Verizon selling Vermont lines

Vermont Business Magazine, Feb 01, 2007 by Kelley, Kevin

In reviewing FairPoint Communications' complex $2.7 billion deal to acquire Verizon's land lines in northern New England, Vermont regulators say they Will focus on whether FairPoint has the resources to make good on its promises to improve telecommunications services in the state.

"It remains to be seen what this means for Vermont," says Stephen Wark, consumer-affairs director for the Department of Public Service. "There's a lot of questions we want to have answered."

The department's assessment of the proposed ownership shift of 330,000 Vermont phone lines will be no rubber-stamp formality, Wark emphasizes. He says the two companies outlined "a bold and aggressive timeline" in projecting completion of all regulatory reviews by October. That target can be hit, however, if FairPoint and Verizon "meet our information requests and cooperate fully," Wark adds.

FairPoint's acquisition, if approved, will vastly increase the size of the North Carolina-based company. It currently provides local and long-distance calling services as well as data transfer and broadband Internet connections to mainly rural markets in 18 states. FairPoint's workforce would grow from 900 to 4000 employees once the deal is sealed, and the number of phone lines it owns would also increase exponentially - from 250,000 to 1.6 million.

Altogether, the purchase of Verizon's local exchanges and related businesses in Vermont, Maine and New Hampshire would make FairPoint the eighth-largest phone company in the United States.

Wark says Vermont regulators welcome FairPoint's pledges to invest $200 million in the three state's telecom sectors, to accelerate broadband buildout to areas still reliant exclusively on dialup, and to maintain customer rates at current levels. The Department of Public Service is also giving FairPoint "the benefit of the doubt at this stage" concerning its stated commitment to honor labor-union contracts and to hire hundreds more workers in the three states.

"We do want to see how all this breaks out for Vermont specifically," Wark cautions.

The state does look forward to improvements in the wire services Verizon currently provides, Wark says. Noting that the New York-based telecom giant has failed for several years to meet state benchmarks for residential phone repairs, Wark finds that "Verizon has not performed in the way we had hoped."

The state is also unimpressed with Verizon's efforts to meet deadlines for expansion of its digital subscriber fines (DSL) network in Vermont, Wark adds. About 62 percent of Verizon's phone customers in northern New England currently have access to high-speed DSL connections to the Internet. Verizon has promised to reach an 80 percent threshold in Vermont by 2010. "Broadband is the linchpin to the state's economic vitality," Wark says. "There's a need to be more aggressive in the buildout."

The department has only jawboning power in regard to broadband services, however. It holds statutory authority to regulate land-line telephone operations but not wireless transmission systems or DSL and cable linkages to the Internet.

Verizon officials say the company is honoring all its commitments to Vermont, as is indicated by the favorable feedback Verizon says it receives from its customers. And Vermonters can expect "continued top service" from FairPoint, according to Verizon Telecom President Virginia Ruesterholz. She says the pending deal will be "great for consumers" as well as for Verizon shareholders and workers.

"We know that FairPoint has a deep understanding of the local phone business and a determination to build on Verizon's operating strength in this region," Ruesterholz declares.

FairPoint CEO Gene Johnson says his company's "established expertise in operating telephone properties in rural areas will now be leveraged in the new Maine, New Hampshire and Vermont markets."

FairPoint already provides local phone service and broadband connections in three Vermont communities: Cabot, Montgomery and Isle LaMotte. Company officials point out that 93 percent of its customers in those areas have the option of accessing the Internet via DSL. Overall, Johnson notes, FairPoint makes broadband available to about 88 percent of its customers in the "very, very rural" markets where it does business.

Wark says FairPoint "has worked hard to improve customer service" in the three Vermont communities where it operates. "They've made investments there in the last several months, and the data seems to suggest that it's working," Wark adds.

FairPoint says it will invest about $100 million in the three states' telecom networks even before the deal with Verizon closes. The company plans to spend a similar amount, mainly on back-office infrastructure, in the first year after the ownership transfer takes effect. FairPoint will also concentrate on expanding DSL services in Vermont during that period, Johnson says.

About 600 jobs will be created in the three states as a result of the deal, Johnson adds. FairPoint will also retain 3000 workers now employed by Verizon in its local phone divisions in northern New England.