A Disaster in Northern New England: A Telco and Region Trapped in Telecom Hell

When Verizon completed the sale of its Northern New England telecommunications assets, CRM applications and aging infrastructure to FairPoint Communications for more than $2 billion in spring 2008, residents of Maine, New Hampshire and Vermont could feel some sense of relief and re-assurance.

After all, Verizon had shown that it did not want any part of this region any more. (One telecom analyst in a 2008 BusinessNH Magazine article called the three states, with their rural communities and challenging topography for laying telco pipes, “the poor sisters.”)

And, FairPoint execs assured, FairPoint did want to be here. It did want to invest in rural broadband initiatives. It did want to build out its infrastructure to accommodate many residents still struggling with a dial-up connection. (In the United States. In 2008.)

There was plenty of optimism, for sure. But there were also plenty of red flags raised during the Verizon to FairPoint sales proceedings that today are still blowing in the wind, and very much red.

From Red Flag to Reality

Just over a year ago, Dave Brevitz, a telecommunications expert hired by the New Hampshire Consumer Advocate organization, testified that FairPoint’s “business model required it to take on massive debt but continue to pay out high dividends to stockholders,” notes a recent article in the Concord Monitor. Brevitz offered various state commissions and regulation agencies a list of probable and problematic outcomes with the Verizon sale to FairPoint.

Most of the scenarios have come to fruition.

Notes the Monitor article: “Increasing interest rates? Check. Loss of customers to FairPoint competitors? Check. Fundamental changes in the financial market? Computer problems? Unexpected costs to rectify customer service issues? Check, check, check.” FairPoint is currently trying to restructure roughly $2 billion in debt and avoid bankruptcy.

During summer 2009, controversy erupted when an anonymous e-mailer alleged that FairPoint had faked tests of its computer networks and systems to win final approval to take over Verizon’s operations. (The allegations ultimately proved false.)

I know all about the sketchy telephone service, e-mail outages, billing problems, networking complexities and overwhelmed customer service folks because I live in New Hampshire, and am now a former FairPoint residential customer of its local, long-distance and DSL services. (I have switched to Time Warner Cable for telephone, Internet and cable-television connectivity, though due to the fact that TWC can route only one telephone line to our house, I’m forced to use FairPoint telephone service for my home office. I’d leave in a second if I could.)

Residents of the three-state region who can’t receive the services of cable or satellite providers, or a good wireless signal (good luck with that!), are stuck with FairPoint as company executives try to dig out from the financial carnage.

And the solution which FairPoint pledged to deliver still remains elusive for too many residents screaming for faster Internet connectivity. For instance, in Coos County in Northern New Hampshire, the most recent state-offered broadband penetration data showed that nearly 70 percent of the residents were without cable or DSL.

Just imagine that for a second. Think of how hard it would be to run a business on dial-up. One New Hampshire resident, Sherri Latulip, could tell you all about it. For years, Latulip had to run Mountain Firewood Kilns, a Littleton, NH-based maker of firewood-drying kilns and alternative energy products, over a dial-up connection, when 95 percent of her business was done via from Internet and e-mail orders, Latulip told BusinessNH Magazine in a January 2009 article.

“When you’re trying to download a screen or go from page to page, you literally could go cook a meal and come back and you’d still be waiting for the next page to download,” Latulip told BusinessNH Magazine. “It’s just super, super frustrating. I mean, just how hard it was to get a business up and rolling knowing that the Internet was going to be the biggest key to your success and not being able to have it.”

Broadband connectivity is critical, especially in Northern New England rural areas where manufacturing jobs are disappearing. A June 2007 Brookings Institute report notes that that for every 1 percentage point increase in broadband penetration in a U.S. state, employment is projected to increase by 0.2 percent to 0.3 percent per year.

Most objective observers of the FairPoint transition cite its executives’ “commitment to the region” and “best intentions.”

Tell that to the families in Maine, New Hampshire and Vermont still crawling on dial-up every single day of their lives.

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