FairPoint may soon be driven to bankruptcy

(NECN: Peter Howe, Derry, N.H.) – Executives of troubled Fairpoint Communications — the North Carolina company that took over Verizon Communications Inc. phone and Internet operations in Maine, New Hampshire, and Vermont last year — say they may soon be driven to Chapter 11 bankruptcy reorganization. In a scene reminiscent of Big Tobacco CEOs or Wall Street plutocrats hauled before Congress, on Wednesday top executives of troubled FairPoint raised their right hands and got sworn in for an extraordinary three-state joint hearing held at the Derry Municipal Center. The focus: When will all the phone and Internet service problems — thousands of complaints about billing errors and a backlog of now over 2,000 unfilled service orders — finally get smoothed out? James Volz of the Vermont Public Service Board said: “We have seen neither sufficient progress, nor a firm commitment that will achieve an acceptable level of service. It’s been over seven months” since FairPoint officially “cut over” from Verizon’s network to its own. Vendean V. Vafiades of the Maine Public Utilities Commission said complaints continue to pile up from both consumers and telecommunications companies that rent FairPoint lines to serve their own customers: “From their experience, you’re not making significant improvements to assist them. Is there some commitment you could make to get that backlog cleaned up please?” Fairpoint’s CEO of two months, former Duke Power executive David Hauser, outlined ongoing efforts to improve operations and improve corporate accountability. “I’ve tried to create that clarity so we know who is in charge,” Hauser said of recent executive-suite reshuffling in the Maine, New Hampshire, and Vermont units. Amid months of rumors, Hauser said FairPoint’s next call may be to bankruptcy court: “We are considering all other restructuring alternatives available to us, which may include the commencement of an in-court resolution under Chapter 11 of the U.S. bankruptcy code.” Bankruptcy’s something investors have been sniffing over the last year, hammering FairPoint’s stock from over $10 last October to a close of 80 cents Wednesday in New York Stock Exchange trading. Many analysts question whether the fundamental problem for FairPoint was that before taking over Verizon operations in New England, it had never run anything bigger than small local rural phone companies scattered across 18 states. The acquisition of Verizon’s Northern New England business increased FairPoint about six-fold in revenues and employees, but left it with a crushing $1.7 billion debt load. The idea of not just a struggling but bankrupt FairPoint scared many officials who attended the Derry hearing. Ralph Montefusco of the Communications Workers of America, which represents about 500 of FairPoint’s 3,500 New England workers, said, “Rural communities of New England, they need high-speed internet access, they need a reliable telecom infrastructure. It’s a big economic driver.” Vermont House Majority Leader Rep. Floyd Nease (D-Johnson) said, “All of Northern New England has built a lot of its future on FairPoint, and this does not inspire confidence … What we’re being told today is: ‘Hang on, we’re working on it. Hang on, we’re working on it.’ How long do we hang on to a company that appears to be nearly bankrupt and hasn’t got a customer-service model that works where we live?” Hauser insists: Don’t worry. “If we have to restructure our debt through chapter 11, it’s important to understand that our customers will not experience an interruption of service, nor will we slow our efforts to improve those areas where improvement is still needed.”