Frustrations mount, while Verizon walks away smiling...
Before Fairpoint Communications acquired Verizon networks in Maine, New Hampshire and Vermont for $2.3 billion, regulators, unions and consumer advocates doubted whether the small telco could handle the acquisition and financial strain of the deal. So far, they were right to worry. Struggling with a work order backlog that's left 40% of orders uncompleted, Fairpoint also recently suspended a quarterly dividend in order to save cash, and has been strained by debt obligations.
Local news outlets report that some States are considering forcing Fairpoint to hire outside software companies to take over billing and support if things don't improve. According to the Associated Press, Fairpoint says things will be better by June, though independent consultants don't sound optimistic:
quote:
...significantly improving service by the end of June probably is unrealistic because of the scope of the problems, the Liberty Consulting Group said in a report dated Wednesday. "Senior leadership has continued to make statements that understate the problem severity and overstate success in fixing them," Liberty said.
Again, the real winner here is Verizon, who offloaded networks they didn't want to upgrade, got a huge cash payout, dumped a ton of debt on Fairpoint, and probably netted at least $600 million in tax writeoffs by using a sophisticated financial maneuver known as a
Reverse Morris Trust to seal the deal. They then got paid $16 million a month to help co-run the network as Fairpoint stumbled through the orientation process.
Consumers probably won't be quite so lucky, though local users say Time Warner Cable is running regional ads targeting the frustrated. If Fairpoint does implode, at least these local users can sign up for capped and metered broadband service. Assuming they have the choice; many of these impacted New England users live in rural markets where there are few (if any) alternative broadband options.
Who says the American broadband market has problems?