Verizon decision postponed Changes proposed in sale to FairPoint

A wrench was thrown into the Maine Public Utility Commission’s plans to deliberate and perhaps come to a decision on the proposed Verizon-FairPoint land line acquisition Thursday.

The three-member PUC postponed its deliberations until Dec. 20 after several parties in the case submitted a settlement stipulation at 1:06 a.m. Thursday, 91/2 hours before the commission planned to meet.

The stipulation, put forth by Verizon, FairPoint Communications Inc., the Maine Public Advocate, PUC support staff and several smaller Maine telephone companies, presents significant changes to Verizon’s original plan to sell its 1.6 million land-based Internet and phone service lines in Maine, New Hampshire and Vermont to Charlotte, N.C.-based FairPoint for $2.7 billion.

The changes include:

. Reducing the debt burden on FairPoint, whereby Verizon will contribute up to $235.5 million in additional working capital.

. Further reducing FairPoint’s debt by cutting its dividend payments by 35 percent, freeing $49.7 million annually, and requiring the greater of $35 million or 90 percent of free cash flow be used to pay down debt.

. Restricting FairPoint’s dividends and further acquisitions should its debt-to-cash-flow ratio exceed certain predetermined levels.

. Requiring FairPoint to invest $57.5 million in the first five years in broadband expansion in Maine with a promise to reach 90 percent of all lines even if it costs more money.

. Requiring FairPoint to adopt Verizon’s current $15 a month DSL price with a two-year contract or $18 with a one-year contract.

. Increasing penalties if FairPoint fails to meet customer service quality standards.

. Protecting consumers by not allowing FairPoint to pass along higher capital costs because it is riskier or has higher debt cost than Verizon.

. Resolving a separate, pending rate case before the PUC, reducing basic telephone rates by $18 million annually, and not increasing rates for at least five years after the acquisition.

The stipulation agreement came after a week of closed-door meetings between the parties and Verizon employee labor unions, which did not sign the stipulation and continue to oppose the sale. Before Thursday morning’s announcement, the PUC staff and Public Advocate Dick Davies also recommended that the PUC reject the deal unless dozens of conditions were satisfied.

In recognition of the union members’ dissent, the PUC has scheduled a public hearing for Dec. 20 and plans to deliberate afterward.

The New England chapters of the Communications Workers of America and the International Brotherhood of Electrical Workers, the unions representing Verizon employees, called the stipulation “partial and contested” at a telephone press conference Thursday afternoon.

“The proposed deal would still leave the residents of the three states with a financially risky company without sufficient resources to improve service quality and expand high-speed Internet,” said Ken Peres, an economist representing the unions.

But Public Advocate Davies is charged with representing the interests of Maine consumers in utility regulatory matters, and he firmly backs the stipulation.

“Our goal all along has been to ensure the financial viability of the post-merger company and to make sure that Maine telephone customers receive high-quality and expanded services,” said Davies. “The settlement agreement will ensure better service, more broadband availability and lower rates.”

FairPoint spokeswoman Rose Cummings said the company hopes the settlement “takes us one step closer to PUC approval.”

“We look forward to continuing dialogue with others who might want to join in the settlement,” Cummings said.