FairPoint fights service quality penalties for last-resort phone lines

Posted Aug. 05, 2014, at 12:46 p.m.
Last modified Aug. 05, 2014, at 1:43 p.m.

PORTLAND, Maine — FairPoint Communications is fighting a new rule requiring it to report service quality metrics for about 29,000 telephone customers in areas of the state that do not necessarily produce profits for the company.

The company argues the reporting requirements and possible penalties for not meeting benchmarks are an unfair burden and are premature as the Legislature is likely to review laws related to its provider of last resort, or POLR, service during the next session.

Timothy Schneider, the state’s public advocate, said his office plans to “strongly oppose” FairPoint’s request and that the new rules are about ensuring the quality of phone service to customers in remote parts of Maine.

“This is really about making sure that phone service within the state meets minimum quality standards,” Schneider said. “You want to know that when you pick up the phone that you can reach the people you need to reach every time.”

The PUC rule sets service quality benchmarks and requires all of the telephone companies providing POLR service in the state to meet those standards or face fines.

Those reports include the percentage of installation appointments missed, average delays for missed appointments, the rate of network trouble per 100 lines, the percentage of network troubles unresolved within 24 hours and the number of service outages per 500 access lines.

The commission could by law assess a penalty of up to $5,000 for each violation and up to $500,000 for a series of violations.

FairPoint is asking the commission to waive those reporting requirements and possible penalties until the Legislature resolves questions about POLR service, which mandates FairPoint provide service to that group of around 29,000 customers. The company maintains around 450,000 telephone lines statewide.

The request comes amid strike threats from line workers and as the North Carolina-based company, which operates telephone access lines primarily in northern New England, continues to lose money.

The company on Tuesday morning reported a net income loss of $22.7 million in the second quarter of 2014, putting it behind about $55 million for the year. Last year, the company reported about $90.6 million of net loss.

In response to a previous FairPoint request to delay a decision on the service rules, the PUC said it found the company’s comments “ unpersuasive.”

“Given that there is no [service quality indicator] currently in place, and there has been no [service quality indicator] in place since the inception of POLR service, we find prudence dictates we adopt the provisional rule,” the order states.

The waiver request stems from battles in Augusta last session over POLR. A bill approving the rules passed muster with lawmakers last session but was vetoed by the governor. After consulting the attorney general, the PUC moved ahead and approved the rule, Chapter 201, in June.

With possible changes to POLR coming in the Legislature, the new rules could face the company with choices of either investing in areas where customer fees don’t cover maintenance or taking on penalties for service problems in those areas. But it was not immediately clear what kind of maintenance the company would need to perform, if any, to meet the service quality benchmarks in that area.

Jeff Nevins, a FairPoint spokesman, said he didn’t have metrics to assess whether there are more service issues among the company’s POLR customers than others.

“I don’t think there are more service issues in the POLR area,” he said.

FairPoint is the only provider so far to request a waiver for the rule that took effect July 27.

That’s, in part, because the the company is in a unique position, according to Nevins. Unlike other POLR providers, FairPoint doesn’t receive state funds to support those lines.

Separately, the company wants about $66.9 million from the Maine Universal Service Fund, the fund from which other POLR providers get subsidies. Staff from the Maine Public Utilities Commission recently reviewed that request, saying it was too high and raising other questions about the methodology the company used to calculate its request and how much revenue it’s taking in from non-regulated services. The company in May received approval to raise POLR rates $2, to $16.69 per month for residential customers and to $34.28 for business customers.

Nevins said the company’s waiver request is independent of those cases and comes mostly in the interest of delaying the changes until policymakers hash out just what to do with the POLR laws. Those laws took effect in 2012 to ensure that companies would not pull out of hard-to-serve areas when the state opened the telecommunications industry to competition.

“The timing of this just did not make sense to us,” Nevins said. “We felt that the move to [service quality indicators] was putting the cart before the horse.”

Nevins said the new rules create a competitive disadvantage for FairPoint: other POLR providers receive state subsidies, meanwhile migration away from landlines and deregulation allowing other providers to compete for its customers has eroded its market.

Nevins said he didn’t have an estimate of how much more the reporting and tracking requirements will cost the company, but said it stands to squeeze FairPoint’s profit margins in some cases as costs rise and other competitors seek to lure away FairPoint customers, with no requirements to provide service in a specific area.

The company argues in its waiver request that type of competition will govern service quality.

“We’re obligated to provide that basic local exchange service and some of them have the option to go to a competitor,” Nevins said, noting the company’s POLR customers are not exclusively in rural areas. “If the quality is not what they believe it should be, they have that option and so the marketplace in itself can be the balancing point in terms of providing a level of quality.”

Schneider said the rules provide motivation to improve service in areas where new investment might be scarce.

“The basic premise is that if you have someone seeking to provide telephone service, that should meet basic standards … particularly where it’s not competitive or in rural parts of the state where there’s less incentive to do the kind of upgrade you would need [to meet the service quality standards],” Schneider said.

The new requirements also come against the backdrop of a looming union strike approved in July, which could pose service quality challenges for the company. A FairPoint spokeswoman said at the time the company has a plan in place to continue service to its customers if workers strike.

Peter McLaughlin, lead negotiator for the unions now in talks over an expired contract with FairPoint, said Monday afternoon he wasn’t familiar with the company’s filing for a waiver, but that he doesn’t think the state is ready to move away from its POLR requirements.

“It’s a necessary thing to have,” said McLaughlin, who has worked in the phone business for more than 30 years. “I think there will be a day where [POLR] will be done, but don’t think we’re there yet.”

One thing all parties can agree on: POLR will be an issue for lawmakers come January.

 

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