Vermont Business MagazineFairPoint Communications, Inc(Nasdaq: FRP), Vermont's largestcommunications provider, has reached a settlement agreement with the Vermont Department of Public Service that would resolve the state's service quality investigation of FairPoint pending since last December.The agreement, set forth in a filed Memorandum of Understanding, requires approval by the Vermont Public Service Board. FairPoint also has announced that it has accepted an $8.8 million in Connect America funding to expand broadband service to 28,400 locations in Vermont.
The settlement calls for FairPoint to pay a significant number of retroactive customer bill credits for out-of-service repair delays and to provide better guidance to telephone customers who are eligible for such credits in the future. It also supports a new proceeding in front of the Public Service Board to review the scope of regulatory obligations applicable to FairPoint in light of significant changes in the competitive telecommunications landscape in the past several years.
The parties agreed to the settlement based upon FairPoint's important operational and network changes that have occurred since the start of the investigation.Since concluding a difficult labor negotiation and worker strike earlier this year, which led to a new contract and then layoffs and closure of its South Burlington call center, FairPoint's service quality has returned to normal levels and it has planned and implemented a variety of improvements to its SS7 network.
The settlement is also based upon FairPoint's commitment to utilize$8.8 millionof annual funding from the federal Connect America Fund ("CAF") Phase II price cap carrier program. The CAF Phase II program will require FairPoint to construct and operate network infrastructure and offer high-speed broadband service to approximately 28,400 qualifying locations in Vermont.The CAF Phase II funding and the FairPoint commitment run over six years, require speeds of at least 10 Mbps download and 1 Mbps upload, and will require significant additional FairPoint capital investment.
The Department initiated an investigation of FairPoint before the Public Service Board in response to deteriorating residential repair response time and a 911 outage that left Vermonters without access to the 911 network for several hours last November, both of which occurred during a time when FairPoint was experiencing a work stoppage. Since resolving its labor dispute in February, FairPoint’s response time for residential repair has improved. Also, in response to several recommendations made by the Department, FairPoint has agreed to make numerous upgrades to its network to enhance reliability and significantly reduce the risk of another 911 outage.
“The Department called for this investigation after receiving an unacceptably high number of FairPoint customer complaints through much of 2014, conditions which worsened during the work stoppage, and after a November 2014 FairPoint regional network outage affected Vermont’s E-911 service,” said Public Service Commissioner Chris Recchia. “After a thorough investigation, it is apparent to me that FairPoint has clearly taken significant steps to improve its operations and network, to the benefit of its customers. As ratepayer advocates, the Department insisted as part of the settlement that FairPoint give credits to customers who experienced unacceptable delays in repairs of telephone service. I am also pleased that FairPoint will utilize federal CAF Phase II funds and significant contributions of its own matching funds to deepen its broadband investment in rural Vermont. Expanded broadband will improve many of the concerns citizens have and should have an ancillary benefit to the reliability of telephone service.” He added.
Jim Porter, the Department’s Telecommunications Director and lead investigator in this matter, noted that FairPoint is Vermont’s largest incumbent local exchange carrier, and provides telephone service in all areas of Vermont, even where economics and market forces are not favorable. “Vermont, like the rest of the country, has seen a significant decline in the number of traditional telephone service customers as technology has rapidly evolved,” he said. “Here in rural Vermont, we have had enormous success in driving high speed broadband throughout the state and FairPoint has been an important partner. Our responsibility is to ensure that FairPoint continues to provide acceptable service to its telephone customers while allowing it to compete in this increasingly competitive telecommunications environment. I am pleased that this settlement offers FairPoint customers additional bill credits for delayed service repairs during its labor dispute and better guidance for obtaining owed credits in the future.”
The Department believes that this settlement and FairPoint’s commitment to accept CAF II funding will result in improved reliability and services for FairPoint customers. The Department and FairPoint have filed testimony with the Public Service Board in support of the settlement. If the Board approves the settlement, FairPoint will issue customer credits within 3 months of the Order.
RELATED:FairPoint to close South Burlington call center, to lay off 260
The Federal Communications Commission first established the CAF program in 2011 to accelerate broadband build-out to Americans living in rural areas who do not currently have access to robust broadband services. The CAF Phase II program continues this mission by shifting more federal funding to the deployment and operation of broadband service from high cost voice service support.
"Since concluding a difficult labor strike we have worked hard to change our operations to improve customer service,"Beth Fastiggi, Vermont State President for FairPoint, said. "We understand the difficulties some of our customers faced in the time period leading up to and during the strike. We hope this settlement and our renewed commitment to increase our broadband network investment through the acceptance of CAF Phase II will help us demonstrate our continued commitment to provideVermontwith a high-quality communications network."
In addition to its fiber-based, high capacity broadband network, FairPoint is alsoVermont'slargest incumbent local exchange carrier, providing telephone service throughoutVermont, even where economics and market forces are not favorable. "FairPoint's network is critical toVermont'seconomy, yet we know that here and nationwide the telecommunications industry is going through tremendous technological change," Fastiggi said. "In order to compete effectively in what has now become a highly competitive industry, FairPoint must continue to evolve and so too must the way we are regulated. The settlement we have reached with the Department will allow us to continue to work with the state and move forward on these issues."
Fastiggi also highlighted the company's success in fulfilling all state and federal broadband commitments to date. In late July, FairPoint completed on time another major broadband expansion project, bringing high speed Internet to 7,100 locations in 53 towns across Vermont. These expansions completed a three-year$9 millionproject funded in part by$2 millionfrom the Federal Communications Commission's CAF Phase I incremental support Program.
Overall, FairPoint has invested nearly$100 millionin its broadband network in the Green Mountain State since 2008, and has added 1,100 miles of new fiber. Its fiber-based, high-capacity network offers customers a better, faster way to communicate. Its network also serves as the backhaul for many wireless and other carriers.
"We are proud that our FairPoint team has emerged from the difficulties of the past year to once again deliver on time a significant broadband expansion inVermont, further deepening our network," said Fastiggi. "With our settlement with the Department of Public Service and our new six-year CAF Phase II commitment, we look forward to delivering better customer service and broadband to even more rural locations acrossVermont. We know that access to broadband opens a door to the world for both residents and businesses that is fundamental toVermont'sfuture economic growth."
In support of the service quality settlement agreement, FairPoint also filed testimony Tuesday seeking Public Service Board approval of the settlement agreement. The Public Service Board will consider the settlement agreement during scheduled hearings in September.
FairPoints shares fell early Thursday to the high 16s, about a dollar off since their Tuesday close of $17.73. Their 52 week range is $13.30 - $20.98.
About FairPoint Communications, Inc.
FairPoint Communications, Inc. (Nasdaq: FRP) provides advanced data, voice and video technologies to single and multi-site businesses, public and private institutions, consumers, wireless companies and wholesale re-sellers in 17 states. Leveraging an owned, fiber-core Ethernet network-- with more than 20,000 route miles of fiber, including approximately 17,000 route miles of fiber in northern New England-- FairPoint has the network coverage, scalable bandwidth and transport capacity to support enhanced applications, including the next generation of mobile and cloud-based communications, such as small cell wireless backhaul technology, voice over IP, data center colocation services, managed services and disaster recovery. For more information, visitwww.FairPoint.com.
SOURCE CHARLOTTE, N.C.,Aug. 18, 2015/PRNewswire/ --FairPoint Communications, Inc.