Bill would cut FairPoint mandatory landline service in 25 communities

Posted March 03, 2016, at 8:13 a.m.
Last modified March 03, 2016, at 4:36 p.m.

PORTLAND, Maine — FairPoint Communications said it is between a rock and a hard place, required to provide landline phone service with no subsidy to major cities and towns while unregulated phone, cable and wireless competitors chip away at its customer base.

The company also wants to lighten landline service quality standards it has failed to meet and for which it faces administrative penalties.

FairPoint has battled the problem and landline service quality requirements at various points before lawmakers and regulators.

In hearings Wednesday and Thursday, it presented a bill to a legislative committee that would remove a requirement to provide landline service to 25 communities, including Bangor, Lewiston and Portland, and change service quality requirements it contests are unreasonable to achieve.

The move would put the company on equal footing in those areas with competitive providers, which can pick and choose which customers they want to serve and can set prices more freely.

Customers in those areas would not lose service under the plan, but prices would no longer be set by state regulators, and the company could deny new connection requests.

The request to lawmakers comes as the North Carolina-based FairPoint turned a corner last year, ending a 131-day strike in February to post its first profitable year since emerging from bankruptcy in 2011, with $90.4 million in net income, according to earnings released Wednesday.

The latest request came to legislators as a compromise proposal worked out with other companies and the state’s consumer advocate.

The proposal for provider-of-last-resort service elicited opposition from the Maine chapter of AARP, which raised concerns about the standards for determining an area doesn’t need to be under those requirements any longer.

“[Our members] are concerned about their right to a reliable, basic landline phone service,” Amy Gallant, advocacy director for AARP Maine, said to the committee Wednesday.

After removing the initial 25 communities from provider-of-last-resort service requirements, the law would use similar standards in determining which places FairPoint could remove from its mandatory coverage area after 2018.

That standard would require a finding that at least 95 percent of residences have access to landline service and 97 percent have access to wireless phone service.

The company argues that competition in those areas will serve as a check on service quality, if customers are able to turn to other phone providers in the case that they’re unhappy.

The company laid that case out in a recent filing with regulators, where it argued the Maine Public Utilities Commission should not open an investigation into its service quality reports for the end of 2015.

“The market determines the service quality criteria of importance to customers and the service quality levels they find acceptable,” Sarah Davis, the company’s senior director of government affairs, wrote. “To the extent service quality is deficient from the perspective of consumers, the competitive marketplace imposes its own serious penalties.”

The other communities the bill would immediately remove from provider-of-last-resort service coverage are South Portland, Auburn, Biddeford, Sanford, Brunswick, Scarborough, Saco, Augusta, Westbrook, Windham, Gorham, Waterville, Kennebunk, Standish, Kittery, Brewer, Cape Elizabeth, Old Orchard Beach, Yarmouth, Bath, Freeport and Belfast.

The company has about 10,000 customers for its provider-of-last-resort service in the 25 communities, out of a statewide total of about 25,000, according to legislative testimony.

Ben Sanborn, executive director for the Telecommunications Association of Maine, said Wednesday that his association approves of the proposal that is crafted specifically to FairPoint’s service area.

Sanborn said he understands increasing competition for FairPoint in the state’s population centers has removed a major reason it was able to maintain service in more far-flung areas: Urban customers could, in a way, help subsidize service elsewhere.

Davis of FairPoint agreed with that description during testimony Wednesday.

The company has tried to address the issue in the Legislature by loosening the provider-of-last-resort service requirements and asking the state to hand over $62.8 million from a fund to subsidize mandatory landlines, called the Maine Universal Service Fund.

It has made similar moves in Vermont, where it last month asked regulators to eliminate service quality requirements it says other competitive providers don’t have to meet.

The requirements for FairPoint are a remnant of the state’s deregulation of telecommunications providers in 2012, which designated certain phone companies as “providers of last resort.” FairPoint covers most of the state.

The proposed service quality requirement changes in the draft bill for Maine would be much more generous than rules the Maine Public Utilities Commission put into effect in 2014, which pertain to all of its landlines. The new rules would only pertain to its provider-of-last resort areas.

For example, the draft envisions setting a limit on trouble reports at fewer than three per 100 lines, a level the company didn’t hit in any single month during its 131-day strike in 2014.

The commission can open an investigation when the annual average surpasses that benchmark, which for FairPoint hit the current benchmark of 1.52 per 100 lines with its average reported line troubles last year.

The proposal also would expand the timeline for the response benchmark, which calls for fewer than 12.4 percent of reported troubles to be resolved within 24 hours. The proposal would look to set that at 20 percent over 48 hours.

The company hasn’t specified how many problems weren’t resolved in 48 hours, but its service quality reports for 2015 show landline problems not resolved within 24 hours hit a high last year, at 57 percent.

The company has repeatedly argued regulators should not open investigations into its service quality metrics since 2014, when the commission did open the first investigation over whether to assess penalties for the performance.

In February, the company submitted its reports for the last three months of 2015, arguing that the benchmarks are set unreasonably high, particularly for clearing calls within 24 hours.

“As stated in previous reports, this metric is set unreasonably high and therefore is unattainable for FairPoint,” the report stated. “FairPoint has not achieved the current required service level since the First Quarter of 2012 and that success was not sustained.”

The Legislature’s Energy, Utilities and Technology Committee held a second workshop Thursday on the bill, now a placeholder with the title LD 466, and will continue working on the bill next Tuesday.

 

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