Portland Press Herald / Maine Sunday Telegram
FairPoint delays full takeover of Verizon
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The company gives up on September and shoots for a November transition.
By TUX TURKEL, Staff Writer June 18, 2008

TIMELINE OF THE VERIZON-FAIRPOINT DEAL

FEBRUARY 2007: Verizon announces a proposal for a three-state, $2.8 billion deal to merge its Maine, Vermont and New Hampshire operations with FairPoint Communications, based in North Carolina. The deal includes 1.6 million phone customers and 230,000 high-speed Internet customers.

FEBRUARY THROUGH SEPTEMBER 2007: Maine PUC holds a series of meetings to review the deal.

SEPTEMBER 2007: Public hearings are held in Fort Kent, Bangor and Portland, drawing hundreds of people.

NOV. 26, 2007: PUC advisory staff recommends against the merger unless 49 potential conditions are met.

DEC. 12, 2007: Following negotiations, PUC advisory staff recommends in favor of the merger after some, but not all, of the conditions are agreed to.

JAN. 3, 2008: Maine PUC approves the merger, now valued at $2.3 billion.

FEB. 15, 2008: Vermont's utility regulators approve the deal.

FEB. 25, 2008: New Hampshire's regulators do the same.

MARCH 31, 2008: Fairpoint finalizes the purchase and estimates it will complete its takeover of Verizon lines by September 2008.

JUNE 2008: FairPoint executives say they cannot meet the September goal, but they expect to complete the transition in November.

FairPoint Communications is pushing back plans to complete its takeover of Verizon's telephone system in September, the company said Tuesday.

The decision reflects concerns expressed by a consulting firm working for utility regulators in Maine, New Hampshire and Vermont, and its assessment that FairPoint hasn't gotten all the bugs out of operating and software systems, or hired enough staff to assume control.

The 911 emergency dispatch equipment, which has malfunctioned several times in different Maine locations, was identified by the consultant as "the most important of the systems still under development."

To assume total control of Verizon's network in September, FairPoint would need to provide an irrevocable notice of readiness to the consultant by July 7. That's unlikely to happen, the company acknowledged.

FairPoint is now shooting for a late November cutover date, as it's called in the industry.

Labor unions and other critics of the sale of Verizon's network to FairPoint had questioned FairPoint's ability to operate the system. The consultant's comments don't raise that concern; they simply indicate that FairPoint needs more time.

A top FairPoint executive echoed that view Tuesday, saying a two-month delay would not be significant. "We're not going to cut over until we're sure we've got it right," said Walter Leach, FairPoint's executive vice president of corporate development.

Asked whether malfunctions in the 911 system were related to this process, Leach said that was a fair assessment. "It's one of the points taking more time and work, and it isn't ready," he said.

The delay will put an additional financial strain on FairPoint, which is paying Verizon roughly $16 million a month in transition fees to jointly operate the system. The company also is in a race against time to roll out marketing and rate programs designed to retain and attract customers. Delaying the cutover sets back that effort.

In Maine, the Public Utilities Commission approved the sale and is overseeing FairPoint's transition. The agency declined to discuss the case specifically Tuesday, but did issue a prepared statement.

"The PUC staff is in discussion with Liberty Consulting and FairPoint about the status of efforts to complete the transition of all services from Verizon to FairPoint," the statement said. "The PUC is concerned about timing issues for the so-called 'cutover,' and will continue to monitor closely FairPoint's efforts to fulfill the terms of the (PUC approval) order and to ultimately deliver quality services to Mainers and Maine businesses."

In March, FairPoint purchased Verizon's land-line network in northern New England for $2.4 billion. FairPoint is now Maine's dominant telephone provider, with roughly 85 percent of the state's access lines. The company is in the process of assuming Verizon's staff, billing and operational functions.

FairPoint has hired a worldwide business consulting firm, part of Capgemini Group, to help develop the systems. The company is replacing 600 of Verizon's custom-designed systems, which handle everything from billing to customer service software, with 60 off-the-shelf versions.

A lawyer at the Maine Office of Public Advocate who helped negotiate regulatory terms of the sale said he was disappointed by the setback. Wayne Jortner said the delay puts off a scheduled rate reduction for customers. It's also a distraction that could slow FairPoint's plans to expand high-speed Internet and other services.

"We certainly hope November is the last delay," he said.

But Jortner also said he recognized the complexity of the cutover. Large-scale cutovers are unusual in the industry, he noted. A poorly executed handoff two years ago in Hawaii led to billing, repair and customer service problems. FairPoint and utility regulators don't want to repeat those mistakes here.

To monitor progress, the states retained...


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