It’s understandable if Maine consumers are skeptical of a regulator’s decision that will change how the private company FairPoint Communications must invest in the expansion of broadband across the state.
In the months after it took over Verizon in 2008, the company was plagued by troublesome computer systems and billing procedures. Call volumes to service centers tripled, leading to long waits for help, let alone fixes for telephone and Internet problems. Last summer, there were days-long Internet blackouts in Blue Hill. This spring, the Maine Public Utilities Commission began investigating whether FairPoint had misused federal funds to help subsidize the cost of providing rural telephone and broadband access.
The company has taken steps to improve its customer service and image, but it still has a long way to go. After the decision by the state’s utilities regulator on Tuesday to relax Internet speed requirements that count toward the company’s mandated broadband buildout goals, it will have even greater need to prove its value to consumers. The company says the agreement is in the best interests of users, and two of three commissioners agreed. But proof will be in the results: more areas of Maine having much faster Internet service.
Though we would like it to be greater, FairPoint has an obligation to provide broadband to 87 percent of its service area by next year. Per the old rules, the company didn’t get credit toward that supply goal if Internet speeds fell below a certain rate. The decision Tuesday will lift the minimum speed requirement from applying to FairPoint’s slower telecommunications networks.
Instead, FairPoint will have to expend a confidential amount of money between Jan. 1, 2014, and Dec. 31, 2016, on broadband facilities and services “that will benefit small businesses and residential customers,” according to the approved stipulation.
But it doesn’t specify exactly what services constitute a “benefit” or how the PUC will measure it. The money “may” be spent on facility and technology improvements and additions, but it’s not clear whether FairPoint was going to spend the undisclosed amount over time anyway. (The company saw data and Internet services revenue grow 11 percent in the second quarter, versus a year prior.) FairPoint needs to build a strong network to manage growing bandwidth demands and stake out its competitive position, but it shouldn’t do so for some residents at the expense of others.
We worry the deal will strengthen services in areas that are already more economically competitive and cause services in more isolated areas to lag further behind. Commission Chairman Tom Welch and Commissioner Mark Vannoy argued that FairPoint should be able to invest where it’s more profitable. A “more targeted use of FairPoint’s capital is warranted,” Welch said.
But by granting more flexibility, and setting ambiguous “benefit” goals, regulators are supporting the company over consumers. FairPoint, like electric, gas and water utilities, has a large share of the broadband market, particularly in rural areas. One of the prices it pays to enjoy that control is meeting benchmarks for service.
David Littell, the commissioner to oppose the change, had strong words of caution. “There is nothing of tangible value for ratepayers in this stipulation,” he said.
FairPoint’s history doesn’t give us reason to be optimistic. When FairPoint took over Maine’s telephone network from Verizon in 2008, it committed to expanding the reach of broadband. This promise is one of the main reasons why the Maine Public Utilities Commission rejected the recommendation of its advisory staff then — that the transaction not be approved because it would put FairPoint at risk of financial failure — and authorized the sale.
The staff were right. About 20 months after the PUC approved the merger, FairPoint filed for Chapter 11 bankruptcy. During bankruptcy proceedings, the all-important obligation for FairPoint to achieve a 90 percent broadband buildout was reduced to 87 percent. The PUC also added the minimum speed requirements. FairPoint fought the requirements in court, but this year the Maine Supreme Judicial Court ruled it was reasonable for the PUC to impose them.
The philosophy of the commission has clearly shifted, as it just changed the rules it fought in court to keep. Now that FairPoint has more flexibility in how it must meet its obligations to provide broadband, it will only be harder to stop it from asking for more.