FairPoint Tries To Retool In A Changing Marketplace

Nov 14, 2014

FairPoint Communications has had a bumpy ride since the company took over Verizon’s land line service. Debt, bankruptcy, service quality issues and a labor dispute have all contributed to the difficulties.

But like other legacy phone companies, FairPoint has also had to adjust to a new business environment where they are no longer a regulated monopoly with no competitors.

The company believes its future lies in providing services that  many consumers may not be aware of.

To help it do that, the state has changed the way it regulates FairPoint compared to its predecessors.

Since 2012 the company has operated under a plan that’s given it freedom from state regulation to set rates, with the exception of basic telephone service. 

The plan was implemented because state wanted to make sure basic landline service remained affordable while giving FairPoint the ability to compete with other providers.

FairPoint is asking the Public Service Board to extend the plan for another five years.

Read more about FairPoint's Incentive Regulation plan here.

“I wouldn’t say the playing field is level, but I think we have less regulation, especially on the retail pricing side,” says Beth Fastiggi, is the Vermont president of FairPoint.

"The part of our business that is growing is the wholesale side; being a provider to other providers." - FairPoint Vermont President Beth Fastiggi

“I don’t have to go ahead and ask the Public Service Board and wait for them to approve it every time I want to offer special pricing. If I want to change our retail pricing, I don’t need to give a public warning for that that our competition can quickly respond to,” she says.

As cell phone technology and coverage has improved, telephone users have been abandoning land lines.

More than 90 percent of FairPoint’s service area in Vermont has cell phone coverage, so it’s likely the company will continue to lose land line business.

Internet voice services provided by companies like Comcast are also siphoning off business.

But the same companies that are taking business away from FairPoint are enabling it to grow.

Every cell phone tower has to be wired into the network. That’s where FairPoint comes in.

“FairPoint’s been very successful building fiber optic cable to the vast majority of the towers in Vermont and really looking to those providers whose business is growing to be the foundation for our future growth as a company,” says Fastiggi.

As residential telephone business declines, FairPoint has increasingly adopted a supporting role to other companies.

“The part of our business that is growing is the wholesale side; being a provider to other providers,” Fastiggi says.

Business and institutional services are a chief part of the company’s focus today. 

FairPoint recently opened a center in Burlington that is providing space and services for start-up tech businesses.

In Maine the company won a $32 million contract to build a "next generation" e911 system.

It also secured a $16 million contract to connect health care providers across Northern New England.

"Part of what we've got to do is get people to think about us differently than just using us for the basic telephone service." - FairPoint CEO Paul Sunu

FairPoint has 15,000 miles of fiber optic cable strung throughout Northern New England to provide services to institutional customers and business customers. 

While fiber is part of the company’s hybrid residential DSL network, it has no plans to run fiber to the home.

“To reach those homes is not an economic business case,” says Fastiggi.

The debt the North Carolina based company took on when it purchased Verizon’s land line business led to its filing for Chapter 11 bankruptcy in 2009. 

A high number of service quality and billing problems raised the ire of consumers and regulators alike.

“A bad customer experience stays with a customer for a long time,” Fastiggi acknowledges.

FairPoint has been trying to repair its image with consumers, but a strike by approximately 1,800 union workers has sparked a public relations battle.

The union says the company is putting its financial woes on the shoulders of workers.

FairPoint says many terms of the union contract date back to when phone companies had no competition and are out of line with the pay and benefits its competitors offer today.

The company is also making an effort to change perceptions about the services it provides.

“Part of what we’ve got to do is get people to think about us differently than just using us for the basic telephone service,” said CEO Paul Sunu in a quarterly earnings conference call earlier this year.

The revolution in telecommunications hasn’t just required that phone companies adopt new technology. It’s also required a change in their approach to what was once a captive marketplace, where consumers had no options. 

“What’s happening is the whole platform has shifted. The customer is in charge,” says Steven Shepard, a Williston telecom analyst who provides consulting services to regulators and companies worldwide.  

“The customer dictates to the service provider what they want with the very clear understanding that if you won’t deliver it, I’ll go somewhere else that will.”

Shepard says FairPoint is ahead of many other legacy telephone companies in understanding how it fits in and the range of products it can offer that go far beyond voice services.

“They’ve gone from being a service provider that was essentially defined by the fact that they deliver voice to a ‘service provider,’ which means they’re delivering a whole swath of things that will enable my business and make me more competitive,” says Shepard.

He says FairPoint stands a good chance of doing well in the future but he believes the company will have to take advantage of its huge coverage area and bundle together services that others provide, from television to streaming video and mobile services, to become a full service telecommunications company.