NH's Changing TELECOM Landscape

Business NH Magazine, Jun 2008 by Wailgum, Thomas

The intended purchase fit FairPoint's business model like a glove: a wireline-based business serving some cities, but mostly rural, small areas often ignored by its competitors. "People ask us, 'Why do you want to buy wireline companies when everybody's going wireless?' " says Leach. And in this region, given the topography and the lack of really good cellular coverage in many parts of state, we believe a wireline connection to the business and home will continue to be very important for a number of years."

The Last Mile Is the Hardest Mile

The sale and transfer of ownership was slated for March 31, 2008. But a last-minute change in FairPoint's financing almost derailed the deal. Due to a confluence of macroeconomic events, the interest rates of FairPoint's bonds increased dramatically, resulting in nearly $28 million a year in additional costs for FairPoint.

After brief, but intense, discussions about the new bond figures, the three states' regulators approved the sale. "The bottom line is, we could not have picked a worse time to try to raise $550 million in bonds:' Leach told the Concord Monitor. Wall Street greeted the close of the deal with a frown: FairPoint's stock initially plummeted 25 percent on the first day. (As of mid-May, the stock price had recovered some of the ground it lost after the sale was finalized.)

Throughout the entire process, from late 2006 to the deal's completion, FairPoint remained resolute in its commitment to the three states. Executives publicly pledged to increase broadband availability and invest in the telecom networks and infrastructure in NH. And contractual stipulations require significant investments. For example, within 18 months of the deal's closing, FairPoint is required to have made broadband available to 75 percent of its NH customer base. In five years, that percentage soars to 95 percent. The potential fines for not meeting those goals are hefty: $500,000 for every percentage point FairPoint does not achieve. "These are very clear requirements in terms of dramatically expanding broadband," Leach notes. "What that means is that roughly 50 percent more of the old Verizon customers will have access to a broadband product who otherwise would not have had access to it."

FairPoint is taking a pragmatic approach to achieve the goals. Leach says it will utilize Verizon's existing infrastructure, which is based on copper-pair wiring, for now. "Our view is, let's get broadband to as many people as we can first, instead of trying to build fiber to the premises," he says. Fiber, of course, is better than copper; but it is expensive toinstall, especially in the rugged terrain of the North Country. FairPoint executives say they plan to invest $200 million to build out Verizon's existing infrastructure and create an advanced broadband network that will employ multi-protocol label switching (MP LS) and Internet protocol (IP) networking technologies.

FairPoint's plans have piqued the interest of small business owners in rural communities. "Just the basic access to broadband is the biggest challenge still for all our rural areas," says Veronica Francis, owner of Notchnet Web Services in Littleton, a Web hosting, management and design firm, and e-mail hosting provider to more than 200 businesses. (She is also a consultant to towns and businesses on Wi-Fi deployments through her other company, Wicked Wi-Fi Inc.) Francis describes friends and clients who are "suffering from dial-up" right now One Notchnet customer is laboring to use her dial-up connection to forge an e-commerce-based business. "If she had high-speed broadband," Francis says, "it would probably boost her bottom line"