Maine Owl

Will northern New England live to regret this?

As a favor to capital, public utility regulatory bodies in Maine last week and just now in Vermont (reversing a December 21 stance) have acquiesced to a complex financial transaction that gives the capitalists controlling the giant Verizon telecom corporation and the pipsqueak FairPoint gifts to their shareholders. Vague promises for service upgrades have been made, but that's not what this deal is about.

The real story is laid out in Maine Owl HERE. Vermont has now climbed down and will approve the deal.

This is how the news has read the last few days:

FairPoint deal gets green light from state PUC
Friday, January 04, 2008 - AUGUSTA, Jan 04, 2008 (Bangor Daily News - McClatchy-Tribune Information Services via COMTEX)

Almost a year after it was first announced, FairPoint Communications' proposal to buy Verizon's northern New England telephone and Internet land lines was approved unanimously by Maine regulators late Thursday night.

At about 7:30 p.m., after nearly 10 hours of discussions, the Public Utilities Commission put forth a list of conditions necessary for its three members to approve the deal worth $2.7 billion.

One condition called for an additional reduction of FairPoint's debt by $100 million. The PUC suggested this money come from Verizon, but shortly after 9 p.m., Verizon rejected the condition.

FairPoint, however, offered a solution. It promised to evaluate its financial situation at the end of 2011, and if it has not met certain thresholds, it will reduce its debt by $150 million by the end of 2012 by selling off assets, issuing stock or reducing dividends.

"I think what they've proposed has a shot at achieving what we want it to achieve. I think the company has made a pretty good faith effort to meet the conditions that we want it to achieve," Rich Kania, a member of PUC's advisory staff, said in response to FairPoint's proposal.

"FP is a much better bet [than Verizon] in terms of providing value to consumers," Commissioner Vendean Vafiades said before the other commissioners concluded they would approve the deal.

A mild congratulatory applause erupted when the deliberations ceased at 9:30 p.m., but not everyone was happy.

The International Brotherhood of Electrical Workers and the Communication Workers of America -- both representing Verizon workers -- has continued to oppose the deal, arguing that FairPoint would be left without the financial resources to meet its obligations to workers and stockholders and its promises to consumers.

Unions blast PUC approval of FairPoint deal
Wednesday, January 09, 2008; Posted: 12:48 AM
Jan 08, 2008 (Bangor Daily News - McClatchy-Tribune Information Services via COMTEX)

The PUC initially asked Verizon to reduce FairPoint's debt by $100 million by cutting the cost of the fees it will charge FairPoint for services rendered during the transition from Verizon to FairPoint. After Verizon refused to do this, the PUC adopted FairPoint's alternative proposal to pay down its debt by $150 million in 2012 if the company does not meet a certain debt ratio by the end of 2011.

"The commission had it right when it initially asked Verizon to cut FairPoint's fees by about $100 million. That would have been an upfront cash infusion taking pressure off FairPoint. Instead, the commission placed more pressure on FairPoint to cut its investment in capital, service quality or the labor force," Pete McLaughlin, business manager of IBEW Local 2327, said in a statement issued Friday. "Sadly, our commissioners made a compromise that falls far short of what telephone customers and the public need."

And look! From the first story quoted above, it appears that the federal wiretapping case and telco immunity provisions now meeting great interest in the Democratic Congress are coming full circle in this FairPoint-Verizon deal:

Aside from the debt reduction, the conditions included:

• The current federal wiretapping case involving Verizon would continue and Verizon would continue to represent itself in the case. In that case, the federal government is trying to stop the PUC from forcing Verizon to divulge whether it provided customer call records to the government without a warrant.
• A requirement for FairPoint to file with the PUC a privacy policy that articulates how the company will guarantee the privacy of its telephone customers, so as to prevent any future cases like the one involving Verizon.

Wow. At least some of the state public watchdogs are not complete pushovers for corporate-federal eavesdropping. Maybe there is a ray of hope. But I will be amazed if these great service promises ever come true. This is a mess for the public. I'll be watching carefully the quality of my DSL. Verizon is really pretty good up here. The downstream speed is a tad slower than the Road Runner cable system. But by upstream speed, cost, and every other service measure, DSL is better. Will it stay that way?

Update: The FCC approved the deal 3-2, with the Democratic commissioners voting against it:

FCC OKs Verizon-Fairpoint phone deal
By Dibya Sarkar - AP Business Writer / January 9, 2008

The commission's two Democrats, Jonathan Adelstein and Michael Copps, voted against it.

Adelstein said "inexplicably, there are no special measures in this order to address the concerns about broadband deployment, wholesale service, or service quality for customers in these three states."

In other words, all of FairPoint's promises are hollow, nobody's going to make them do anything.