February 5, 2007
Phone tag | Can FairPoint deliver on its promise of beefing up rural Internet access?
By Whit Richardson
FairPoint Communications is no stranger to Maine. Though based in Charlotte, N.C., the telecommunications company has served several rural communities in Maine for years through six local telephone companies it owns here.
With its announcement in January that it plans to acquire Verizon's 1.5 million telephone lines in northern New England, FairPoint is in a position to become the largest telephone company in the state. If the $2.7 billion deal is approved by state and federal regulators, FairPoint would inherit from Verizon 234,000 high-speed Internet customers and 600,000 long-distance customers in Maine, New Hampshire and Vermont. Under the deal, Verizon would spin off its assets in those three states and create a subsidiary that would merge with FairPoint. The new company would be majority owned by Verizon shareholders, but operated by FairPoint, which already operates China Telephone Co. and Standish Telephone Co., among others, in Maine.
The possibility of such a deal raises hope for some who believe Maine has been in Verizon's blind spot for too long, especially when it comes to expanding high-speed Internet access. But others question whether a relatively small company ˆ FairPoint's 2005 revenue was roughly $263 million, compared with the more than $75 billion for Verizon ˆ can take such a big step so quickly without stumbling along the way.
If you ask FairPoint, the deal is good news for everybody. Walt Leach, who helped organize the deal as FairPoint's executive vice president for corporate development, believes his company's presence in Maine and its company-wide focus on rural markets ˆ it owns 31 local telephone companies serving rural areas in 18 states ˆ makes it better equipped than Verizon to serve communities in Maine. "We have always focused on smaller urban markets," Leach says. "[Maine communities] will be the most important markets to FairPoint, while they aren't for Verizon."
For Verizon, the deal reflects not so much a determination to shed its rural markets as a way to create value for shareholders, says John Bonomo, a Verizon spokesperson. "We found a partner in FairPoint whose expertise and business model is based on rural and very small urban communities," he says. "[These markets are] more aptly suited for their business."
Jeff Kagan, an independent telecom analyst in Marietta, Ga., agrees. The telecom industry, says Kagan, is reinventing itself, and large companies like Verizon, which is preoccupied with increased competition from cable companies in higher-density areas in the New York and mid-Atlantic regions, are shedding rural markets and leaving them for small and mid-size companies like FairPoint. "The customers in [Maine] will be better served because it's going to be by a company that focuses on their customer group," Kagan says.
The Internet question
The average Verizon telephone customer in Maine isn't likely to notice a difference if the deal goes through. The customers who would notice a change, if FairPoint delivers on its promise, are those who may finally receive long-called-for access to broadband Internet. As soon as the deal was announced, FairPoint pledged it would hire ˆ in addition to the 3,000 Verizon employees it would inherit ˆ 600 new workers in Maine, New Hampshire and Vermont and invest roughly $200 million within the first 12 months to expand high-speed Internet access throughout the region.
Currently, 86% of homes and businesses in the state have access to high-speed Internet, such as DSL, according to the Maine Public Utilities Commission. But that's still not enough, says Maine Public Advocate Stephen Ward, adding that access problems exist in every county in the state. Even residents in communities like Somerville, just 20 minutes outside Augusta, don't have access to high-speed Internet.
Word of expanding high-speed Internet access is music to Jaimie Logan's ears. As executive director of the Boothbay Harbor Region Chamber of Commerce, Logan represents many small businesses in the area that don't have access to high-speed Internet. "Internet access is critical for businesses in general, but particularly for small businesses that are up here in rural areas," Logan says. "Because so much business is done online now, in order to stay competitive with businesses in other locations access is very important and may make the difference if a business can open or not."
Based on FairPoint's track record, Ward says the chance the company will expand DSL access in the state is good. "FairPoint as a corporation has done a better job of rolling out DSL access in their rural territories than has been the case with Verizon in northern New England," Ward says. "It's clear Verizon has its eye on more densely populated markets further south."
Indeed, FairPoint's Leach says 91% of its approximately 77,000 rural customers in Maine, New Hampshire and Vermont have access to high-speed Internet, compared to 62% for Verizon. "Right off the bat, we have a head start to make high-speed data available to more customers," Leach says.
But while some applaud increased access to high-speed Internet in Maine, others question whether FairPoint is the best company to deliver it. Ward admits that FairPoint has a "spotty" record when it comes to service. "Overall, their ratings for service quality have been below average for all telephone companies providing service in the state," Ward says. And even though its rates are lower than Verizon's, the Public Advocate's Office recently filed a complaint with the Public Utilities Commission claiming that FairPoint's rates are too high, Ward says.
For now, Ward's not sure whether to embrace a future where seven out of 10 Mainers would be FairPoint customers. "There's certainly a question about whether the PUC and Legislature should be comfortable if one enterprise serves 95% of customers in the state," he says.
But according to FairPoint's Leach, Maine will be well-served by a company that has banked its business on paying attention to its rural customers. "We believe this is going to be a very good transition for customers and employees, and very good for the communities we would serve," he says.
With its announcement in January that it plans to acquire Verizon's 1.5 million telephone lines in northern New England, FairPoint is in a position to become the largest telephone company in the state. If the $2.7 billion deal is approved by state and federal regulators, FairPoint would inherit from Verizon 234,000 high-speed Internet customers and 600,000 long-distance customers in Maine, New Hampshire and Vermont. Under the deal, Verizon would spin off its assets in those three states and create a subsidiary that would merge with FairPoint. The new company would be majority owned by Verizon shareholders, but operated by FairPoint, which already operates China Telephone Co. and Standish Telephone Co., among others, in Maine.
The possibility of such a deal raises hope for some who believe Maine has been in Verizon's blind spot for too long, especially when it comes to expanding high-speed Internet access. But others question whether a relatively small company ˆ FairPoint's 2005 revenue was roughly $263 million, compared with the more than $75 billion for Verizon ˆ can take such a big step so quickly without stumbling along the way.
If you ask FairPoint, the deal is good news for everybody. Walt Leach, who helped organize the deal as FairPoint's executive vice president for corporate development, believes his company's presence in Maine and its company-wide focus on rural markets ˆ it owns 31 local telephone companies serving rural areas in 18 states ˆ makes it better equipped than Verizon to serve communities in Maine. "We have always focused on smaller urban markets," Leach says. "[Maine communities] will be the most important markets to FairPoint, while they aren't for Verizon."
For Verizon, the deal reflects not so much a determination to shed its rural markets as a way to create value for shareholders, says John Bonomo, a Verizon spokesperson. "We found a partner in FairPoint whose expertise and business model is based on rural and very small urban communities," he says. "[These markets are] more aptly suited for their business."
Jeff Kagan, an independent telecom analyst in Marietta, Ga., agrees. The telecom industry, says Kagan, is reinventing itself, and large companies like Verizon, which is preoccupied with increased competition from cable companies in higher-density areas in the New York and mid-Atlantic regions, are shedding rural markets and leaving them for small and mid-size companies like FairPoint. "The customers in [Maine] will be better served because it's going to be by a company that focuses on their customer group," Kagan says.
The Internet question
The average Verizon telephone customer in Maine isn't likely to notice a difference if the deal goes through. The customers who would notice a change, if FairPoint delivers on its promise, are those who may finally receive long-called-for access to broadband Internet. As soon as the deal was announced, FairPoint pledged it would hire ˆ in addition to the 3,000 Verizon employees it would inherit ˆ 600 new workers in Maine, New Hampshire and Vermont and invest roughly $200 million within the first 12 months to expand high-speed Internet access throughout the region.
Currently, 86% of homes and businesses in the state have access to high-speed Internet, such as DSL, according to the Maine Public Utilities Commission. But that's still not enough, says Maine Public Advocate Stephen Ward, adding that access problems exist in every county in the state. Even residents in communities like Somerville, just 20 minutes outside Augusta, don't have access to high-speed Internet.
Word of expanding high-speed Internet access is music to Jaimie Logan's ears. As executive director of the Boothbay Harbor Region Chamber of Commerce, Logan represents many small businesses in the area that don't have access to high-speed Internet. "Internet access is critical for businesses in general, but particularly for small businesses that are up here in rural areas," Logan says. "Because so much business is done online now, in order to stay competitive with businesses in other locations access is very important and may make the difference if a business can open or not."
Based on FairPoint's track record, Ward says the chance the company will expand DSL access in the state is good. "FairPoint as a corporation has done a better job of rolling out DSL access in their rural territories than has been the case with Verizon in northern New England," Ward says. "It's clear Verizon has its eye on more densely populated markets further south."
Indeed, FairPoint's Leach says 91% of its approximately 77,000 rural customers in Maine, New Hampshire and Vermont have access to high-speed Internet, compared to 62% for Verizon. "Right off the bat, we have a head start to make high-speed data available to more customers," Leach says.
But while some applaud increased access to high-speed Internet in Maine, others question whether FairPoint is the best company to deliver it. Ward admits that FairPoint has a "spotty" record when it comes to service. "Overall, their ratings for service quality have been below average for all telephone companies providing service in the state," Ward says. And even though its rates are lower than Verizon's, the Public Advocate's Office recently filed a complaint with the Public Utilities Commission claiming that FairPoint's rates are too high, Ward says.
For now, Ward's not sure whether to embrace a future where seven out of 10 Mainers would be FairPoint customers. "There's certainly a question about whether the PUC and Legislature should be comfortable if one enterprise serves 95% of customers in the state," he says.
But according to FairPoint's Leach, Maine will be well-served by a company that has banked its business on paying attention to its rural customers. "We believe this is going to be a very good transition for customers and employees, and very good for the communities we would serve," he says.
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