Fair for FairPoint

Posted July 09, 2009, at 5:51 p.m.

The intersection of private enterprise and public service is often problematic and messy, but the troubles that FairPoint Communications has encountered since taking over land-based telephone service in Maine, New Hampshire and Vermont should not weaken the resolve of regulators to protect consumer interests.

FairPoint, a relatively small telecommunications firm based in Charlotte, N.C., has worked to secure a market niche in rural areas such as northern New England. The Maine Public Utilities Commission approved FairPoint’s purchase of Verizon’s land lines in the region after much review, and, im-portantly, after attaching conditions. Since the switch from Verizon to FairPoint, many Maine customers have complained about difficulties reconfiguring e-mail accounts, accessing the Internet and billing inaccuracies.

Then the company hit rough financial waters, and pondered bankruptcy or another restructuring mechanism. FairPoint is debt-heavy, with $530 million in loans. Some of its problems probably are related to the soft economy. Others may be attributable to an overly ambitious growth plan and poor customer service, which further hurts sales.

The poor service has hurt the dozen or so small, independent telephone companies in Maine that rely on the lines now owned by FairPoint. As dictated by earlier agreements, FairPoint owes $845,000 in fines to be paid to the small companies. FairPoint wants those payments waived, or held in abeyance temporarily.

The company must not be let off the hook.

FairPoint, like electric, gas and water utilities, has what essentially is a monopoly in the market. One of the prices it pays to enjoy that monopoly is meeting benchmarks for service. If state regulators waive the fines, they will have tilted the playing field to the point of bailing out a private company to the detriment of smaller, local firms. Regulators exist to protect consumers, including these small telephone companies.

Dick Davies of Maine’s Office of the Public Advocate says there are reasons to waive fines, but FairPoint has not made the case for doing so. If technology it purchased unexpectedly failed, or subcontractors dropped the ball, Mr. Davies said, giving FairPoint a break might be warranted. But as far as is now known, a lack of staffing, planning and customer service response seems to be at fault.

“We think it’s important to have tough standards when it comes to quality,” Mr. Davies said. In addition, FairPoint is not being asked to meet a higher standard; the company took on benchmarks that Verizon had to meet. Verizon, before the sale, paid some $3 million in fines for service problems, so FairPoint knew the history it was inheriting.

And then there is the precedent-setting nature of waiving the fines. If they are waived, the next time a public utility runs into financial problems, it would expect to be bailed out of the consequences by regulators.

Residential consumers, businesses and regulators should root for FairPoint to dig itself out of its financial mess and succeed. But service standards must not be relaxed, and the PUC must keep its eye on those standards, not FairPoint’s financial troubles.

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