Wednesday, September 14, 2011

We Told You So Dept: FairPoint layoffs were always part of the plan

Published in the Portland Phoenix

While FairPoint executives are saying that the 400 layoffs the company announced last week are related to "workload" and "competition," they're hoping everyone forgot that their business model — especially in northern New England — requires regular downsizing to have a prayer at success.
The North Carolina-based telecommunications company, which promised to create as many as 675 jobs starting in 2008 if it was allowed to buy Verizon's landline business in Maine, New Hampshire, and Vermont, is now getting rid of 375 jobs in those three states (and 25 jobs in other states FairPoint serves).
Back in 2007, the Portland Phoenix broke the story that FairPoint's business model contained several questionable assumptions, including that the price of gas for company vehicles would not increase for seven years, and that spending on employee salaries and benefits would stay flat as well. (See "FairPoint: No Raises For Seven Years," by Jeff Inglis, November 16, 2007.)
When that story came out, FairPoint's executive vice-president for corporate development, Walt Leach, called to clarify my initial assumption that FairPoint wasn't planning raises. Rather, he said, the company predicted that as many as four percent of its workforce would leave every year, and there were no plans to replace them. The savings from having fewer workers would provide enough money to give raises to those who stayed, Leach told me. (See "No Raises: It Gets Better," by Jeff Inglis, November 30, 2007.)
That's cold comfort for the 150 people whose jobs evaporated with less than a week's notice. Pete McLaughlin, of the International Brotherhood of Electrical Workers, the union representing all of the laid-off people, says FairPoint could have let them go the day of the announcement, but agreed to keep them on for a few days. Another 75 or 80 so-called "temporary" workers, hired by FairPoint to handle the transition from Verizon, hold what McLaughlin says the company calls "critical" positions. The temporary workers holding those jobs will stay on until permanent employees — another 150 of whom are also finding their jobs eliminated — are reassigned to take their places.
Temporary workers, who occupy roughly two-thirds of the jobs being eliminated, get no severance or other compensation for being let go. Adam Fisher, at the Maine Department of Labor, said his agency would be working with FairPoint to provide services such as career-center access and information about unemployment benefits and health-care coverage. McLaughlin said the AFL-CIO's "rapid-response" team is already involved helping workers prepare for their transitions.
The move has renewed criticism of FairPoint from labor sources. McLaughlin says many workers and organizers were quiet about problems they see within FairPoint before the layoffs were announced, in hopes that the company would find its way out of its struggles.
Now that it's clear FairPoint, which needed a federal court's protection to escape bankruptcy as a result of the terms of its 2008 purchase, remains in serious trouble, the critics are raising their voices once more.
"This company's been in a downward spiral," McLaughlin says, citing a "revolving door of leadership," and expressing concern that the company may never be able to emerge from its cash-flow problems.
He attributes many of the company's difficulties to the back-end management and maintenance computer system set up as part of the purchase. (Verizon refused to transfer its actual customer, technical support, and service-call database structures to FairPoint, requiring the new buyer to build its own system from the ground up to both accommodate Verizon's data and, FairPoint hoped, streamline the company's workflows.) McLaughlin says the new computer system still doesn't work efficiently, which means that the layoffs are getting rid of productive workers. "Everybody's busy . . . working overtime every day," he says. As the staff gets smaller, the workload will increase, and the inefficiencies will multiply.
McLaughlin's criticism raises significant concerns about FairPoint's ability to provide service at the level required by state regulators. Thomas Welch, chairman of the Maine Public Utilities Commission, told the Phoenix that the commission would be watching FairPoint carefully, and is prepared to issue penalties if the company fails to meet state-mandated standards for service performance.
Welch says FairPoint has been "struggling" since the takeover, and though he has seen "significantly better" outcomes this year than in the past, the company's still not where it needs to be, in terms of providing service and maintenance. He noted that LD 1466, a law passed in the most recent session of the Maine Legislature, has somewhat limited the PUC's ability to impose penalties, but hopes the remaining threat will keep FairPoint moving in the right direction. The key, he says, is to make sure "the customers don't get caught in the backwash."
FairPoint spokespeople Jeff Nevins and Meghan Woodlief did not return multiple phone calls seeking comment for this story.