State Reaches Agreement With FairPoint Buyer

Jun 2, 2017

The state and the company purchasing FairPoint Communications have signed a Memorandum of Understanding (MOU) that helps clear the way for approval of the sale. The Department of Public Service says Illinois-based Consolidated Communications agreed to nearly all of the state’s requests.

Key among them is a three-year commitment by the company to reinvest an average of at least 14 percent of its regulated and unregulated business in Vermont, including telephone, internet and wholesale revenue in its statewide system.

“After our investigations and after our analysis, our experts determined that this is the appropriate amount for the company to reinvest in the network,” says Clay Purvis, director of the telecommunications and connectivity division at the department.

Purvis says the department had asked that should Consolidated Communications fail to reinvest the full 14 percent in the Vermont system, any shortfall would be deducted from shareholder dividends.

Instead, Consolidated Communications agreed to spend an additional $1 million annually on service quality improvements and work with the state to determine how the money will be used. The additional money is separate from the 14 percent reinvestment.

Purvis says investigations by the Public Service Board into service issues and E-911 outages under FairPoint will not be affected by the sale.

Regulators in New Hampshire and Maine have already approved the sale. In New Hampshire, Consolidated Communications agreed to reinvest 13 percent of its state revenues into system improvements.

The Maine agreement calls for an annual reinvestment of $17.4 million for three years.

Purvis could not say how much money the 14 percent reinvestment would yield in Vermont, because confidentiality agreements prevent him from sharing unregulated revenue figures.

FairPoint’s regulated gross operating revenue, which includes the company’s telephone business, was just under $128 million in 2016.  

“I think our settlement is very much in line with what the other states are doing,” he says.

Purvis says in the short-term Consolidated Communications will continue to operate FairPoint’s billing and customer service systems while it determines how to transition to its own network. In 2008, when FairPoint took over the network from Verizon, there were serious problems with the transition.

The MOU has been submitted to the Public Service Board for its approval.

Unions representing FairPoint workers in Vermont have raised concerns that Consolidated Communications has not provided enough information about planned improvements or changes to staffing levels which they say could negatively affect service quality.  

“This deal falls way short on details,” said Mike Spillane of Local 2326 of the International Brotherhood of Electrical Workers in an email to members. “We are not happy with it. The Union presented a case and gave examples for the State to use, and it was ignored.”

Union representatives are concerned about “synergies” Consolidated Communications says it plans to undertake to reduce expenses, which they fear will reduce the number of Vermont employees.

Unlike FairPoint, Consolidated Communications will not have high-level or senior management personnel based in Vermont. Instead, under the agreement, the company will have “senior regulatory staff, with decision-making authority” in Vermont.