FairPoint seeks telephone fee increase for Maine customers

Wes Dempsey of FairPoint Communications finishes work on a cable line in an east side Bangor neighborhood in 2009.
Bridget Brown | BDN
Wes Dempsey of FairPoint Communications finishes work on a cable line in an east side Bangor neighborhood in 2009. Buy Photo
Posted Nov. 12, 2013, at 6:48 p.m.
Last modified Nov. 12, 2013, at 9:10 p.m.

AUGUSTA, Maine — FairPoint Communications is asking state regulators to increase the fee Mainers pay on their telephone bills to help subsidize the basic telephone service the company is mandated by law to provide.

The Charlotte, N.C.-based company has asked the Maine Public Utilities Commission to approve two requests that would help cover the cost of providing what’s known as “provider of last resort” service.

The basic telephone service the state mandates should be available to any customer costs $67.6 million more than the revenue FairPoint is able to generate, according to the company’s filing. FairPoint claims it has 29,000 residential and business customers who pay for this service in the state.

To make up that shortfall, FairPoint is asking the Maine Public Utilities Commission to provide it with $66.9 million from the Maine Universal Service Fund, which has traditionally been used to help small rural telephone providers cover the cost of offering telephone service and funded by everyone in the state who pays for voice service, including landlines, cellphones and pager services.

According to some initial calculations from the Maine Office of the Public Advocate, FairPoint’s request would mean a person paying $75 per month for cellphone service would see their bill increase by $5 per month.

FairPoint has never received money from the fund because it was felt the company had a large enough customer base “to spread around the pain,” Jeffrey Nevins, FairPoint’s spokesman, said Tuesday.

The fund only collects about $8.3 million a year in fees from Maine residents, which means that if FairPoint’s request is approved, the total annual amount collected from Maine contributors to the fund would need to increase from $8.32 million to $75.2 million.

That’s “a very big ask,” Tim Schneider, Maine’s public advocate, said Tuesday.

The Maine Legislature considered a bill last session that would give FairPoint access to the state’s Universal Service Fund, “and declined to do so,” Schneider said.

“We would be surprised if the commission agreed to FairPoint’s interpretation without the Legislature weighing in on this question,” Schneider said.

The idea behind provider of last resort service goes back to the telecommunication industry’s infancy, according to Nevins. The idea was that urban customers in densely populated areas would help subsidize the cost of providing telephone service to customers in rural areas.

However, that theory no longer works as more people drop landlines in favor of cellphones. Additionally, there is competition from companies like Time Warner and Comcast, neither of which are mandated to have provider of last resort service, Nevins said.

“We have fewer and fewer landlines, so in terms of being able to balance it out to spread the burden, there’s less of a chance to do it because there’s fewer people,” Nevins said. “The thought was if you’re a large provider, you could spread the pain among those you’re serving. Because of what’s happened in the competitive marketplace, we want them to consider offering up Universal Service Funding to meet that gap for us. … FairPoint is generally asking to be treated like other telephone providers.”

FairPoint is also asking the Maine Public Utilities Commission to approve a $2 rate increase on those 29,000 residential and business customers who use provider of last resort service. Specifically, that translates to an increase from $14.69 to $16.69 for residential service and from $32.28 to $34.28 for business customers, according to the company’s filing.

“I think the $2 rate increase at first glance appears reasonable and is consistent with what FairPoint’s competitors are charging,” Schneider said.

He added that with FairPoint’s filing, the question is how much should Mainers have to pay to provide basic telephone service.

“It’s really important to identify what that cost is,” he said, “It’s a really fundamental question whether we as a state want to continue providing the service and at what cost.”

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