Decision Near on Fairpoint’s Request to Acquire Verizon in Maine, New Hampshire And Vermont

October 15, 2007 -- After months of litigation, the Maine Public Utilities Commission (PUC), along with its counterparts in New Hampshire and Vermont, will soon decide whether Fairpoint Communications will be allowed to own and operate Verizon’s network and become the major regional provider of telephone and broadband services in those three states. The Public Advocate, on behalf of Maine’s consumers, has been one of the most active parties in the case, which is undoubtedly one of the most important cases ever decided by the Maine PUC.

Last October, just after the last day of formal hearings, the Public Advocate announced that we would not oppose the acquisition if the Commission adopted over twenty separate conditions that would serve to protect Maine customers and the public interest. Because Fairpoint is a much smaller company than Verizon, and because it is financing this acquisition with a lot of debt that is rated below investment grade level (sometimes called junk bonds), many of the conditions we recommend are aimed at Fairpoint’s financial viability, including our condition that Verizon accept a lower purchase price.

Other recommended conditions address Fairpoint’s obligation to provide high quality service to customers, its future prices for telephone and broadband services, its technical ability to successfully create and implement new operational systems, its ability and commitment to deliver DSL broadband service throughout Maine, its continued delivery of all necessary wholesale network services to competitive carriers, and its obligations to maximize federal support to keep telephone rates as low as possible. Other intervenors in the case are focusing on service to competitive carriers, employment issues, and Fairpoint’s obligations to ensure the privacy of customer information and phone calls. In our view, the paramount concern is the risk that the State’s major telephone and broadband carrier will encounter serious financial difficulties, perform poorly, and demand rates higher than those of Verizon.

Fairpoint already operates 6 rural telephone companies in Maine. However, if Fairpoint is approved, the operations and prices of those companies will not change at the outset, but Fairpoint indicates that it would eventually try to unify its operations in Maine.

One potential benefit of the acquisition is the possibility that Fairpoint will offer video service (IPTV) over its network in competition with Time Warner’s television packages. However, even if such plans move ahead without delay, Fairpoint’s planned TV service will be rolled out incrementally (town by town) and its earliest availability in limited areas is not likely to occur before sometime in 2009. It could also be much later.

A final decision by the Public Utilities Commission is expected in January, 2008.

Source: Maine Office of the Public Advocate

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