FairPoint Bankruptcy
October 30, 2009 -
MAINE PUBLIC UTILITIES COMMISSION
Issue Information
October 30, 2009
FMI: Evelyn deFrees, Public Information Officer 287-6141 evelyn.defrees@maine.gov
• Monday FairPoint filed for voluntary Chapter 11 bankruptcy in federal bankruptcy court in New York.
• In filing for Chapter 11 bankruptcy—the section of the federal code dealing with debt restructuring not liquidation—the Company obtains certain protections from its creditors.
• As the state agency which regulates the telecommunications utilities, the Commission assures the public and FairPoint customers that the operation of the phone network will continue and dial tone for will not be lost. The bankruptcy status should not be noticeable to customers.
• FairPoint’s ongoing financial reporting, both to the Commission and to the Securities and Exchange Commission, showed increasing concern about its ability to manage and pay its sizable debt which consists of bank debt and bond obligations. Starting in early September, the CEO of FairPoint spoke publicly about the possibility of bankruptcy as a tool for debt-restructuring.
• The Commission has retained special legal counsel to participate in the bankruptcy proceedings in order to protect the interests of ratepayers, to ensure that the Commission retains authority over FairPoint rate-making and service quality regulation, and to make certain that the Company follows the Commission order for improved, expanded broadband in Maine—a key stipulation of the Fairpoint purchase of Verizon’s phone network.
• The Commission receives weekly financial information from FairPoint which shows that its income can cover current operating expenses. FairPoint’s continuing upgrades and building of its network are very important for the Company’s viability, for Maine and to the Commission. These upgrades are part of Fairpoint’s regulatory commitment made during their original 2008 purchase of Verizon’s phone network system.
• The Commission in its regulatory capacity continues to closely monitor and analyze FairPoint’s customer service, and back office systems performance.
Background on FairPoint and the Commission:
• Starting with the February 2009 “cut-over” of phone network and operations from Verizon to airPoint, the Commission has closely monitored FairPoint’s efforts to reach “business as usual” operations in several ways: through daily reports on operational statistics and issues, through the daily monitoring activities of its consultant, the Liberty Group, and through direct Commission staff contacts at least once a week with senior FairPoint staff. These monitoring activities continue.
• The Commission was first among three state regulatory agencies to call on FairPoint to file a stabilization plan and to call FairPoint management in to provide further details (April 2009).
• In response to a Commission request, FairPoint is providing bi-weekly updates on progress toward date-specific milestones including for improved services in areas such as customer call response, number of new service orders pending and number of bills with known errors.
• The Consumer Assistance Division (CAD) of the Commission established an “escalation” process to ensure that FairPoint resolves customer complaints in a timely manner. CAD staff work in conjunction with FairPoint’s escalation team to ensure that customer complaints filed with the CAD against FairPoint are properly and quickly investigated.
• Approval of Fairpoint’s purchase of Verizon phone network: FairPoint was granted the authority to buy Verizon’s phone network and operations in January 2008, in part, because Verizon—despite having more financial resources—was not serving Maine customers well and was unwilling to invest in the northern New England network, and, because FairPoint agreed to invest substantially in infrastructure upgrades and expansion of broadband in Maine and the region.
• The Commission regulates electric, telephone, water and gas utilities to ensure that Maine citizens have access to safe and reliable utility service at rates that are just and reasonable for all ratepayers. Commission programs include Maine Enhanced 911 Service, Dig-Safe, and Efficiency Maine.
