Burlington company sues FairPoint
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By BRUCE EDWARDS STAFF WRITER - Published: April 26, 2009
Allegations contained in a lawsuit naming FairPoint Communications Corp. could be considered prophetic.
The federal lawsuit filed by Caleidoscope Communications Corp. of Burlington last year warned that "… FairPoint knew or had reason to know that it could not transition the business from the Verizon systems to its own, a process known as 'cutover,' within the time frame contemplated by the transaction, and it knew that the likelihood that customer service and satisfaction would decrease dramatically was very high."
The lawsuit was filed on Christmas Eve last year, a little more than three weeks before FairPoint cut the cord to the Verizon systems, beginning a transfer of data to its own network. It also marked the beginning of serious problems for FairPoint that have frustrated customers and regulators in Maine, New Hampshire and Vermont for more than three months.
As an agent for telecommunications companies and the largest Verizon agent in northern New England, Caleidoscope Communications sells a portfolio of products and services to businesses in the three states.
In her lawsuit, Caleidoscope founder and president Loretta Roby alleged that FairPoint strung her along to steal her customers and obtain confidential information about her business and then cut her loose as an agent.
Verizon was a major source of business for Burlington-based Caleidoscope until Verizon sold its northern New England landline business to FairPoint last year for $2.3 billion.
Convinced she was misled, Roby refused to go away quietly and in December she sued in federal court in Burlington alleging FairPoint engaged in a pattern of deception and misrepresentation to misappropriate Caleidoscope's clients and "commercial telecommunications expertise" in the three northern New England states.
In its response to have the 44-page lawsuit dismissed, Charlotte, N.C., -based FairPoint denies the allegations, saying it was Caleidoscope that pursued a new and expanded deal to sell FairPoint's services.
A FairPoint spokeswoman could not address the lawsuit's claim that the company experienced staffing problems a year ago that resulted in problems for Caleidoscope and its customers.
Red flags
When the sale of Verizon's landline was announced in the fall of 2007, critics charged that FairPoint was too small, too highly leveraged and lacked the expertise to absorb a much larger network into its system.
In laying out her case, Roby's December lawsuit alleges problems its business customers experienced following the consummation of FairPoint's purchase on March 31, 2008. (Because FairPoint's own systems were not operational, the company continued to employ and pay Verizon to use its systems until January of this year when the cutover was finally made after two delays.)
The lawsuit alleges that immediately following the sale that FairPoint was overwhelmed by the magnitude of the transaction.
"A host of integration problems immediately resulted. Services did not function as they were supposed to. Functions included in Verizon products stopped working. Bills failed to reflect contract charges, and Verizon customers received bills for services that were no longer valid. Services were disconnected because bills were sent to branch offices that had been previously sent to corporate headquarters. Former Verizon customers needing to add, delete or modify service products could not get orders processed or correctly provisioned in a timely manner, absent a Herculean level of intervention and project management by Caleidoscope personnel."
The lawsuit continued that FairPoint's failures "created a customer care fiasco" and that Caliedoscope experienced a significant jump in calls from its customers.
The problems alleged in the lawsuit encountered by Caleidoscope customers could be considered a precursor of what other FairPoint customers encountered immediately following the Jan. 16, cutover from the Verizon systems.
FairPoint was flooded with complaints from residential and business customers in all three states about e-mail and Internet connection problems; customers who called for technical support were placed on hold for long periods or in many cases couldn't get through; service calls were delayed and billing problems arose. While e-mail and Internet-related complaints have abated, FairPoint continues to have billing and customer service problems.
David O'Brien, Vermont's commissioner of the Department of Public Service, remains frustrated at FairPoint's inability to clear up its problems. O'Brien said while some problems after the cutover were to be expected the scope of the problems caught the department by surprise.
Asked whether the problems alleged by Caleidiscope in its lawsuit should have been a warning, O'Brien said he was not aware of the problems allegedly encountered by Caleidoscope customers. He also said at that time FairPoint was still using Verizon's systems.
"The fact that there would be problems after the cutover I can say, yes, that would be the case but prior to the cutover is a surprise," said O'Brien, whose department serves as the public advocate in utility cases.
Roby said in an interview that the problem at the time wasn't the Verizon systems but FairPoint's inability to staff those systems once the sale was consummated last year. In her lawsuit, she alleged that FairPoint's customer service, sales and technical support teams "were hopelessly overwhelmed" by their new responsibilities.
While O'Brien said he was not aware of any problems Caleidoscope customers experienced last year, Roby said complaining to state regulators was not the first option for her or her customers. "We try to solve those problems before they get to that level," she said.
Roby said Caleidoscope attempted to fill the customer service void left by FairPoint following the sale in March 2008. She said the situation was made worse when Caleidoscope could not access FairPoint's primary electronic records system to help her customers.
FairPoint's motion to dismiss the lawsuit does not address Caleidoscope's statements that staffing and service problems arose last year. Spokeswoman Beth Fastiggi said, though, some problems could be expected.
"When you have any transition, I mean things don't always go smoothly at first, Fastiggi said. "I'm not sure particularly what they're talking about, the level of service or service levels last year."
No deal
In her lawsuit, Roby said she was under the distinct impression that FairPoint valued her company's track record and expertise and wanted to maintain and expand that relationship. But according to Roby, several months after FairPoint closed on the March 2008 purchase, FairPoint said it wasn't interested in continuing the relationship Roby's company had with Verizon.
She alleges in her lawsuit and in an interview that before it closed on the Verizon landline purchase, FairPoint was enthusiastic about continuing the relationship.
"I was told that I had a deal and that the deal would a better deal than I had with Verizon," Roby said in the phone interview. "I was told I was their agent program and being the largest agent in the area, I was told I could write my own ticket."
Representing Verizon and other telecommunications companies, Caleidoscope receives a commission for selling a variety of products tailored to meet the individual needs of a business, including local and long-distance, Internet with large bandwidth and video conferencing. The company also provides after-sales technical support for its customers.
According to the suit, a FairPoint representative called Roby in September 2007 to arrange a meeting to discuss its agent program. The Caleidoscope suit goes on to say that during that call Roby was told by Paul Michalko, a FairPoint regional sales manager, that Caleidoscope was the `cornerstone of (FairPoint's) plans,' and that he intended to build the FairPoint agent program around Caleidoscope.
At a meeting on Oct. 3, 2007, Caleidoscope alleges that FairPoint officials assured Roby and Zoltan Keve, her chief executive officer and vice president, that the company was not only committed to an agent program following the Verizon landline purchase but a far more extensive program.
Roby also claims in her suit that FairPoint officials told her and Keve that the company would not interfere with Caleidoscope's existing customers or prospective customers. But Roby alleges that FairPoint did just that and attempted to steal her customers and make them direct FairPoint clients.
That initial October meeting led to a series of other meetings and phone calls between Caleidoscope and FairPoint officials as Roby attempted to forge a new agent contract but with no success.
Five months after the Verizon landline purchase was completed, FairPoint notified Roby on Aug. 27, 2008, that it was terminating her company's existing agent contract in 90 days.
In its motion to dismiss, FairPoint said that it was pressured by Caleidoscope to come up with a new contract even before the Verizon purchase was complete. FairPoint alleges that Caleidoscope demanded a far larger sales commission and increased `client ownership,' both at FairPoint's expense.
Despite those demands, FairPoint said it "gave thoughtful consideration to a new agreement with Caleidoscope and attempted to negotiate such an agreement."
Fastiggi said the end of the Caleidoscope contract was part of a decision by FairPoint to discontinue use of independent agents to sell its products.
"We decided to serve the business market in northern New England with its own inside sales force," she said.
Fastiggi could not say when FairPoint made the decision to end its agent program in northern New England before notifying Caleidoscope.
bruce.edwards@rutlandherald.com
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