FairPoint telephone deal clears Vt. hurdle

MONTPELIER, Vt. – The state reached a tentative settlement Tuesday on FairPoint Communications’ proposed $2.7 billion purchase of Verizon Communications’ land lines in northern New England, but it still must pass state regulators’ muster.

The proposal, which must be approved by the three-member Vermont Public Service Board, essentially mirrors an agreement already reached by Maine regulators. It calls for a $235 million reduction in the purchase price, reduced dividend payouts that would free more money for debt service, and some special accommodations for Vermont.

Among them:

. Quality standards that would require FairPoint to focus on reliability, even “in the tiniest hamlets of Vermont,” according to David O’Brien, commissioner of the Department of Public Service.

. A minimum annual capital investment of about $40 million in each of the first three years.

. Set-aside of up to $12.5 million a year to address service quality issues that come up.

. Dividend reductions of $50 million a year, $35 million of which would go to repayment of the expected $2.3 billion FairPoint plans to borrow to make the deal.

. A requirement that FairPoint extend broadband service to all customers in 50 percent of its Vermont markets by 2010, under threat of “substantial financial payments” to the new Vermont Telecommunications Authority if not.

“We’re pleased with the [agreement] and appreciate the hard work and support of the Vermont Department of Public Service,” said FairPoint CEO Gene Johnson. “We look forward to working with the department as we serve the public interest in the state of Vermont.”

No date was set for a Public Service Board vote on the deal.

Mike Spillane, business manager for the International Brotherhood of Electrical Workers Local 2326 in Essex, which represents about 500 Verizon employees, denounced the proposed settlement.

He said consumers were facing “a dead-end future that impacts the economy and jobs.”

“We’re going to be stuck with a DSL copper-based product that’s the horse and buggy of broadband,” Spillane said.

The performance penalties could end up hurting consumers if FairPoint doesn’t have the money to pay the fines and opts to cut services to raise it, he said.

Maine, New Hampshire and Vermont all have to agree to the sale for it to go forward. Maine’s Public Utilities Commission OK’d it last week. New Hampshire regulators have yet to approve it. The Federal Communications Commission also must sign off.

“What happened in Maine absolutely benefited all three states in terms of the financial aspects,” O’Brien said.

The tentative Vermont agreement comes about two weeks after the board rejected the deal but invited the Charlotte, N.C.,-based FairPoint to reapply.