FairPoint mistakes
Toolbox
Published: July 8, 2009
It's hard to call the introduction of FairPoint Communications to northern New England anything but a disaster. Service by the telephone and Internet company appears to be improving, but the company is teetering on the verge of financial collapse. This was not the plan.
It was an audacious idea to start with. A relatively small communications company based in North Carolina would take over the land lines and Internet service of Verizon in Maine, New Hampshire and Vermont. FairPoint had about 300,000 customers in 15 states. In taking over for Verizon, it would add 1.6 million customers.
The price was $2.3 billion, much of it borrowed. This was before the credit crisis and the financial meltdown. Now the company's problems have pushed it to the edge of bankruptcy, and Vermont regulators are making contingency plans in case FairPoint can no longer pay its bills.
FairPoint has lost more customers than it anticipated because of poor service that snowballed at the time when it took over Verizon's computers. Customer service complaints have been legion, and though FairPoint has always talked a good game, problems with telephone and computer service have impaired business and driven customers away. A customer who can't get a straight answer from customer service now has the option of abandoning his or her land line altogether. FairPoint has suffered as a result.
The public service departments of all three states OK'd the FairPoint deal after pressing for reassurances that the change would be beneficial. It is important for the three states to find out what went wrong with FairPoint and how the regulators misread the situation. Was FairPoint straight with regulators, or did the Public Service Department indulge in the same excessive optimism that characterized FairPoint's case? The deal took shape in an era when lax regulation at the national level was leading us toward financial catastrophe. There was a tendency to give business the benefit of the doubt. Did that happen with FairPoint?
The performance of the Public Service Department, which is charged with defending the interests of consumers, is relevant beyond the case of FairPoint. Vermont regulators and legislators have responsibility for deciding whether to extend the license of the Vermont Yankee nuclear power plant beyond 2012. We need to have confidence that the PSD is not giving Entergy Vermont the benefit of the doubt, but is applying rigorous skepticism to the case. It's easy to glide into a decision based on company claims. That is not to say the PSD must punish Yankee for FairPoint's errors. Rather, it is to suggest that the PSD needs to learn from its own mistakes, or from FairPoint's.
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