Most of the objections about the Verizon-FairPoint telephone-company merger proposal do not hinge on whether either of them is providing any kind of worthwhile, valuable, or useful telephone service.
The proposal, in which industry giant Verizon would sell the wired-telephone parts of its business in northern New England (including the wires, switching equipment, maintenance staff, and everything else) to industry midget FairPoint Communications, is relevant in Maine — and New Hampshire and Vermont — mainly in terms of what it would mean for rural customers who want high-speed, broadband Internet access.
Everyone involved — the two companies, the merger’s opponents, and state officials — talks about the deal’s impact on bringing DSL broadband Internet service to rural Mainers. This is indeed a concern in many remote parts of Maine, although state figures show that, overall, 85 percent of Mainers already have the option to choose broadband service via cable-Internet or wireless access, if not DSL.
While the states’ public utilities commissions technically regulate only telephone service, and not Internet access, DSL enters the discussion because it can be provided over regular old copper telephone wires, so long as those lines are properly maintained and equipped.
The trouble with this debate is that DSL is the wrong topic. We should be talking about fiber-optics technology, which transfers data over laser beams through glass wires. Because fiber-optic lines are capable of handling telephone, Internet, television, and other communications of the future, fiber optics is widely accepted as the immediate future of high-speed Internet connections. It is currently being rolled out by Verizon in major population centers around the country, including New York City, Boston, and Washington, DC. Whether the $2.7-billion Verizon-FairPoint deal goes through or not, the problem is that our state officials haven’t noticed that DSL is the wave of the past.
Lighting the world
Nationally, Verizon operates about two-thirds of the 1.3 million fiber connections to homes, according to the Fiber to the Home Council, a nationwide non-profit agency combining towns, utility companies, real-estate developers, and Internet service providers working to encourage the connection — by whomever is best equipped to do so — of fiber to every home in the US. (Today, just under two percent of US homes have fiber connections, the council says.)
Verizon’s fiber customers are primarily in large urban areas where population density (and therefore the number of prospective customers) is high enough to justify the cost of installing fiber. But many of the homes connected to fiber other than Verizon’s are, perhaps ironically, in rural places where town officials or smaller companies have decided to install it to boost economic development, according to FTTH Council president Joe Savage.
Seems like a good idea. “We’re the slowest in New England as far as download speeds,” says Peter McLaughlin, the business manager of the union representing Maine’s Verizon employees, which is a member of the national Communications Workers of America union’s research project on US Internet-access speeds. The union — looking to expand employment opportunities for its members — is lobbying to get companies to increase bandwidth, and to get government regulators to require universal Internet availability.
Through a variety of initiatives over many years, Maine has been trying to build rural economic development, including DSL-focused efforts to bring better Internet service to the hinterlands. The state is even looking to boost the number of telecommuting workers; Savage suggests fiber to the home may be faster than businesses’ office connections. But not even the few legislators who have commented to the Maine Public Utilities Commission (PUC) about the FairPoint deal have mentioned fiber; one didn’t even mention DSL.
That’s too bad, because Maine actually has a lot of fiber already. Many Maine high schools and colleges are connected by a fiber-optic “ATM” network, which is mostly used for videoconferencing now. Maine has fiber-optic backbone running throughout the state, between telephone-company switching offices, in major connections by cable-television companies, and in downtown Portland and Lewiston-Auburn. Oxford Networks sells fiber to the home — in Maine. And Verizon is letting homes in a few Maine towns right on the New Hampshire border get fiber service from its Portsmouth center.
Vermont is in about the same place as Maine: Verizon provides no fiber to Vermont homes, though some communities have it, through either municipal initiatives (like Burlington’s) or small, independent companies. New Hampshire is better off, at least in the southern part of the state, where Verizon does offer fiber connections to homes in some areas.
In Maine, aside from those few homes next to New Hampshire, Verizon has no fiber to the home. FairPoint, which has phone customers in 18 states, offers fiber-optics to residential customers in four states (none in New England), but only in sizable housing developments being constructed on land with no previous telephone or Internet service.
If the Verizon-FairPoint merger is approved, FairPoint says it will spend about $40 million ($13 million to $14 million in each of the three states) to expand DSL service to some areas that don’t have it, and roll it out over the next few years to cover as much as 93 percent of their customer base here.
By that time, we’ll be behind again. Savage, from the fiber council, estimates that in 15 years, 80 percent of US homes will have fiber connections.
Not us, though: Maine public advocate Richard Davies (the state official whose job is to represent Maine consumers in public-utilities deals) just made a deal with Verizon in which the company agreed to invest $12.5 million to expand broadband in Maine, but not with fiber. “Because they’re looking to sell out, it was not logical” to ask for anything other than DSL, he says. Verizon, in exchange for installing old technology, gets to wait until next year before PUC officials will determine whether the company has been overcharging customers by as much as $30 million a year for the past six years. (By that time, Verizon won’t be here, and Davies’s agreement will leave the rate battle to FairPoint.)
The head of one telecom company in Houlton (where Internet service is provided by small, independent local companies) suggested the $12.5 million be given to the ConnectME Authority, a state agency set up to bring broadband Internet to rural Mainers without any broadband options at all.
That sum would dwarf the $500,000 the Legislature has allocated to be split among several companies seeking to debut broadband service in rural areas of Maine. The rest of the money to fund ConnectME will come from Mainers, who this fall will begin paying an additional monthly surcharge (0.25 percent) on their telephone and Internet bills.
Of course, ConnectME has no plans to roll out fiber-optics anywhere in Maine, either, and is just hoping to get any kind of broadband at all to rural Maine before we’re completely left behind. “DSL is certainly not the leading technology, like fiber,” says Phil Lindley, acting executive director of ConnectME, “but it’s certainly something that will serve people’s broadband needs for a while.”
Left in the dark
Verizon knows fiber is the real future: the company has been taking profits from Maine and other rural areas around the country (like the rural Midwest and West Virginia), and investing that money not to improve telecommunications in the places the money came from, but to put the real broadband, fiber-optic cables, in densely populated areas like New York City, Boston, and the area around Washington, DC.
Now Verizon wants to get out of northern New England — and its other rural landline businesses (see sidebar, “Verizon Unloads”) — to focus on fiber elsewhere. In getting out, Verizon would leave us to a small, heavily indebted company (FairPoint) whose best plan is to invest less money in system upgrades than Verizon ever did, and to have those system upgrades get Mainers’ service to a level city-dwellers are already beginning to discard as too slow.
What if the deal failed, and Verizon had to stay (at least until it found a new buyer)? Verizon spokesman Peter Reilly said the company wouldn’t comment on what would happen in the “hypothetical” case that the sale — which must be approved by three states and the federal government — could fall through, leaving us to put the pieces together on our own. The picture isn’t good.
In Maine, Verizon is already the subject of some complaints to the Public Utilities Commission from rural customers about the unavailability of high-speed Internet (including one titled “Request for commission action to implore Verizon to implement the use of DSL” from 21 business owners and 12 residents in The Forks and West Forks, the central-Maine home to the state’s whitewater-rafting industry).
Verizon has made clear its lack of interest in being in the landline phone and wired-Internet business here. If the sale to FairPoint is blocked, Verizon will have no incentive to maintain its services, wires, or anything else — in fact, neglecting its customers and employees will serve to shift opposition to the sale into support as people insist on getting decent service.
Davies says the PUC has “very broad powers” to force Verizon to provide minimally acceptable telephone service, though that may involve going to court if Verizon is reluctant to do what is required. And those powers don’t address broadband service, which is not regulated by the PUC or state law.
Davies thinks that if Verizon tried harder to market its landline and broadband services — and if the company expanded broadband offerings in Maine — the company could do better here. As it is, “they’ve sort of said over the last couple of years, ‘we’re not going to invest in the state,’” Davies says.
Seeing the light
And while FairPoint talks a great game about how they will bring outdated, slow DSL to rural Mainers who are still stuck on dial-up, they’ll have to spend a lot more than they’re expecting, to do even that.
There is no outside evaluation of the condition of the wires Verizon would transfer to FairPoint (it’s protected as a company secret), but there are people who have a good idea of what they’re like.
McLaughlin, whose union members maintain the lines, estimates that FairPoint should expect to spend “a couple hundred million” dollars just to repair the existing copper wires to a condition where they can handle DSL traffic.
“Publius,” a pseudonymous Verizon employee who started the VerizonVsFairPoint.com Web site to distribute information about the sale, says FairPoint is dreaming if they think it will be relatively cheap to improve service in northern New England.
“There is absolutely no way” that the installation of the equipment FairPoint is talking about would, on its own, bring broadband to the rural masses, says Publius, who withholds his real name for fear of losing his job.
The wires are in terrible condition, he says, many having been in place for decades and repeatedly spliced back together after wind or trees or car crashes knocked them down. Not all of those splices (of between 1000 and 2000 tiny 22-gauge copper strands in each wire) are perfect, as you might imagine, and there are plenty of places — such as the Concord, New Hampshire, neighborhood discussed in an August 2 Concord Monitor article — where the combination of age and bad connections means that Verizon phone service cuts out whenever it rains.
So repairing them will be expensive. And if FairPoint is going to invest millions — much less McLaughlin’s projection of hundreds of millions — what about fiber-optics?
Rather than replacing the old copper wires with new copper, Savage of the fiber council suggests installing new fiber — he even says doing so can be cheaper in some circumstances, but not really in rural areas where the distances are great.
In places like that, he says, our best bet is to arrange some sort of joint venture between the government — local or state — and telecommunications companies, in which the government would grant some sort of benefit to the company in exchange for bringing fiber to homes.
If only our state officials thought about fiber.
For seven years, Verizon has been busy getting itself out of the landline business around the country, and around the world. Here are the highlights:
2000 Verizon sells 133,000 landlines in WISCONSIN to a couple of local telephone companies for $365 million.
SEPTEMBER 2002 Verizon sells its shares in NEW ZEALAND Telecom, a landline company in that country.
SEPTEMBER 2002 Verizon sells 675,000 telephone lines in MISSOURI,KENTUCKY, AND ALABAMA for $2.6 billion to CenturyTel, a publicly traded company based in Louisiana.
APRIL 2004 Verizon announces it will sell Verizon Dominica (serving the DOMINICAN REPUBLIC), and its shares of phone companies in PUERTO RICO AND VENEZUELA, to a couple of Mexico-based telephone companies for $3.7 billion. The deal affects 15 million landline, broadband, and wireless customers.
OCTOBER 2004 Verizon announces the company is looking to sell 15 million of its nearly 50 million landlines AROUND THE NATION, to focus on wireless service and high-speed Internet connectivity.
MAY 2005 Verizon sells 700,000 lines in HAWAII for $1.65 billion to private-equity firm the Carlyle Group (a company backed financially by both former president George H.W. Bush and members of Osama Bin Laden’s family).
MAY 2006 Verizon’s hopes to sell 3.4 million landlines and related operations in ILLINOIS, INDIANA, MICHIGAN, AND OHIO are reported in the Wall Street Journal Online, and is seeking to earn between $5 billion and $6 billion from that deal. In addition, its hopes to sell its northern New England lines for between $2 billion and $3 billion.
JANUARY 2007 Verizon announces that it will sell its NORTHERN NEW ENGLAND operations, including 1.6 million landlines, for $2.7 billion to FairPoint Communications.