FairPoint Wins Agreement From New Hampshire to Support Verizon Purchase

By Ashley Smith, The Telegraph, Nashua, N.H.

Jan. 25–CONCORD — The deal seemed like a long shot as recently as Christmas, but FairPoint cleared yet another major hurdle Thursday in its quest to replace Verizon as northern New England’s telephone company.

“It’s been a long, arduous process. I missed a lot of dinners with my wife and a lot of vacation,” chief executive officer Gene Johnson said.

“But there was never a time when I thought the deal would not happen.”

PUC staff in New Hampshire has joined its counterparts in Vermont and Maine by reaching an agreement to support the proposed purchase of Verizon’s landlines and Internet business here, as long as certain changes are made.

The decision is a surprising turnaround from a month ago, when Vermont regulators rejected the deal because of financial concerns.

But the $2.7 billion deal, under which FairPoint would buy Verizon’s phone and Internet lines in all three states, isn’t in the bag.

The deal still must be approved by the utility commissions in all three states. None has approved it, although the Maine PUC has come close and seems likely to OK the deal shortly.

Donald Kreis, general counsel for the New Hampshire PUC, stressed that although the commission often issues rulings in agreement with its staff, this case is “not a done deal.”

“It’s important for our side to stress this is a staff-level decision,” Kreis said. “The more high stakes the case is, and therefore the more controversial any case is, the less likely it is that the commission will just approve the staff’s recommendation.”

Even so, news of the New Hampshire stipulation did not sit well with local Verizon unions. They claim even with the concessions, FairPoint does not have the financial stability to handle the Verizon business, which is roughly four times larger than its current operations.

They, and other critics, have also expressed concern that North Carolina-based FairPoint’s plans to expand broadband through an upgraded form of DSL will leave New Hampshire as a technical backwater.

“There’s nothing on there about what happens to the 100 megabyte service in Nashua,” Larry Cohen, president of Communications Workers of America, said in a conference call Thursday.

He was referring to FiOs, the high-speed fiber optic network Verizon introduced only in a few of the southernmost portions of New Hampshire before announcing plans to leave the wire line business here.

“Because that’s the only world-class service in the three states,” he said.

Stipulations in all three states require FairPoint to increase broadband access and reduce the debt load it inherits from Verizon.

But none require FairPoint to offer faster Internet than Verizon’s current DSL product, which some say is already out of date.

FairPoint has promised to roll out a new version of DSL they say will be considerably faster.

Cohen said he doesn’t blame FairPoint for not offering “world-class” Internet speeds. He said the issue is really a matter of public policy — the FCC needs to set a minimum speed requirement, such as Japan, Sweden and Singapore have done.

Most telecommunications companies in the United States that offer DSL offer speeds similar to that of Verizon and FairPoint.

The Internet that cable companies provide is faster.

This is a “national issue,” Cohen said. “The spotlight is on Northern New England, on New Hampshire, today.”

Together, all three stipulations reduce FairPoint’s debt by about $300 million. Union officials say it should have been reduced by twice that.

The New Hampshire stipulation requires that $50 million of that savings be “used for New Hampshire projects.”

It also requires FairPoint to make broadband available to 75 percent of the state within 18 months, 85 percent of the state within two years and 95 percent of the state with in five years.

Financial penalties — to the tune of $500,000 per missed percentage point — will be imposed if the deadlines are not met.

The stipulation also requires to FairPoint to use most of its profits to pay down the debt and reduce the money kicked back to shareholders each year until the company is more financially stable.

FairPoint’s Johnson said the terms of New Hampshire’s settlement ensures the company will have long-term viability and suggests the state really understands the company’s financial plan.

“We are very pleased with this. It was quite thoughtful. It doesn’t really change what we were planning to do,” he said.

A public hearing of the New Hampshire PUC is expected to take place in early February, after which the commission will issue a decision.

Meanwhile, Verizon sent letters to its customers this week saying, should the deal go through, the transaction will close on or after Feb. 29.

After that time, FairPoint’s name will appear on the bill although there won’t be any change to service or prices, the letter says.

If the deal goes through, FairPoint would take control of roughly 1.6 million land lines for phone and Internet service in the three states, including fiber-optic lines in southern New Hampshire, as well as all associated poles, switches, offices and staff.

Verizon will keep its wireless operations in the region.

The Federal Communications Commission has approved the sale.

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