Despite Blessing The Deal, FCC Panel Splits On FairPoint/Verizon

Telecom Policy Report, Jan 14, 2008

"FairPoint initially proposed to spend $52.55 million on broadband expansion in the three-state region by 2010, including $18.55 million in Vermont, $16.45 million in New Hampshire, and $17.55 million in Maine," the commission says. "FairPoint anticipated that over 128,000 customers in the three states that do not currently have broadband access would benefit from these investments. FairPoint stated that such expenditures will allow it to make broadband addressable to 88 percent of lines in Vermont within 34 months of the completed transaction, and 83 percent of lines in New Hampshire and 83 percent of lines in Maine within 24 months of the completed transaction. Further, FairPoint stated its plans to increase broadband addressability eventually to at least the same level (92 percent) it has achieved in its existing service territory in these three states."

The commission also pointed to the decision reached between Maine regulatory officials, Verizon and FairPoint (please read further in this story) "to substantially increase its proposed broadband investment to reach 90% addressability in Maine, and to maintain certain price levels and service offerings. To do so, during the five years following the closing of the transaction, Verizon and FairPoint collectively agreed to spend $69.55 million in implementing this broadband commitment."

That's not how the two Democrats on the panel see it. According to written dissent from Commissioner Michael Copps, "Petitioners promise that they will invest in bringing broadband to (rural) areas, increase jobs and increase quality of service. In contrast, there is sizable information in the record to show that FairPoint may be limited by the terms of their agreement in its ability to deliver on its promises. If the seller is not committed to ubiquitous broadband deployment, then letting someone else with more commitment do the job makes sense. But if the buyer is shackled by the costs of the agreement, it becomes more difficult to see how the public interest is served. As a result of this particular transaction, FairPoint may be unable to meet its broadband promises, have less reliable service, employ fewer people over time and meet its other commitments due to its heavy debt load and historically high dividends."

Pointing out that the public-service commissions in the three affected states still have not made a final decision regarding this acquisition, Copps wrote, "The Commission was asked by a number of parties, including Members of Congress from these states, to wait for the state commissions to complete their work before acting. We should be doing that in order to benefit from their more granular analysis and their on-the-scene knowledge and experience. Nevertheless, I hope and expect that the states will continue independently in their consideration of this matter despite the FCC's action today."

Added Commissioner Jonathan Adelstein, "At the state level, red flags have been raised by the Maine Public Utilities Commission Hearing Examiner, the Maine Public Advocate, the Vermont Department of Public Service, the staff of the New Hampshire Public Utilities Commission, and the New Hampshire Consumer Advocate. The Vermont Public Service Board did more than raise red flags -- it put up a red light in denying the transaction as proposed. These commenters raise serious issues that would have benefited from more attention than the casual dismissal we offer today."