PUC denies waiver of FairPoint penalties

Posted July 28, 2009, at 9:43 p.m.

AUGUSTA, Maine — The Maine Public Utilities Commission on Tuesday rejected FairPoint Communications’ request to waive financial penalties for problems delivering wholesale service to smaller telecommunications companies.

But commissioners left the window open slightly to allow the beleaguered company to file additional information in support of claims that the problems were caused by “extraordinary events” beyond FairPoint’s control.

FairPoint had been assessed more than $845,000 in penalties in Maine for February through May for recurring issues in the services the company is obligated to supply to smaller, independent telecommunications firms. Penalties for June have not yet been assessed. Rather than being assessed as fines, the penalties show up as credits on the bills of the smaller companies, which claim FairPoint’s service and billing problems and delays are hurting their businesses.

FairPoint officials said Tuesday the company already has credited penalties to the smaller firms through May, but was still seeking to waive the penalties retroactive through February.

On Tuesday, the three commissioners denied the company’s request to waive penalties for February and March because the deadline to seek a waiver had already passed. The commissioners also rejected waivers for April through June for lack of information, but extended the filing deadline to allow FairPoint to submit more data.

Company officials argued that the company’s problems stem from the unprecedented complexity of transitioning all of Verizon’s systems and data networks to FairPoint’s systems and networks. While bugs still exist in those systems, the company is making progress, FairPoint officials said.

The commissioners rejected those arguments.

“I do not feel they have met the burden of proof,” Commissioner Vendean Vafiades said during Tuesday’s deliberations. “I do not think the penalties should be waived.”

Tuesday’s session was restricted to the penalties tied to wholesale services. The commissioners did not discuss the problems that residential customers continue to report regarding FairPoint.

Commissioners also embraced a suggestion by the Office of the Public Advocate that a third party be brought in to study the company’s “back-office” computer systems and networks. FairPoint has acknowledged that those back-office systems — which are being contracted out to another company responsible for the integration — are a major source of the problems in both its residential and wholesale businesses.

“I think the suggestion from the Office of the Public Advocate is a good suggestion and that we should follow through with our colleagues in the other states that are involved,” said Commissioner Jack Cashman. Regulators in New Hampshire and Vermont are also scrutinizing FairPoint’s performance problems.

Ratcheting up the political pressure on FairPoint, Senate President Elizabeth “Libby” Mitchell, D-Vassalboro, released a statement Tuesday supporting the public advocate’s request for a third-party investigation of the company’s systems.

“Over the past few months, FairPoint has made an effort to correct many of these problems but the major problems with their computer system persists, exposing Mainers to service disruptions at much too high a rate,” Mitchell said. “Unreliable phone and Internet service is more than just a hassle for consumers. The current state of our land line communications service is hurting Maine businesses and potentially putting the safety of Maine families at risk.”

FairPoint spokesman Jeff Nevins said the company believes a third-party study is not necessary. Instead, the company wants to focus its resources on fixing those systems as quickly as possible. Likewise, Nevins said FairPoint officials had sought waivers from the penalties in order to devote more money to addressing the internal problems.

“We are in agreement with the commissioners: We want to get the problems fixed,” Nevins said.

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