Verizon merger will hurt ratepayers

Providing Maine with a strong communications infrastructure has for years been a top priority among the state’s policymakers, regardless of party affiliation. One thing we can all agree on is that without reliable access to the Internet, as well as other technological innovations now in development, Maine’s information superhighway will be little more than a logging road, and Maine will be unable to compete in the global economy.

Yet, a logging road is exactly what we could end up with, courtesy of Verizon, the company that currently owns and operates nearly all of the telephone lines in the state of Maine.

Verizon is looking to get out of the landline business so it can concentrate on expanding its network of fiber optic cables, which transmit data at a much higher rate than the old copper cables that comprise Maine’s infrastructure, in urban areas throughout the country.

The problem is, Verizon wants to improve things for its urban customers at the expense of residents in Maine, New Hampshire and Vermont, who would reap none of the benefit, yet bear much of the cost. That’s because Verizon would finance this fiber optic upgrade in part by merging with a much smaller company based in Charlotte, North Carolina, called FairPoint Communications.

FairPoint Communications is little more than a holding company, already burdened by a crushing amount of corporate debt. The choice of FairPoint as a partner in this merger is curious; the difference in size between Verizon and FairPoint is truly stunning. Verizon has 1.5 million miles of lines in New England; FairPoint has only 251,000 access lines throughout the entire United States. Verizon has more than 3,600 employees in northern New England; FairPoint has fewer than 900 in the entire country.

It’s worth noting that FairPoint’s credit rating is BB-minus, a deplorable status, according to Standard & Poor’s, who characterizes the company’s stock as weak and “high risk.”

Yet, in an extraordinary bit of Enron-esque accounting, it will be FairPoint that emerges from this proposed merger – saddled, as a result, with a crushing debt on the order of $2.3 billion, which is just about equal to the size of the general obligation debt of Maine, New Hampshire and Vermont combined.

Verizon, on the other hand, will be free to invest the $1.7 billion it extracted from FairPoint upgrading service to customers in more profitable markets like Massachusetts, New York and New Jersey. Meanwhile, Maine’s vital communications infrastructure would be owned and operated by a company with precious little experience operating a statewide telecommunications infrastructure. Perhaps more importantly, FairPoint would possess neither the means nor the incentive to invest in providing truly high-speed Internet access across the state, where it is currently unavailable.

This proposed merger is bad for Maine ratepayers. If this example of creative corporate accounting is allowed to go through, ratepayers in Maine will be shortchanged at the expense of Verizon’s more profitable customers in big cities.

And if it’s bad for Maine ratepayers, it would be catastrophic for Maine businesses. We will be in no position to compete in the global economy with a second-rate communications infrastructure – which is exactly what FairPoint, a tiny company of dubious financial standing, will provide.

Make no mistake, this proposed merger is nothing more than a risky corporate scheme designed to benefit Verizon shareholders at the expense of those who live and work in Maine, New Hampshire and Vermont.

Fortunately, the deal is not done yet.

Legislation now pending in Augusta, LD 1866, would require the state’s Public Utilities Commission to determine that mergers like the one proposed between Verizon and FairPoint result in benefits to Maine ratepayers and advance the state’s goal of improving access to information and creating economic development.

This legislation would give the PUC exactly the tools it needs to protect the interest of Maine’s ratepayers and help Maine attract the businesses and jobs of the future, which depend so heavily on the quality of Maine’s telecommunications infrastructure.

It is legislation that is sorely needed. Verizon has already demonstrated that it considers its customers in Maine not worth the investment. It’s time for those in the Legislature to stand up and make sure that Verizon doesn’t kick Maine’s economy out of the Information Age. It’s time for the Legislature to enact LD 1866.

Peter McLaughlin is business manager for the International Brotherhood of Electrical Workers.