Consolidated’s FairPoint deal will come under state regulatory scrutiny

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As Consolidated moves forward with its acquisition of FairPoint Communications, the telco will face scrutiny from state regulators who want to avoid the issues that befell FairPoint when they purchased Verizon’s assets in 2008.

During a series of upcoming meetings, Consolidated will present federal and state regulators in FairPoint’s territories its plans for the new company.

Although some would view FairPoint’s issues with eroding telephone service revenues, labor and customer service in Northern New England as a deterrent, Consolidated sees an opportunity to provide a better service experience for business and residential customers.

RELATED: Consolidated snaps up FairPoint for $1.5B, adds 3K on-net buildings, fiber to the tower footprint

Consolidated Communications will begin laying out its plans for the merged company during meetings with federal and state entities that oversee and regulate its activities in coming weeks and months.

Bob Udell, CEO of Consolidated, said during the call announcing its acquisition of FairPoint that the telco has been familiarizing itself with the specific concerns and processes with all of the states that require approval.

“We have spent quite a bit of time understanding what we think the process will look like, what those state commissions have as their specific areas of interest,” Udell said. “But we are very confident beginning today and we are going to begin engaging each of them with the right steps to facilitate the most efficient closing processes as possible.”

Winning over New England regulators

One of the key regulatory challenges that Consolidated faces is winning over the state regulators in FairPoint’s Northern New England territory.

Regulators have a right to be concerned about a new entrant.

After FairPoint acquired Verizon’s Northern New England network assets in 2007, the service provider filed for bankruptcy protection 18 months later. At that time, it continued to bleed customers due to myriad operational and integration problems.

Vermont, in particular, was an area of great pain for FairPoint. In 2009, Vermont threatened to revoke FairPoint's operating license.

Later, in 2011 FairPoint reached a $1.6 million settlement with Vermont’s Public Service Department (PSD) to fix any future problems.  

FairPoint faced similar issues in Maine and New Hampshire.

Maine’s Public Utilities Commission has considered fining FairPoint $500,000 for not meeting phone service customer service standards during the past two years.

Despite these past issues, Udell said the telco has “good relationships, cooperative, collaborative with the commissions.”

Udell added that it wants to make the process seamless for its shareholders and the new customers it will acquire.

“We are interested in doing what is best for customers and also doing what is best for our shareholders and balancing those effectively and have through our history,” Udell said. “So we are confident that we can work through this process, and we look forward to engaging the regulatory bodies and we have done an extensive amount of planning around how we will fan out and approach those discussions in a structured way.”

The service provider is going to also get the support of the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW), labor unions that say they will carefully monitor the two companies as they work to close the deal.

CWA and IBEW said in a prepared statement last week that they are “cautiously optimistic” about Consolidated’s purchase of FairPoint.

Multi-state process

Consolidated said it plans to submit documents with federal officials later this week.

Specifically, Consolidated will file with regulators in 17 states including Maine, New Hampshire and Vermont by month’s end.

Each of the filings, according to a Portland Press Herald report, will include details related to Consolidated initial discussions with regulators.

“We are obviously, because of the size, focused on Vermont, New Hampshire and Maine and expect also there will be filings in Pennsylvania, Virginia and Washington State so there is roughly 17 states that we'll have to work through,” Udell said. “But that is nothing dissimilar to what we have had to do in the past.”

Udell added that “we are already familiar with some of the states and all of them are states that FairPoint are very familiar with.”