Fairpoint Investigations Loom

Wow, so this group will "determine" Fairpoint shouldnt be able to operate in Vermont. That will certainly be great news for all the people who have the service......

Business as usually for these bogus groups, all they do is cause prices for EVERYONE to go up. Perhaps the people in Vermont would be better served by asking their government to BAN such groups instead??

Their desire to prevent Fairpoint from operating in Vermont brings up an interesting conundrum - who then provides landline service in Vermont? Does the state take it over? Does the state order some national telecom provider to takeover with FCC complicity?(IE make Verizon take it back) Do they sell the assets off to the highest bidder? Would there actually be any bidders?

P.S.>> the Associated Press link in the story is invalid(now fixed). Here is a better link for the full AP story:
»wbztv.com/wireapnewsnh/S ··· 638.html

The first question would be can VT legally do any of these suggested options? I realize bankruptcy will increase VT's options, but some of these suggestions are drastic, if not impossible.

I agree. Just showing how absurd the options of kicking Fairpoint out really are as a practical matter. The horses are already running loose and shutting the barn door now does no good at all.

Such an order would likely be interpreted by the court as government seizure of private property. Eminent domain gives the government that right, but fair market value would have to be paid by the state for all the assets involved. Given the recent purchase of these assets it would be trivial for the court to assign their value and force the state to either pay Fairpoint the fair market value or revoke the order. I sincerely doubt the state could afford the billions it would cost to purchase all the line, CO and other assets of fairpoint in their state so an order terminating their right to operate would likely be terminated by the court after both parties spend a few million dollars on legal fees.

That was kind of my thinking as well. Seizing a failed utility by a municipality or the state might sound ok on the surface to some, but getting into the actual costs and technicalities of doing so most likely make it prohibitive. I simply don't see how "FairPoint's license to conduct business in Vermont" can be revoked short of selling the telecom's assets to another investor and/or restructuring Fairpoint during bankruptcy and shedding some of its debt.

It cant, that line is thrown out there by left leaning organizations who are looking to appease politicians. These "groups" are simply trying to leverage the current economic and political environment so that they can somehow secure funding for future "projects". Its a total scam, thats why when you see the words "consumer advocate", especially on this site, you need to RUN AWAY (not literally of course, but you get the idea).

Do you ever feel guilty about leading a life full of lies? Or do you pretend you're being honest?

The "scam" is perpetrated by groups or individuals paid for by big business masquerading around as "consumer advocates".

I could cite hundreds of examples of telco abuse of their customers, and the various efforts by real consumer advocates to put a stop to it, but you would likely just cover your eyes and ears.

Great comment! Seriously, one of your best. Totally contributes to the discussion. Golf clap for Sonicmerlin everyone.....

Is this your standard response? Maybe if you actually present your argument and the references that you hint at, you may open a more thoughtful and contributory dialog.

Just because the phrase "consumer advocacy" is invoked does not means it's partisian. There were multitudes of people in this forum that vocally spoke out against the Fairpoint takeover, I was one of them.. Now collectively, that would make us a group. Are we partisian;no. Just because there are people looking to rectify bad decisions from regulators does not make them automatically bad. 95% of the consumer advocate patrons in this forum knew that Fairpoints takeover would be a clusterf**k, and guess what, it is!

You are talking about two distinct things here. First, and organized group (either a for profit or "not for profit" organization) such as the one being discussed here is always a partisan thing. These groups exist solely to pander to one political group in the hopes of receiving funding that contributes to their "not for profit" status.

Actual groups (like the people on this website) are a different story. The groups here are nothing more than like minded people, who happen to think a certain way. These groups can be partisan, but they can also be fully neutral on the issues.I agree, however look at my above comments. People who simply post their opinion on a website are a far different animal compared to companies who exist to get public funding.

But the topic involves the New Hampshire consumer group, which is a part of the state gov't and has already began looking into this matter (»www.oca.nh.gov/07-011.htm). What they should also be doing is looking into the regulators that approved this mess. Yes there are people out there sponging for public support...but in this case....it's clear that both Fairpoint and the regulators that approved this transaction, didn't know what they were doing or didn't care!

You know what they say in business, the squeaky wheel gets the grease! The more "active" this group is (guess what!) the more funding is allocated to them.If they are looking to place blame, then yes the regulators are the ones who approved this. For Verizon and Fairpoint is was a business transaction, done within the full rights afforded by the law.

1st of all....hit the link. The "active' group'" your talking about is the State of New Hampshire. 2nd, the transaction that took place may not have been legal in the first place due to the fact that Fairpoint never had the resources to fulfill the contract. And third, just because something may be legal does not mean its beneficial to the consumer. Think about the monetary resources that these states are using now just trying to sort this mess out. This business transaction will end up costing these states plenty!

It sounds like you think the regulators who approved this are at fault. Assuming both Verizon and Fairpoint operated legally, then there is nobody else to blame. Therefore, this "witch-hunt" against Fairpoint is frivolous, and is a waste of resources. My concern is that this will end up costing the state money as they throw funds to their internal "advocacy" group to investigate. Assuming nothing illegal has transpired, then the only recourse is to investigate those who approved the deal.

Both Verizon and Fairpoint likely knew the end result of such a transaction would be bankruptcy. They have some extremely intelligent engineers and statisticians they employ to determine the degree of difficulty and cost of things like upgrades and network acquisitions. So yes, while it was "legal" and the regulators dropped the ball by approving the transaction, if it can be proved Fairpoint and VZ knew what would happen they'll be in trouble as well.

According to what laws? If a company goes bankrupt due to a bad deal, thats it. Here in America there is nothing illegal (thank God) about making a bad business decision.

Bad business decisions nearly obliterated our financial institutions and tanked our economy. Our grandchildren will still be paying for the bad decisions that were legal. So when your taxes go through the roof and you can't afford vacation this year, take solace in the fact the contributing factors of your not having enough money were legal.

Again, you need to look at the situation. Was it the bad decisions that caused the problems, or the system set up to allow them to proceed? On the other hand, many millions of Americans of are of the belief that we should have just let things "ride the course" instead of dumping further billions into the problem. As bad as what recently happened was, what our grandchildren will be paying for is this administrations "fix" to that problem, NOT the actual issue itself. Think about that for a minute, as that is the real problem.

Ah, the reflexive "private business" is sacrosanct while consumers stuck with third world service just need to tough it out while the "free market" gets around to solving the problem... eventually... maybe.

It's not the inept provider that's the problem, it's the consumer outrage and those busybody consumer groups that keep butting in demanding action.

Telephone service remains a utility. That means any company doing business as one (whether they like it or not) agrees to certain performance and service standards. FairPoint negotiated for months with all three states and agreed to those standards -- nobody forced them to sign.

In northern New England, there are vast areas with lousy cell phone reception and no cable television at all. That means for telephone service, there is one choice -- FairPoint.

The problem with the Free Market approach I see advocated by some around here is that it forces captive consumers into an Ayn Rand horror show played out in their own backyards. While the bully boys of telecom play capture the flag, customers have no dial tone, outrageously inaccurate bills, can't get phone service established at any price, and have collection agencies calling them at all hours for phone lines they disconnected in February but were still being billed for in June.

Some businesses improvised in a very unique way - they seriously contemplated moving out of New Hampshire and into Massachusetts just to get phone service installed (from Verizon)!

In a perfect world, we'd all have lots of choices for phone service, no matter where we live. That's a fantasy, however, particularly in rural communities. Where healthy competition exists, the absence of regulation and government oversight is already common. Where monopolies and duopolies exist, we hear the same rhetoric for providers to be "unshackled" so they can "innovate."

In the case of FairPoint, they innovated themselves into their current predicament - over-borrowing to leverage a buyout of three states' telephone networks, lacking the resources and expertise to manage them, yet still finding time to handsomely reward the outgoing CEO and some management cronies with enormous bonuses. Now the company teeters on bankruptcy.

But it's not FairPoint that's the problem -- it's those pesky consumers that want the problems to be fixed or have FairPoint tossed out of their states.

To be fair, regulators blindly got suckered into approving this nightmare of a deal in the first place, and they have only themselves to blame for the consumer menace that FairPoint represents today.

But the solution here is not to simply forgive and forget FairPoint's atrocious service (which included repeated 911 failures in the state of Maine, by the way) and simply shrug one's shoulders.

The answer is to determine whether this company can honestly provide a utility class of service in its current state, and if it cannot, force it to sell the service to someone who can manage it. FairPoint not only agreed to providing a certain level of service, an agreement it has broken repeatedly, but also understood up front the consequences for breaking that agreement, and now wants a free waiver on the fines it has piled up for lousy service and also be permitted to dip into reserve funds established to protect ratepayers.

Apparently the free market approach has an asterisk permitting these set asides to flow into FairPoint's bank accounts while demanding zero accountability, no oversight, and no regulation in return.

The better idea is to send FairPoint packing before it declares bankruptcy and walks away from its debt obligations, or worse yet demands some sort of public-financed bailout, rewarding bad management and letting them keep New Englanders stuck with phone service comparable to what one would find in Ghana.

There is not a whole lot of love for FairPoint in New England, regardless of what the free market fan club here has to say on the matter.

Who should force them, and on what legal grounds? Furthermore, who will buy it, and at what cost? Who will oversee that transaction and ensure its "better" than the current one? I think you are putting far too much faith in the gubment to do this. Every "business" the government touches turns to crap. Look at Amtrak or the Postal Service.

Access to the public ROW is a privilege, not a right. It can be revoked at any time. Same as a drivers license.

I concur with patcat88's assessment.

Use of the public ROW is not a right, and neither is providing utility services.

Providing certain utility services (electricity, gas, water, telephone) requires approval/licensing from state/local governments. Said approval or license comes with the conditions of minimum performance/reliability standards and rate controls (typically at 10% profit). Considering the utility almost always has a monopoly, it makes guaranteed money.

My local utility Pacific Gas & Electric (PG&E) charges me about $0.18 per kWh nominally (rough estimate) and a bunch of PG&E specific user fees/taxes, and makes well over a billion a year in what amounts to free money. Municipally owned electric utilities in California typically charge around $0.10 per kWh at the high end, no nonsense fees/taxes, and are self-sustaining with no government support beyond what was used for start up. Ratepayers will ultimately pay for everything, and still come out ahead with a local muni (or coop, which operates similarly). It's one of the few examples of government working well for constituents, but I digress.

While government could use eminent domain to condemn a private utilities' property (how some municipal utilities came into existance), it would have pay out a bunch of money to do so.

But if a company is under-performing and not meeting its minimally required obligations, it can be declared in violation of its operating license, its assets put into conservatorship/receivership by state, and turned into a muni operation. Operating surpluses (i.e. profits) would be reinvested in the network (e.g. FTTP upgrades) or returned to ratepayers in the form of lower rates.

Sounds revolutionary you say? Consider this.

When a bank/thrift is not meeting minimum financial requirements, its regulator tells them it must improve them and gives them some time. If they still don't meet them, what normally happens next (pre bailout for big banks) is they are declared in violation of their banking license, the assets are seized, and placed in receivership of the FDIC (or NCUA in the case of credit unions). Usually they run it for a weekend or so, and the assets are sold off to other institution(s). In the case of IndyMac, they ran it for several months before selling off all the assets. The whole thing works out surprisingly well, the change in management is pretty seamless to customers, and no insured deposits have ever been lost since deposit insurance was created decades ago.

There's no reason those same high standards couldn't apply to investor owned utilities providing utility services (electric, telephone, etc.).

If the state began seizing private assets for under-performing (not just bailing them out and having a controlling interest a la the Auto Industry), the citizens would revolt. That is what has happened in Venezuela, and its the antithesis of what America stands for.

Venezuela seized the assets of primarily oil companies, and they were actually seized with little to no compensation. It's hardly comparable.

Banks and utilities go into business, with approval/licensing from the various regulators, with the understanding that they must meet minimum performance/reliability and financial standards. If they fail to live up to them, their assets will be put into receivership by the regulators to clean up the mess created by the mismanagement of the companies.

It's happening every weekend in banks across the country. You can call that seizure if you wish, but I doubt most would agree.

The other people responding to this thread are suggesting the government come in a seize Fairpoint, thats the problem. They actually think its realistic that it would ever happen. I just used the Auto industry as an example of what happened when the government became involved after a bankruptcy, its certainly not a comparison to the seizures some of the people here are talking about. If you go back and re-read some of the absurd comments posted thus far, you will see people suggesting many such outlandish things. Some of the "funnier" comments were related to the government revoking their license, seizing the company, and forcing a sale "at any cost" all for simply "under performing". Its truly a sad day in this country when people want/believe the government will do things like that.

So that goes back to the original argument then; if the state revokes the rights of Fairpoint to operate what happens next?? Is Fairpoint obligated to terminate all service in the state, leaving millions without phone or internet? Does the state (shudder) step in and start running the network? Its a Pandoras Box that should NEVER be opened, and thats why its an absurd notion.

As I mentioned it happens in other sectors, almost every weekend in banking by federal regulators.

In fact, much of the rail transit system in your home town of New York City and its metro area were built, operated, and maintained by private companies. Eventually they all come under public ownership, because they weren't financially viable as stand-alone companies.

Tens (if not hundreds) of millions of Americans receive utilities services (electricity, water, sewer, telephone) from cooperative or municipally owned utilities every day, at lower prices than investor owned utilities (even in adjacent localities).

This "Pandora's Box" was opened a very long time ago, and the world didn't end.

We are talking about actual phone and internet service here, its totally different.

FairPoint does not have carte blanche to provide service in New England. Regulators have full authority to withdraw their regulatory agreement with FairPoint. That will instantly force a sale because to not sell will result in a 100% loss because the company will be stuck owning assets from which it can generate zero revenue. That's how they can force a sale.

FairPoint agreed to a certain level of service as a regulated utility. If they are not providing it, and there is an ample and growing record of that, with (unpaid) fines to match, that provides ample legal grounds to take action.

Imagine that: a framework that does not allow private enterprise to rape and pillage consumers while also holding many of them hostage. Shocking.

You may be unaware of the history of this transaction. FairPoint was by no means the only company interested in three fairly-well-to-do states' telephone networks. Verizon structured the sale to them because they creatively found sufficient loopholes to make the transaction tax free. It wasn't like they were begging FairPoint as the only suitor.

Verizon threw customers under the bus by picking a buyer based not on their ability to serve customers, but how to best stiff the tax man for the benefit of their shareholders. Hell, they would have sold it to Hugo Chavez if it paid well.

As we've tracked the sad saga over the past two years, the one thing that is apparent (much to the consternation of Frontier I am sure with respect to their own deal), is that regulators have learned a lot of lessons and are done simply taking the word of corporate entities on service standards. Trust but verify, baby. New England got a snowjob from Verizon and FairPoint to "make the deal work" and they should have had the shovels ready to get rid of it two years ago.

As far as government running things, I suppose it depends on the people running it. Who else will deliver a letter to ANY address in the United States for less than 50 cents in just a few days?

Where's Airborne Express/DHL domestic these days? How much will it cost you to send a letter to Riverton, Wyoming using UPS?

I think it's a tough sell to try and move the usual anti-government empty rhetoric at a time when public taxpayer dollars are being shoveled to bail out the "free market" but "too big to fail" massive private enterprise failures we've witnessed over the last year.

I think that rhetoric is just as bankrupt as FairPoint is about to be.

And who would that be? I don't see anyone lining up for that job.Again. Who is going to takeover with regulations making doing so unprofitable?

I like how your response to Dampier's post is to imply any action against Frontier by the government is doomed to failure, so we should shrug our shoulders and let Fairpoint do as it pleases. That is *exactly* what Dampier was criticizing about you.

Your assumption that regulation makes businesses unprofitable is laughably ludicrous. Regulations prevent abuse of consumers by businesses *while* making profits. Most regulated utilities still make plenty of profit.

Regulations allow banks to profit off of loans while preventing them from overstepping their bounds and making loans that can't be repaid. Regulation forces monopolies to provide basic levels of quality of service. It can also be used to create competitive environments that reward the most innovative companies.

Good. A little late though, considering the damage is done. I hope the investigations follow the trail of money and this results in the nifty tax deal Verizon employed in dropping these regions to be illegal in the future or at least require any corporation that uses this type of deal to have some level of accountability for essentially abandoning customers for a nice tax break. Acountability is a good thing.

I know. Return it to Verizon free and clear, no debt. Let them run it again. Then they can sell it again later.

Were the residents of these states not already ignored by VZ? How would forcing VZ's hand make an already bad and undesirable situation any better? VZ sold off the markets for a reason, just like they're preparing to do with other markets. These markets no longer fit into VZ's strategic plan.

I see NH and Vermont are bucking up against these clowns...Am I right to assume that Maine is going to sit back and take it? It would seem that if all three states got together, they could collectively agree that Fairpoint can't operate in the states and then get something done that way......You know...like sell back to Verizon.

It looks that way.

So what happened to the previous CEO? And his bonus? And what if Verizon figured this all out way before some Southern-run company had any clue how the "Great Northern Aggression" Telco/DSL customer phone support operated?
What about all the ex-Verizon employees that were let go or forced to move to other districts? And what about the current employees and their future?
What about the customers?Do they know what they want and what to expect from their state bureaucrats that APPROVED the fiasco in the first place?

I think it's time to call Comcast and get the triple
play deal. I figure at $99 for a 2 year deal is great.

I plan on calling them as soon as I here they go in
Chapter 11 ....

You is lucky. Some of us do not have any cable provider.

Gee, after all the pre-acquisition warning going around that Fairpoint would not be able to handle the acquisition, the Vermont regulators approved it anyhow. Now they are all running around scratching their heads and wondering what happened. Maybe the regulators need to be cashiered and a more competent group put in their place.

Because Fairpoint is a regulated monopoly the state of VT can demand that Fairpoint sell operations in VT to another provider capable of serving the state. Fairpoint would have no choice...of course the question then begs who would buy it???

Frontier? lol

Turn it into a dividendless municipal phone company. No profit, no dividend, no need to be cheap, any money left over (aka profit) goes into a fund to be spent on capital improvements. It can't leave the company any other way. And since its a govt job/non-profit, the CEO can't expect to make more than 200K-500K salary + bonus combined.

I have said it before and I will say it again. If Vermont didn't have such a Regulatory strangle hold on the LEC business, Companies would stand a chance at providing service. Example: Verizon was forced to change the way all the bills looked across the country because Vermont didn't like the way they looked. Have you seen a Verizon bill they are completely confusing. Thats because of Vermont. Now that they are out of Vermont they are working toward a less confusing bill. Vermont actually has a Regulatory rule that Senior Citizens can have Basic LEC service for like $5 per month. But Its Illegal to force them to prove their age. So what happens.. Every Joe Schmo that knows about this rule calls up and says.. Hey I'm over 65. Abuse Abuse Abuse.

Yep, my Time Warner phone for 25/month with local calls, caller id, call waiting, three way calling and .07/min long distance is working just fine.

ALONG with 19.95 cable internet(not a promo) and 18.50 TV with local HD channels (QAM).