Fair warning to FairPoint


Friday, May 18
When we heard the news in January that Verizon wanted to sell off its land line operations in northern New England to FairPoint Communications, we admit it was cause for rejoicing.

It seemed then that any potential owner would be an improvement over Verizon. Only 60 percent of Verizon's 1.5 million customers in Vermont, New Hampshire and Maine have access to broadband Internet service -- a level of service that the telecommunications industry newsletter, DSL Prime, recently called one of the lowest broadband access rates in the developed world.

But as bad as Verizon has been, there is growing doubt about whether the North Carolina-based FairPoint can live up to the promises it has been making.

The $2.175 billion deal, which still needs the approval of state regulators in all three states, would transfer all of Verizon's northern New England land line assets and its 3,000 employees to FairPoint.

Is FairPoint strong enough to take over for Verizon? A closer look at FairPoint's finances reveals a company that has become successful with the help of federal subsidies.

The federal Universal Service Fund was established to bring telephone lines to poor, rural and sparsely populated areas. As an incentive for telecom companies, the fund subsidizes services in these areas. For example, Verizon gets subsidies averaging $31 per telephone line in Vermont.

For the 311,000 access lines in the 31 exchanges in 18 states that FairPoint currently serves, the company's USF subsidies average more than $400 per line. They won't get that kind of subsidy in New England.

If this deal goes through, FairPoint will take on $1.7 billion in debt, quadrupling its current debt load. Where is the money going to come from to pay for the expanded services it is promising?

There are also questions about what type of services FairPoint will offer.

FairPoint has committed to beating Verizon's promise to extend DSL (basic high-speed Internet technology) to at least 80 percent of Vermont by 2010. With the recent passage of a bill in the Vermont Legislature requiring 100 percent access by 2010, can FairPoint deliver?

Experts in the telecom field are saying that DSL -- which uses copper phone line technology that's been around for more than a century -- will be obsolete within a decade. But that is the technology FairPoint will be relying heavily upon.

A fiber-optic network, which has become the norm worldwide, delivers more data faster than DSL. It is already available in some of the small towns that Verizon serves in southern New England. That's the standard that Vermont should insist upon from FairPoint.

While Verizon has clearly neglected customers in our region, FairPoint may not be much better, and potentially could be worse.

Vermont must insist upon strict guarantees and timetables for expanding broadband service. And FairPoint must be able to conclusively prove it has the financial and technical wherewithal to take on the responsibilities of being the region's leading telephone provider.

The future economic and social well-being of Vermont is going to rely heavily upon high-speed Internet service being universally available in every corner of the state. If FairPoint does no better than Verizon in living up to this standard, Vermonters will be stuck in a telecommunications backwater for years to come.


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