[OT] Verizon/FairPoint sale (was: Comcast!?!?)

[Bill McGonigle]

On Nov 16, 2007, at 03:13, Ben Scott wrote:

> On Nov 15, 2007 6:37 PM, Bill McGonigle <bill at bfccomputing.com> wrote:
>> Vitts wasn't regulated the same way telcos are.
>
>   Why not?  Vitts was a telco, a Competitive Local Exchange Carrier,
> per the NH PUC [1].

Perhaps a bad choice of words - they weren't the cable plant operator  
or the ILEC.  The important part here is as Vitts went away, nobody  
said, "oh, no, we can't get telephone service from anybody".  They  
switched to Verizon or other CLECS.  Yeah, there was some panic and  
difficulty.  Sometimes life is like that - that doesn't mean the  
government should interfere in markets.

>  Right.  And Vitts was made to stay open for a whole 60 days -- 29
> days longer than the above would indicate is required.  Now, I think
> it was the NH PUC and not the FCC that was driving that, but either
> way: What happens after that period?

Because Vitts was a CLEC nobody had to worry about it after 60 days -  
there were other options.  If the ILEC went bankrupt, then the  
Bankruptcy courts would order management of the assets, probably at  
the   At some point the value of the plant is sufficient that  
somebody will want to own and run it.

>   Right, and NH has some of the highest electric rates in the country
> [2], and that wonderfully productive Seabrook facility.  If we knew
> that would be the outcome of the FairPoint sale, I would say we should
> stick with Verizon.

Only in PSNH country.  Rates up here are pretty normal (we have  
National Grid).  It's arguably a less profitable grid due to the  
lower population density, but it's not managed by a cage of monkeys,  
apparently.

>>   Apropos, an improperly redacted PDF from the Maine OCA has been  
>> posted here:
>
> http://verizonvsfairpoint.com/index.php?topic=234.0

Good read.

>   The short version is, as I understand it: The Maine OCA believes
> FairPoint would be over-extending itself with the purchase, and would
> have severe money problems.

I didn't read it that way - they say that Fairpoint is overpaying for  
the value of the plant and that if all of their worst-case scenarios  
came true they'd burn all their cash-on-hand to cover their interest,  
expenses and dividends.  So, if everything goes wrong they're still  
not bankrupt.

Things to consider: first, the deal isn't closed.  They can possibly  
re-negotiate the value of the plant, depending on how bad Verizon  
wants out.  Second, the document points to the federal funds rate as  
of July, which has been cut at least twice since then.  If we're  
really headed into an inflationary recession then this is the best  
time to borrow money.  Third, the PUC is very down on their ability  
to service existing plant with data services (Internet, IPTV).  They  
seem to not want to understand that this isn't their first outing,  
they've repeated that model a few times already, so they probably  
have some credibility.  Most disturbing is that the PUC wants to  
mandate how the company structures their debt and runs its finances -  
I say let a solvent profitable company do what it's doing right - the  
PUC doesn't have credibility here.

>   I also note that same document reiterates that Verizon has also not
> been taking good care of the PSTN in NNE.  I do start to wonder if
> maybe the PUCs are just not doing a very good job of policing the
> telcos.

Ah, well that's a given isn't it? :)  If the PUC mandated FiOS to  
every home within ten years and CLEC access to it, few users would  
have much to complain about.  But I do believe they're taking the  
correct approach by trying to allow the private sector to solve the  
problem before implementing a de-facto government take-over.

>   In rural areas, they sometimes are just that.  That's why everybody
> pays the "Universal Service Fund" charge -- it redistributes the cost
> of bringing POTS to rural areas.  That might include you.  :-)

In my case it doesn't - I live in a fairly dense area of town, with  
almost a dozen homes per mile.  They turn profit between 5 and 9.

But the numbers are really only depressing when you consider the  
antiquated voice-only system.  If you can offer $100 of service over  
the same density instead of $30 of service, then the numbers are much  
more delightful.  That's pretty much Faripoint's business model,  
IIRC.  If everybody decides to turn off and tune out, they're in  
trouble.

So, yeah, I'm acknowledging some real risks with the change, with  
both eyes open.  However, I believe alot of people are seeing that  
and flinching.  They're not looking at the bigger picture in which  
the economy is already suffering due to the lack of broadband  
penetration in the state (I've seen several examples personally, and  
could imagine many more) and future economic development is severely  
hindered by its absence.

Now there is a third option - that this will fair simply because  
there's not enough money in stringing up wires to maintain a  
business.  Verizon sees it as low-profit, many municipalities are  
beginning to implement their own fiber plants, etc.  I've been  
reading recently about the history of the New Hampshire Turnpikes -  
there was a time when many of our roads were privately owned and paid  
for, for about a century and a half or so.  Our wire plant is mostly  
less than a century old.  It could be that we're seeing a tipping  
point on the horizon.  But everytime I hit a pothole and blow out a  
strut I wish there was some competition in roads.

-Bill

-----
Bill McGonigle, Owner           Work: 603.448.4440
BFC Computing, LLC              Home: 603.448.1668
bill at bfccomputing.com           Cell: 603.252.2606
http://www.bfccomputing.com/    Page: 603.442.1833
Blog: http://blog.bfccomputing.com/
VCard: http://bfccomputing.com/vcard/bill.vcf