Fairpoint Completely Takes Over New Hampshire's Landline Phone System

Fairpoint officials say they’re eager to begin now that regulators are going to let them compete in the state’s telecommunications market.

Jeff Allen is a Fairpoint Vice president.

We have a fairly extensive lineup of enhanced products that we’re planning on offering in 2009. I think you’ll see some new promotions, some pricing changes where it makes sense. We still have some regulatory restrictions as far as raising any prices but as far as lowering prices.

Fairpoint will likely offer customers traditional phone service bundled with broadband service.

That bundle could be priced lower, to compete with cable companies and other internet providers.

But the company is making these offerings while the nation goes through its biggest recession in a long time.

Because of that, and the fact that Fairpoint has been losing land line customers faster than had been expected, a Wall Street firm last week cut
Fairpoint’s bond rating to “junk” status.

Fitch Ratings’Analysts questioned whether Fairpoint would earn enough cash to pay millions of dollars of debt incurred to purchase Verizons’ northern New England business.

Fairpoint’s Jeff Allen says those concerns are overblown.

First of all, our monthly costs decrease. We pay, paid Verizon what we believe to be substantially more per month than what it will cost it ourselves to run all of those operations. So from an expense standpoint, starting February 1, our expenses are reduced.

Some expenses may indeed go down.

But others are sure to rise, because regulators in Maine, Vermont and New Hampshire have required Fairpoint to bring broadband to rural areas that don’t have it.

That expansion is likely to cost millions of dollars.

And some potential customers may have been lost, since some business have closed, putting thousands of people out of work.

Erle Pierce, the former Verizon spokesman, is now a consultant, though not with Verizon or Fairpoint .

He says Fairpoint really wants to offer rural service.

what I believe they’re trying to do and just culled from the newspapers is they want to get that broadband pipe into the home because the technology is changing, where once you have a broadband connection like you say you can get the tv, you can those other things over the same pipe.

Fairpoint has not yet been able to offer television to most customers over its one wire, because for the most part, Verizon didn’t.

Now Fairpoint is starting a pilot program in Portsmouth and Kittery, Maine to offer IPTV, which could in the future be bundled with voice and internet over a single wire.

That would compare well with Comcast, the cable tv provider that bundles voice, television and internet and is among Fairpoint’s direct competitors.

In the meantime, some of Fairpoint’s access line loss is likely attributable to some customers forgoing traditional service and relying entirely on wireless phones, cable service, or internet connections.

Fairpoint’s Jeff Allen says the company has planned for that, and foresees making a profit despite the departures.

Although we anticipate that there’s going to be access line loss based on where you start and where we project we do believe from a revenue standpoint a lot of that’s going to be made up with the, on the data side.

In other words, customers who sign up for internet service will more than replace customers who’ve decided to cut their ties to Fairpoint.

There is always the possibility that Fairpoint executives have misjudged the harm line losses will do to their bottom line.

And since the company is heavily indebted, corporate losses could quickly lead to more losses and even insolvency.

Because of that possibility, regulators in all three states required Verizon to make payments to Fairpoint should too many customers leave the network.

Katherine Bailey is with New Hampshire’s PUC.

As part of the condition to transfer the systems they required Verizon to pay fairpoint 15 million dollars on the first anniversary of the close which is april 1st, to sort of get them through this first year…to offset revenue loss from the first year, and then over the next year, if they have greater than 7 ½ percent line loss Verizon has to pay another 15 million dollars next april.

If a Verizon cash infusion is necessary, it practically guarantees Fairpoint can survive heavy line losses for a while.

But those infusions won’t last forever, and Fairpoint will have to find a way in the next year or two to win more customers than it loses.