In Maine, bankrupt FairPoint Communications managed to scrape up enough cash to launch a lobbying effort to get a bill introduced, tailor-written to prohibit stimulus award winners from… helping provide improved broadband service to Maine residents.

Marrache

Incredibly, Sen. Lisa Marrache, D-Waterville, the assistant Senate majority leader, has introduced a bill that would ban the system from using any tuition money to help pay for efforts to expand broadband access. Marrache mouthed FairPoint’s talking points as she suggested poor college students’ tuition money would be diverted for broadband projects. She claimed the bill was introduced because constituents FairPoint’s lobbyists and employees were calling her about it.

The fact Marrache so misunderstood a public-private partnership between the University of Maine, Great Works Internet, and two private investors to improve the Internet “backbone” in Maine should be of grave concern to her constituents. Unless some campaign contributions from FairPoint and its executives make their way to Marrache’s next campaign, voters must be wondering whether the majority leader has a grip on the technology matters before her.

Indeed, the University of Maine explained the “middle mile” improvement program was not going to steal students’ lunch money, but rather dramatically improve broadband capacity for all comers — something FairPoint couldn’t be bothered with while breaking promises to expand broadband service themselves.

Jeff Letourneau, associate director of information technology at UMS, told the Bangor Daily News, “as for tuition subsidizing our broadband efforts, that does not happen and will not happen.”

[flv]http://www.phillipdampier.com/video/WABI Bangor Federal Funding of Maine’s Rural Broadband 12-17-2009.flv[/flv]

WABI-TV in Bangor reported on the announced funding of broadband projects in Maine designed to improve rural broadband service statewide (12-17-2009 — 2 minutes)

Ironically, the network that will be built with the help of the broadband stimulus program will be open to any and all providers, including FairPoint, on a wholesale cost basis. But of course FairPoint would not own and control it, so it’s bad for them, and they’re trying to convince Maine lawmakers it’s bad for Maine residents as well.

Great Works Internet has had a running dispute with FairPoint

But then, FairPoint has had a vendetta of sorts against Great Works Internet for months, trying to overcharge the independent ISP for connectivity it obtained under provisions established in the Communications Act of 1996.

Also running interference for FairPoint is Rep. Stacey Fitts, R-Pittsfield, who serves on the Legislature’s Utilities and Energy Committee. His bill prevents any “undue” competition by UMS with existing broadband providers. In other words, he has written the FairPoint Entrenched Provider of Mediocre Broadband Protection Act. Fitts said he has concerns that the university’s efforts could have unintended consequences on private companies (read that FairPoint) that “already provide access.” It will have directly intended consequences on GWI by further disadvantaging them and potentially sinking their efforts to provide better service in Maine.

“If the university is able to bypass some of the competitive markets, and cherry pick, it could affect the ability to deliver broadband to others,” he said.

Exactly how it affects the ability of FairPoint to deliver what it has failed to demonstrate it is capable of delivering is a question Fitts doesn’t answer.

Fitts

“I know this will cause a lot of discussion in committee,” he told the newspaper. “But we need to have that discussion.”

Maine Public Radio covered the introduction of Rep. Fitts’ bill, and the debate swirling around it. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Constituents need to have a discussion with him. Unless he wants to be known as the representative from FairPoint, he might want to get out of the way of a project that has a chance of improving broadband in his state, as opposed to the empty promises from a bankrupt provider. If he wants to tie himself to FairPoint’s record of failure, voters can choose someone else to represent them at the earliest possible opportunity.

Those with a need for high speed broadband have tried, and failed, to obtain better service from FairPoint. As Stop the Cap! has reported in exhaustive detail, FairPoint was preoccupied in delivering third world phone service at the time, finally collapsing on the courthouse steps under the weight of its bankruptcy filing.

Bills like these in Maine are further evidence that Congress needs to act on the federal level to pass the Community Broadband Act, which would overturn these kinds of bought-and-paid-for protectionist bills passed in several states. Communities must have the right to bypass companies in the broadband shortage business.

[flv width=”352″ height=”264″]http://www.phillipdampier.com/video/WLBZ Bangor Broadband Stimulus Will Help Maine Health Care 12-2009.flv[/flv]

WLBZ-TV in Bangor showed what broadband brings to Maine’s health care system and other business.  (3 minutes)

[flv]http://www.phillipdampier.com/video/MaineBiz Broadband Special 11-2009.flv[/flv]

MaineBiz Sunday spent nearly an hour going in-depth into broadband challenges in Maine, the problems with FairPoint Communications, the dispute with GWI, and more.  Appearing on the show, which originally aired last November: Fletcher Kittredge CEO of GWI, Phil Lindley of the ConnectMaine Authority, Steve Hand of Know Technology and Rep. Cynthia Dill of District 121 in Cape Elizabeth. (36 minutes)

Coming up…

Comcast Is Allergic to the Word “Free” Except When They Are the Recipient

Frontier customers are advised to recycle their directories after November, but the new books won't arrive until March.

The dead tree format telephone directory lives on, dropped on the front doors of millions of Americans each year, often whether they want them or not.  The ubiquitous “phone book” has been with us for 100 years, and continues to be the source of controversy, anger, and irritation for those who advertise in it, want either to be listed or unlisted from it, or simply want to stop killing trees to print it.

Now two phone companies have riled up their customers over the books — Frontier Communications for changing the printing schedule of the Yellow Pages, forcing businesses trying to economize to continue to pay for advertising they no longer want, and FairPoint Communications for omitting a large number of customers from their 2010 White Pages.

Coincidentally, the controversies impact two communities sharing the same name – Rochester, New York and Rochester, New Hampshire.

Even though this coupon expires in December 2009, Agatina's Restaurant will still be paying for their advertising until March, 2010.

In Frontier’s largest service area in western New York, businesses are confronting the fact they’ll be forced to pay up to four additional months for Yellow Pages advertising, including for coupons that expire in December.  That’s because Frontier has decided to change the publishing schedule for telephone directories from the traditional month of November, in place in Rochester for decades, to next March.  Residential customers may also accidentally discard their phone books, which indicate they should be recycled in November, assuming new directories are on the way.

The change impacts existing businesses who want to reduce or stop their Yellow Pages ads, as well as new area businesses that will have to wait until spring before their listings appear in the printed directories.

Although many customers now look up telephone numbers online and don’t use the White Pages print edition, many consumers still rely on the Yellow Pages to size up businesses, look for coupons, or learn more about businesses from their advertising.

[flv]http://www.phillipdampier.com/video/WHEC Rochester Frontier Delays Phone Books 8-18-09.flv[/flv]

WHEC-TV Rochester’s I-Team 10 reporter visits with the owner of Agatina’s Restaurant, who is upset to discover he’s going to be paying for his Yellow Pages ad longer than he thought. (2 minutes)

In southern New Hampshire, scores of customers receiving new directories from FairPoint are discovering they are not in the book, or have outdated addresses listed, some nearly 19 years old.

The New Hampshire Union-Leader covered the story Wednesday:

“Basically, they left a lot of our numbers out of the phone book,” said Rochester City Manager John Scruton.

“My main concern is we want to provide good service to the city of Rochester, and it is difficult for people if they cannot find key phone numbers using the phone book,” he said.

“Hopefully, they’ll correct it in the next generation of books, but that’s not going to help people who have trouble finding them right now,” he said.

Plaistow Town Clerk Maryellen Pelletier said, “We didn’t even get the right directory.” After years of getting the Haverhill, Mass., directory, the town suddenly was delivered the Manchester-Derry book.

In that same book, Union Leader-New Hampshire Sunday News, a reference to the company that publishes the statewide newspaper and this web site, is listed twice in succession, once with its current address, once with an address it left 19 years ago.

Ironically, FairPoint’s phone books are printed by another Verizon castoff that declared bankruptcy earlier this year: Idearc.

Customers are outraged by the latest FairPoint foul-up.

Jim in Hillsboro: “Other than hoodwinking the Public Utilities Commission, name me one thing FairPoint has done right. Anybody?”

Mo in Plymouth: “Is this strike three and out of business? I hope so. Maybe we can get some company who will at least tell us the truth.”

Doris in Manchester: “Good ole FairPoint. What else would you expect from this fine outstanding company? I have never seen such a screw-up company as FairPoint.”

Frank in Bedford: “Waste of paper = phone book. When everyone has a computer there should be no more phone books allowed. Speaking of being allowed, FairPoint is another thing that shouldn’t be allowed to screw up anymore in New Hampshire. Give them the boot.”

DL in Nottingham: “In Nottingham, we keep getting new phone books every week for all different sections of the state. They just keep showing up.”

Chris in Bow: “Let’s all hope FairPoint managed to print the correct home telephone numbers for members of the Public Utilities Commission.”

Bren in Manchester: “Three months running now my home phone has been disconnected for “non-payment.” Three times I’ve called, spent my lunch hour giving the date that my payment was processed, waited while they figured out where it was misapplied and then had to wait several hours for the service to be reinstated. Then the insult of a phone book that isn’t going to be used, delivered into a rain puddle – the result is a wasted tree.”

FairPoint Communications’ performance in New England, finally leading to bankruptcy, harms not only itself but also smaller local Internet companies providing jobs and service across the region.  That’s the gist of a report in this morning’s Kennebec Journal outlining a dispute between FairPoint and Great Works Internet, a Biddeford, Maine Internet Service Provider caught between FairPoint’s fiber optic network and a billing dispute that demands GWI pay more than $3 million dollars by December 19th, or face service termination by FairPoint.

GWI leased fiber optic cables with FairPoint’s predecessor Verizon back in 2005.  As part of the Communications Act of 1996, designed to spur competition, GWI obtained access at special interconnection rates, lower than the prices charged for retail customers.  Verizon felt the price was too low, and went to court in 2005 to seek the right to charge “market rates” for access, but the issue was never settled before Verizon sold its landline network to FairPoint last year.  In March of this year, FairPoint stopped accepting new orders from GWI for fiber service, which has kept the company from growing beyond its current fiber network agreements, costing the company plenty in new business.  Then, in September, FairPoint back-billed GWI for $3,085,025, representing the price FairPoint felt GWI should have been paying since 2006.  If the Maine-owned ISP doesn’t pay up, it has been threatened with having its service cut off altogether.

Fletcher Kittredge, GWI’s founder and chief executive officer, has been around the ISP business a long time.  The company was founded in 1994, before Internet access became common, and he has grown the company into a locally owned business serving 18,000 customers with phone and Internet connections.  At risk are the loss of up to 75 local jobs and a significant part of $13 million in annual revenues earned by what the Journal calls one of Maine’s leading Internet providers.

“For us, it’s vital that this be settled soon,” Kittredge told the newspaper. “FairPoint has been threatening us with some pretty draconian action.”

FairPoint’s threat has already cost the company customers, Kittredge said, and the uncertainty makes it hard to go after new business accounts.

But growth has been trimmed by FairPoint’s actions, according to Kittredge. For instance: The company signed a contract with the Skowhegan school system for high-speed access and set up equipment. But the connections it needed from FairPoint were never made, Kittredge said, and he had to cancel the school contract. That has had a chilling effect on efforts to go after new accounts.

“We can’t go out and solicit new businesses,” he said. “We can’t say, ‘This is going to be great, but we may not be able to deliver it to you.’ ”

Great Works hasn’t wanted to make a big deal in public of its fight with FairPoint. It’s concerned that the news will cause existing customers to worry that they could lose their Internet connections.

“It’s a threat I’m going to watch,” said Mitch Davis, chief information officer at Bowdoin College in Brunswick.

Bowdoin gets phone service from FairPoint, but most of its Internet access is from Great Works. Davis was aware of the initial court dispute, but didn’t realize FairPoint was threatening to cut line access. He hopes the bankruptcy judge will let the case go forward and get settled.

GWI told the Journal the company may just be trying to steal Great Works’ lucrative business customers.  That might come to pass if the circuits are cut.  Despite Davis believing FairPoint probably wouldn’t make good on their threat because of the bad publicity it would generate, he admits if they do, he might be forced to transfer the college account to FairPoint.

“I would do what I need to do to keep the college running,” Davis said.

One Journal reader characterized the dispute as just one more consequence of approving FairPoint Communications’ takeover of Verizon service in Maine.

“I would like to thank the governor of Maine for letting such a strong stable company like FairPoint in this state. You really did your homework.  I thought we had a Public Utilities Commission that watched out for public interest.  Boy are they on the ball.  I am glad to see […] they are not running my business.”

Phillip Dampier

The Concord Monitor published an editorial Sunday suggesting that FairPoint Communications’ crash and burn bankruptcy is, in fact, a good thing for New Hampshire.

FairPoint’s bankruptcy was always a distinct possibility. At this point, it’s good that it happened. The massive reduction in debt that will result will either allow the company make good on its promise to provide widespread broadband service or make it attractive to a buyer capable of doing so. Surviving on landlines alone isn’t an option.

FairPoint’s debt would have been hard to repay even in good times by a smoothly operating company. The severe recession, lousy service that caused customers to flee in droves and high interest rates on its debt doomed FairPoint.

This is like saying the GM’s bankruptcy was a great thing for Detroit.  The Concord Monitor would do better to beat the drum for utility commission reform, to make sure such bad deals don’t get approval in the first place.  As it stands, FairPoint’s promises aren’t worth much in good times or bad.  How many broken promises should cust0mers endure before realizing money alone does not resolve bad decisions, bad implementation of those decisions, and now “cost savings” from a company that cannot afford to lose a single technician or customer service employee.

Making FairPoint attractive for a buyout or merger means slashing costs, and we all know where that will happen – among local employees who do the work to keep the company running.  Another merger or buyout with a sweet bonus for management will do little for New Englanders who rely on FairPoint for telephone and broadband service unless the buyer has the resources to provide a more advanced platform for telecommunications in this century.

The editorial is right in calling out the enormous debt FairPoint took on to make the deal happen.  It would be hard to repay in good times by a smoothly operating company, which is precisely why those who live in the next round of cities Verizon is about to cast into the wild Frontier should be so very wary.  The economy, it’s suggested, is getting better, but for those of us in economically challenged states like New York, Ohio, West Virginia, and others where Frontier operates wouldn’t know it from looking around their communities.  If FairPoint thinks it has a challenge now, watch as customers trying to economize continue to pull the plug on their phone lines.  As cell phone plans continue to offer more minutes (or unlimited access), why pay for two phone bills when one is high enough?

Most of FairPoint’s customers have another option: cell phones. Between June 2008 and June 2009 the company lost 11 percent of its landline customers. They’ll lose customers even faster if they raise prices. There are other threats to FairPoint’s future. Small companies and cooperatives are beginning to offer wireless internet service in rural areas. So even if FairPoint succeeds in extending broadband into the boonies, it could face competition.

Considering FairPoint, like Frontier, is relying on rapidly aging ADSL technology for broadband, and has few apparent plans to meet the needs of a wider bandwidth future, old fashioned DSL broadband isn’t far behind copper wire landlines on the endangered species list.  But FairPoint, like Frontier and other independent companies focusing on rural communities may be betting their business plans that for the same reason Verizon said goodbye, would-be competitors will never drop in and say “hello.”  In communities too small for cable companies, the prospect for wireless broadband, or other competition, isn’t exactly rosy.

Not so the investors in FairPoint, who will exchange hundreds of millions of dollars in debt for stock that at week’s end was trading for just over a dime a share. The investors gambled and lost. The free market worked.

The free market worked particularly well for Verizon, who played the system and won an enormous bounty.  Investors taking a beating will write off their losses and move on.  Where do rural FairPoint customers go to write off their loss in the broadband backwater they’ll be stuck in indefinitely?  FairPoint actually represented another failure in the free market, because of the lack of appropriate oversight which should have taken one look at this deal and the debt pile-on it represented, and then rejected it as inappropriate for a utility to gamble with ratepayers’ money.

FairPoint made a number of commitments to win state approval of its purchase. Whether such agreements must be kept is now up to the court.

Utilities are classically required to provide universal service. Urban customers subsidize service for rural ones for the good of society and because they may want to communicate with them. But the game changed when technology allowed other unregulated companies to poach on a utility’s turf by offering cheaper or better service.

FairPoint will keep operating, and its customers are unlikely to see any effect from its decision to declare bankruptcy to reorganize and shed debt.

Don’t pick me up off the floor shocked and surprised when FairPoint and its banker-owners walk into court begging to be freed from the “onerous commitments” they made to get the deal done in Maine, New Hampshire, and Vermont.  Those “hard won” concessions by utility oversight boards may be nothing but memories soon enough.  The game change of telecommunications choice has come to more urban areas, where customers have options.  That isn’t necessarily the case for rural New England consumers without cable and with zero bars on their cell phone from home.

Customers who earlier thought that no changes in the quality of their FairPoint service meant “more crappy” service in their future may find the “crap bar” still has plenty lower to go should the company seek to realize its fiscal conservatism at the expense of its experienced and competent workforce who have coped with bad management decisions since day one.  Somehow the “must keep” employees might just turn out to be the same folks at FairPoint headquarters in North Carolina who made the bad decisions that put the company in its current predicament.

Strong, careful oversight of any restructuring is essential to protect New England ratepayers from being victimized all over again.

Barely 18 months after taking control of telephone and broadband service from Verizon Communications, FairPoint Communications collapsed under the weight of enormous debt and an economic downturn, announcing they would declare Chapter 11 bankruptcy this morning.

As Stop the Cap! reported Friday afternoon, sources told us the company had quietly notified key employees of the impending filing, which was expected as early as this weekend.  On Monday morning, the announcement of the filing was made to the media and to an unsurprised customer base of several million dissatisfied customers in Maine, New Hampshire, and Vermont who lived through a never-ending nightmare of bad service and broken promises from a company many believe “bit off more than they can chew.”

Today’s announcement may bring additional scrutiny to the next telecommunications deal Verizon has planned for customers in 13 states.  Frontier Communications, much like FairPoint, wants to take on the operations of a departing Verizon, who wants to disengage from smaller communities to focus on providing fiber optic telecommunications service in larger cities.  Today’s bankruptcy announcement marks three out of three failures for companies assuming control of Verizon’s discarded operations.  Hawaii Telcom declared bankruptcy last December, three years after being sold to The Carlyle Group, a politically well-connected private equity investment firm.  Idearc Media, a Verizon spinoff of the phone company’s print and online yellow pages business declared bankruptcy on March 31st, and FairPoint Communications, which took over Verizon’s northern New England phone operations made its bankruptcy known this morning.

FairPoint executives admit the downturn in the economy and much larger than anticipated conversion problems contributed to the declaration.  FairPoint has accumulated more than $2.7 billion in debt, mostly from the Verizon transaction, and faced difficulty making payments on that debt as credit markets froze and customers fled the terrible service problems that developed when the company tried to integrate 600 Verizon computer systems and software to 60 FairPoint systems on January 30th.

“Those two things contributed to FairPoint having too much debt, at the end of the day,” said David Hauser, chairman and CEO of FairPoint.

Creditors now effectively control FairPoint Communications, and they’ve agreed to forgive $1.7 billion dollars in debt and reduce the company’s interest payments to keep service operational.  Company officials are also looking for savings from cost-cutting measures.  Union officials are extremely concerned that could mean significant job losses for a company already stressed to provide service.  Although company officials characterized today’s announcement as a “non event” for FairPoint customers, many are not so sure.

“There have been a lot of promises made by FairPoint,” one customer told a Maine television station.  “Services that were promised are not being delivered,” said another.

Skepticism was rampant that today’s bankruptcy announcement would be the start of a new beginning for a restructured FairPoint.

“On the news they said that the services would go on as usual, which means crappy,” said one Maine customer in Portland.

Perhaps to underline that sentiment, FairPoint spokeswoman Jill Wurm reported FairPoint broadband’s e-mail service is out of order this evening.  Wurm said anyone with a fairpoint.net e-mail address has been without service since 6pm.  The company was unable to project an estimated time when service will be restored. It was also not known how many customers were affected.

Union leaders said they take no pleasure in the fact their predictions were all-too-accurate about the ultimate outcome of the FairPoint-Verizon deal.

“What good does it do us? We can say it, but we’re left here to deal with it,” Pete McLaughlin of the International Brotherhood of Electrical Workers, which represents FairPoint employees, told the Associated Press.

State regulators across all three New England states plan to keep a watchful eye on reorganization proceedings.  Special consultants and attorneys have been hired to give the states input and guidance as the restructuring commences.  For some consumers, that doesn’t provide much comfort because many of these same regulatory agencies approved the deal in the first place.

Stop the Cap! has extensive coverage of today’s developments from across all three states’ local newscasts.  We’ve also been notified representatives of utility boards now considering a similar spinoff with Frontier have also arrived here to gain our perspective on the sales deal now before them.  For that reason, we will continue covering FairPoint’s final months before today’s announcement to complete the record on FairPoint and its impact on customers, state regulators, and public safety officials.

Our coverage begins with today’s announcement, starting in Maine, where it was a lead story across the state.

[flv]http://www.phillipdampier.com/video/WGME Portland FairPoint Mess 10-26-09.flv[/flv]

WGME-TV in Portland leads their 6pm newscast this evening with the news of FairPoint’s bankruptcy and what it means for customers, some of whom remain skeptical. (5 minutes)

More video to view below ….

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