Static Over Telecom Deal

Virtually every person with a telephone in Maine, New Hampshire and Vermont would be affected if the region's biggest telecommunications deal is approved. FairPoint Communications Inc. hopes to see its business grow sixfold by buying Verizon Communications' landline business in northern New England for $2.7 billion. As regulators study the merger, the deal has taken on the air of a political campaign. The different sides have held rallies and press conferences and bought newspaper, television and radio ads. Signs opposing the deal have sprouted on roadsides and in front yards alongside political signs leading up to Tuesday's election.

Unions representing more than 2,700 Verizon employees oppose the merger, and politicians are urging regulatory scrutiny. At a rally in New Hampshire, presidential hopeful Dennis Kucinich was quoted as saying the deal "doesn't pass the smell test. "FairPoint, critics say, paints a rosy picture but lacks the wherewithal to deliver. "If you listen to FairPoint, they could be down at Disney World as greeters," said Robert Erickson of the International Brotherhood of Electrical Workers, which represents about 2,400 Verizon employees in the region.

FairPoint, based in Charlotte, N.C., claims it is financially strong with plenty of experience running phone companies in rural places like northern New England. FairPoint, which owns and operates 30 phone companies, is also experienced in buying other telecoms, with some 35 acquisitions in its 14-year history. "This fits right in the sweet spot of what we do best," FairPoint founder and CEO Gene Johnson told The Associated Press. From the start, the deal has met opposition from critics who say FairPoint isn't up to the task. Some suggest it's the equivalent of a mouse swallowing a cat.FairPoint has 975 employees and a little more than 300,000 access lines nationwide. Its 2006 revenues totaled $270 million.By contrast, Verizon has more than 3,000 employees and 1.6 million access lines in northern New England alone.

For the company as a whole, Verizon, based in New York, had 2006 revenues of $88 billion.To win over skeptics - as well as regulators in the three states - FairPoint has made a list of promises.FairPoint says it will maintain services at current rates and expand and upgrade high-speed Internet in the region. It says broadband capability will be extended to 85 percent of its Maine customers within 24 months of the deal's completion, and to 80 percent of New Hampshire customers and 85 percent of Vermont customers by 2010.

Furthermore, the company says, it will not only maintain existing Verizon jobs and honor union contracts, but will add 675 new jobs in the three-state region to support administrative and technical service functions.So far, the business community likes what it hears. The statewide chambers of commerce in each of the states have endorsed the merger. But skeptics say FairPoint could face financial pressures under a heavy debt load and be forced to cut services or jobs, or raise rates. "FairPoint's so small and Verizon's so large. How can FairPoint take on this responsibility?" said Richard Davies, the Maine Public Advocate.Davies' office last month recommended that the Maine Public Utilities Commission not approve the acquisition unless 23 separate conditions are met, including a restructuring of the proposed sales agreement to reduce the cost by $600 million.

In New Hampshire, the Office of the Consumer Advocate is also recommending that the transaction be denied by that state's Public Utilities Commission.In Vermont, the Department of Public Service consumer advocacy division said Verizon has shown little interest in improving substandard service and inconsistent broadband access that many Vermonters now get. "If FairPoint succeeds in converting its stated good intentions into the tangible reality of sound service quality and achieved broadband milestones, then this would indeed serve the public good of Vermont," the department told the Vermont Public Service Board. "The inescapable fact remains, though, that there are serious questions about whether FairPoint can deliver."