Arthur Kurtze, and
FairPoint witness Mr. Brian Lippold. I address statements made related to conversion
planning, experience requirements for project management, wholesale system selection
and planning, TSA pricing, and comments related to recommendations from my prefiled
direct testimony.
D. TESTIMONY
Q.
Several witnesses have suggested that the Hawaiian Telecom conversion of the
acquired Verizon Hawaii property and a potential conversion of the Verizon
Northern New England properties are not comparable or analogous (Mr. Stephen
E. Smith, page 10 line 16; and Mr. Michael Haga / Mr. Arthur Kurtze, page 35 line
5). Do you agree that there are no relevant parallels between these two efforts?
A.
No. There are many important differences between the two systems integrations and
projects as mentioned by Mr. Smith, Mr. Haga, and Mr. Kurtze. Among these are that
apparently CapGemini was engaged by FairPoint much earlier in the process than
Hawaiian Telecom’s systems integrator, and that FairPoint has allowed a longer project
schedule for implementing the systems and preparing for conversion than Hawaiian
Telecom did. However, even the longer FairPoint schedule is aggressive given the
amount of coordinated work that must be completed according to their plans. Regardless
of the amount of testing performed, the entire integrated set of new systems would not
have been proven in production prior to conversion of the Verizon systems and
Surrebuttal Testimony of W. Curtis Mills, Jr. (on behalf of Vermont Depart of Public Service)
August 10, 2007
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customers. This is an unusual situation and carries the risk of unanticipated problems in
production that could be customer service affecting. As I generally stated in my prefiled
direct testimony, recognition of risk is not intended to imply that problems will occur.
Only that they are possible and, where the potential damage is high, that they should be
managed to the extent feasible.
Q.
Several witnesses testified that a “flash cut,” or single conversion, would be the only
practical way to convert the Verizon Northern New England customer base, and
that any type of phased conversion was overly complex, excessively expensive, and
could actually increase of the risk of customer impact in the event of problems (Mr.
Stephen E. Smith, page 13 line 19; Mr. Michael Haga, page 29 line 8; and Mr.
Arthur Kurtze, page 29 line 1). Please respond.
A.
I agree with Mr. Haga and Mr. Smith that it would be impractical to attempt to break up
the related systems and phase a conversion of this type by application, due to the
integrated nature of the systems. I also agree with Mr. Haga and Mr. Smith that phasing
these conversions by state would be more complex and costly than a single conversion.
That is, executing two or three conversions would require more work, time, and expense
than a single conversion effort. However, as stated by Mr. Smith (page 15 line 4) and
Mr. Kurtze (page 32 line 5), there will be no way to “fall-back” to Verizon systems after
the actual cutover. Since the new FairPoint systems would be in production for the first
time after cutover, all of the more than 1,500,000 access lines and related customers
would be exposed to impact if there are unanticipated data, system, or business process
problems. If even relatively small problems are discovered after cutover, they may be
difficult to mediate with such a large customer base spread across three states. Although
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August 10, 2007
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problems are not inevitable, the lack of fall-back options increases the potential damage
exposure to a high level, regardless of the probability that problems may occur. Even
exhaustive system and conversion testing would not eliminate the risk of unanticipated
problems.
If a single state could be converted first, a much smaller and more easily manageable
group of customers would be exposed to disruption while the process is proven in
production. Following a successful initial conversion, both remaining states could be
converted together with a much higher level of confidence.
As stated in my direct testimony, similar size conversions of which I am aware have
converted by state, at least until the process and systems have been proven in production.
For example, in a 2002 sale of Verizon properties to CenturyTel, CenturyTel converted
the two acquired states (Alabama with 300,000 access lines and Missouri with 354,000
access lines) separately and several months apart. FairPoint would have additional
complexities due to the common work-centers and staff, and this would have to be
planned and coordinated.
Q.
In his rebuttal testimony, Mr. Arthur Kurtze (page 33 line 7) responds to your
direct testimony statement “Although they are experienced in related areas, the
CapGemini senior management that I interviewed did not have personal experience
implementing or converting ILEC customer systems for regulated mass market
telephone service.
This experience is an important determinant in successfully
managing like projects.” Mr. Kurtze states that this is “overly narrow and not
appropriate given the scope and scale of our assignment.” He states further that
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August 10, 2007
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there are other important criteria that must be considered for evaluation. Please
respond to this testimony.
A.
The experience and success that Mr. Kurtze refers to is important. I noted that
CapGemini management had this experience in my direct testimony. Many of the
general issues are the same for all large projects and for different types of
Communications industry segments. The experience that Mr. Kurtze notes is a given and
essential for the successful management of a project of this scale and complexity.
However, actual experience implementing and converting ILEC customer systems is also
an important determinant of success. ILEC systems, functionality, data, and business
processes are deceptively complex, and present unique issues that other Communications
industry segments do not share. This experience is not the only determinant for success,
but it is an important determinant. It is recognized that Mr. Michael Haga, who is a
senior member of the FairPoint management team, does have this experience.
WHOLESALE SYSTEMS AND SERVICES
Q.
In his rebuttal testimony, Mr. Brian Lippold (page 4, line 34) describes FairPoint’s
selection of applications and vendors for wholesale systems, and their plans for
implementation. Please offer observations about this testimony.
A.
Any change to carrier and CLEC business processes and user interfaces would create
some level of disruption. Interface work, training, and learning curve time would be
involved to institute any change. If a change is going to occur, the Wisor application
would not be more difficult for them to learn than others. From a systems perspective,
FairPoint’s strict emphasis on current industry transaction and protocol standards is a
positive. Unlike the retail customer application software packages commercially
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August 10, 2007
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available today, there are wholesale software packages and service companies for
ordering, trouble management, and Carrier Access Billing (CABS) that are proven in
ILEC production environments. This means that there is a reduced risk of service impact,
functional deficiencies, implementation delays, and unexpected production problems
after cutover with these applications than with the retail systems that FairPoint would be
implementing. The integration of the Wisor system order entry into the standard retail
order management (CRM) and provisioning processes is also a positive as it places
wholesale orders on par with retail orders for priority. In the same manner, FairPoint’s
intention to integrate and process wholesale customer trouble tickets alongside retail
trouble tickets also improves the positioning of wholesale customers for repair
prioritization. It should be noted that the degree of integration planned with the CRM,
provisioning, and trouble management systems couples the quality, success, and delivery
of the wholesale applications with the retail systems.
The certification process that Mr. Lippold describes would reduce the risk of individual
carrier problems by formalizing the confirmation of each carrier’s preparedness in
advance of a cutover.
TSA PRICING
Q.
In his rebuttal testimony, Mr. Stephen E. Smith (page 18 line 1) states that the
average TSA costs are roughly equivalent to the comparable Verizon operating
costs for the first 16 months of the TSA agreement and are therefore reasonable.
Please respond to this testimony.
A.
Current actual costs for comparable services would be a good basis for determining the
reasonableness of the TSA costs. However, unlikely as it may be, in the event that the
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August 10, 2007
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TSA continues beyond 16 months, monthly costs would escalate indefinitely and could
be regarded as unreasonable at some point since they would immediately exceed the
comparable internal Verizon cost.
REBUTTAL TO POTENTIAL CONDITIONS FROM DIRECT TESTIMONY
Q.
In their rebuttal testimony, Mr. Michael Haga (page 36 line 16) and Mr. Arthur
Kurtze (page 36 line 11) state that they do not believe that an independent monitor
is necessary since they are open to sharing status and testing reports, and that an
independent monitor might impede progress. Would you please respond?
A.
Yes. The basis for the recommendation of an independent monitor is to reduce the
potential for impact to Vermont customers given the risk related to a completely new set
of business systems prior to a large conversion. They would work more closely with the
team than simply reviewing delivered project and test status reports. The independent
monitor would participate in test reviews and status meetings to review detailed project
and test status results, and regularly report back to both FairPoint management and The
Vermont Department of Public Services. The independent nature of the “monitor” would
remove any bias from status reporting and increase confidence that the project was
progressing as planned and prepared for the cutover. Involvement would be defined so as
not to impede progress or create extra work for any part of the project team.
Q.
FairPoint witness Mr. Arthur Kurtze (page 38 line 7) states that a “switch to bill to
tariff” comparison cannot be undertaken prior to cutover. Please respond to this
testimony.
A.
Technically, a formal switch review could not take place until the switch was converted
to FairPoint ownership. However, since the existing customers and their products are
Surrebuttal Testimony of W. Curtis Mills, Jr. (on behalf of Vermont Depart of Public Service)
August 10, 2007
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already provisioned on the switches, a cooperative effort with Verizon would allow this
prior to cutover. The purpose of this review would be to confirm that customers are
provisioned for the services on the switch for which they are being billed, and that
products for which they are being billed are correct as defined by the related tariff. It is a
test of the source data quality, data conversion, system table set-up, and switch profile
accuracy. This would involve a statistically valid sample and would not need to be
exhaustive. Discrepancies would involve products for which customers are not being
billed but are receiving (custom calling features are common examples), products for
which customers are being billed but are not receiving (custom calling features are
common examples), and accuracy of the billed products and rates relative to the tariffs. I
have been involved in several of these reviews for independent ILEC and RBOC
customers and switches, and have seen a discrepancy range of 8% to 27%. Note that my
recommended condition for this area has been modified to occur after cutover.
E. SUMMARY OF RECOMMENDATIONS
Q.
Please summarize your recommendations to the Board
A.
My testimony addresses customer service, as it may be impacted by the system
replacement and conversion. If the acquisition is approved, I would recommend that the
Board consider carrying out the following:
1. The Board should direct FairPoint to engage an independent monitor for the system
development and conversion process to ensure quality and readiness.
The
independent monitor would be selected by The Vermont Department of Public
Services. Their role would be to provide an unbiased view of project status and
Surrebuttal Testimony of W. Curtis Mills, Jr. (on behalf of Vermont Depart of Public Service)
August 10, 2007
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readiness for conversion with a focus on quality assurance.
This independent
oversight approach is frequently employed on nuclear power plant construction
projects and is referred to as “the owner’s engineer.”
Work approach and
responsibilities would include:
o Interface directly with the FairPoint and CapGemini project management.
o Participate in status meetings for the overall project and the test activities for the
key areas of the project.
o Define a group of key test criteria that would provide an objective measurement
of conversion readiness.

The test criteria would address the conversion process and system
development completeness.

The test criteria may include items that have been problems in the past.

The test criteria would be communicated to FairPoint and CapGemini
management in advance of testing so that they could incorporate the
criteria into their mainline testing process for greater efficiency.

The independent monitor would review the test plans in advance of test
execution, participate in or observe testing, and review the detailed test
results for each criteria.

Upon completion, a report would be prepared and presented to the Board,
The Vermont Department of Public Service, and FairPoint management.
o Review overall test status and defect reporting at application and summary levels.
o Review weekly and monthly project status reports for overall project status.
Surrebuttal Testimony of W. Curtis Mills, Jr. (on behalf of Vermont Depart of Public Service)
August 10, 2007
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o Report status monthly to The Vermont Department of Public Service and
FairPoint management.
2. In order to ensure underlying data quality in the new systems prior to cutover, the
Board should require the addition of a conversion “audit” task to confirm conversion
data accuracy for important data. This would involve statistically valid sampling of
important converted data within the new systems to ensure that it is accurate as
designed and required for business operation. This would be executed on the final
mock conversion in advance of cutover.
3. The Board should require a post-cutover “switch to bill to tariff” comparison to
determine the accuracy of the converted billing records. This review would involve
sampling the customer base represented on multiple representative switches to
determine the degree to which products that are provisioned on the switch are actually
being billed to the customer, and that the products that are being billed to the
customer meet the tariff requirements.
The review would confirm not only the
accuracy of the conversion, but the accuracy of the current switch profiles, and the
quality of the source billing data as it relates to the switches and tariffs. The review
could be scheduled several months to six months after cutover.
4. The Board should require a billing audit within six months of cutover. This would be
a statistically valid sampling of representative billing output from multiple billing
cycles. This review would include full invoice verification. It could be performed in
conjunction with the “switch to bill to tariff” comparison and standard revenue
operations production reviews.
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August 10, 2007
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5. The Board should require that the CapGemini conversion team utilize automated
comparative conversion metrics reporting of key count statistics between the Verizon
systems and the converted data in the new systems. These would include access line
counts by type, customer counts by type, product counts by product code, etc. The
reporting would be used as a tool by the project team during the conversion testing to
quickly identify data mapping and conversion process problems.
6. The Board should require that the actual cutover be executed in at least two phases, to
simplify an initial conversion and cutover. The first phase would include the state
decided to be the most simple from a conversion perspective. The second phase
would include the remaining states. Ideally, Phase 2 would be planned for execution
two months after Phase 1 to allow for full monthly business cycle execution, issue
discovery, and adequate time for remediation. However, Phase 2 could be planned
for one month after Phase 1.
F. CONCLUSION
Q.
Does this conclude your Surrebuttal Testimony?
A.
Yes.
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August 10, 2007
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