Courts allow photographs of documents

Published in the Portland Phoenix

Back in September, we told you that a Maine judge had issued a secret, unwritten order barring people from taking pictures of court documents (see "Speak Now, or Forever Pay for Copies," by Jeff Inglis, September 28). The practice, a popular tactic among reporters and members of the public alike to avoid the expense of buying official copies (at $2 for the first page and $1 for each additional page), had been permitted by court officials for more than five years. Last week, a memo went out from state-court administrator Ted Glessner to all Maine court clerks and their staffs re-authorizing the practice.

There has been no formal change of policy, but that too is in the works, according to Maine Chief Justice Leigh Saufley, who says the court system expects to take another two months to finalize new rules regarding using cameras in courtrooms during proceedings. The two topics are related because the no-cameras-in-courtrooms rule at the moment bars cameras from entering courthouse buildings at all, which would obviously prevent taking pictures of paperwork.

In the meantime, regarding the specific act of photographing documents, there will be “an internal order that tells everybody it’s okay,” Saufley says.

“It’s perfectly appropriate for people to use cameras to take photographs of documents,” she says, noting that existing rules — and the ones under consideration to replace them — bar people from photographing only participants in a trial, including judges, witnesses, attorneys, and defendants, without the judge’s prior written permission.

The larger problem is that “every single cell phone sold today has a camera in it,” Saufley says — and many laptop computers, too. Cell phones, cameras, and laptop computers are banned from the federal courthouse in Portland (though laptops are allowed for a “privileged few,” such as attorneys working on cases, according to federal-courthouse staff).

Saufley says the Maine courts have a tradition of being more open to electronics than the federal courts. (Also, the federal limits are at least partly offset by Internet access to court filings, which are not available for state-court cases.)

But while people can again bring cameras into state courthouses for the purposes of photographing documents, and Saufley appears unenthusiastic about banning cell phones and laptops from courtrooms, using cameras during trials and other court proceedings will likely continue to be restricted.

Court officials have talked to members of the state’s television media about their needs, and the state’s advisory Committee on Media and Courts is at work on crafting rules that would, in effect, state that “we don’t want to stop people from bringing cameras into the courtroom,” Saufley says, but “you can’t use cameras” there without advance permission.

Shopping advice from the star: The Marden’s lady lets you in on her secrets of surviving Black Friday

Published in the Portland Phoenix

If anyone in Maine knows how to shop with gusto, it’s the Marden’s lady. You’ve seen her all over the TV — you may have even seen her around town. The woman knows how to spot bargains, values, deals, and great items like nobody else in the state.

She doesn’t give out her name because of “trouble with paparazzi,” but we managed to find her, which led right into one of her problems: “One of my hardest things about shopping is the people that follow me because I am not only glamorous and a sex symbol, but they know I’m a consummate shopper. Sometimes I go in disguise.”

The Portland Phoenix convinced her to take a break from shopping in a quiet part of town, and got her to share her thoughts on how to survive — and even to thrive — on Black Friday.

ADVANCE PREPARATION
“You gotta start early,” she says. “Like about a week and a half, two weeks in advance, you gotta start stocking up on the mini-marshmallows. ... You start drinking cocoa and you think of everything you can stick ’em in. Load the sugar on, because from here on out, it’s gonna be a sprint.”

She also observes that you might not be able to fit everything you buy into your car at once, and advises: “Get a few rental storage units, strategically placed between shopping areas, so you can drop off what you’ve got and go on to the next place. All you gotta do is rent ’em for a week.”

THE DAY BEFORE
“You don’t ever want to eat turkey on Thanksgiving. All that tactrotactlycicerin or trychtelactin, everything that slows everybody down. ... The goal is to get speeded up. My mantra is ‘Caffeine, caffeine, caffeine, burn, baby, burn.’ ... Tofu turkey is never okay. I’ve eaten enough tofu in my life to know that. ... The bottom line of Thanksgiving is to stay away from things with feathers. If the Pilgrims had stayed away from everything with feathers, there’d be a lot more Native Americans here today.”

GETTING READY TO GO
What to bring
“Allen’s Coffee Brandy could come in handy. I suggest you always keep your flask with you. I store mine in my hat.” Also, “Daddy’s wallet. Daddy’s huntin’ while I’m shoppin’. The men are all out wandering with their guns at all hours.” We think that means they don’t need their wallets.

Dealing with kids
“Daddy can’t take ’em huntin’ and you can’t take ’em shoppin’. You gotta feed them a lotta lotta turkey, and you tuck ’em into bed real tight. If they’re too young to be on their own, then maybe you have the neighbor kid look in on ’em.”

Dress the part
“Get deep into your own kind of style, because that is going to help your intuitive being. Do not wear one of those coordinated tracksuits — you’re gonna be confused all day.”

IN THE STORE
Find the perfect item
“It is kind of a religious experience. You walk in the store and you gotta receive, and when you start seeing an aura in a particular aisle, you gotta run. Until you see that aura, I suggest you run in place. You don’t know where they’re going to have hid the best stuff, so you gotta stay ready.”

Handle other shoppers
“I think a Taser might come in handy.”

Keep up your health
“It’s imperative at one point during the day to get some of that fresh-air shopping — do not miss it. Inhale short, quick breaths to recharge.”

If you shop in groups
“Be very careful, because you can avoid strangers, but it’s always your friends that hurt you the worst. If a friend grabs that one item you had your eye on, she won’t put it down. You can will a stranger to put an item down and then you grab it, but a friend know it’s worth something to you. ... I never shop in a herd. I like it when Daddy goes huntin’ alone — it’s safer.”

Share deals with friends
“Stay connected, cell phone at the ready, but hands-free. Do not call arbitrarily. A good friend is gonna buy two — if she finds something she’s going to buy two because she knows you need it. That may be difficult when it comes to ponying up for the things she bought you, though. ... You can lose good friends. If they like it and you didn’t buy them something, they won’t forgive you.”

WRAPPING UP
Find a checkout line
“Pick a cashier that’s smilin’. If they’re not havin’ fun, then you’re not gonna have fun.”

Pay for your purchases
“Always pay in cold, hard cash. However, cash can be hard to come by, so what you want to do and what you end up doing are two different things.”

Get it to the car
“You’ve seen those people on TV who carry things on their heads. There’s a real advantage to that because when the cart’s full, you can push it with one hand and hold more on your head with the other. Also, people get out of your way."

Sidebar: PUC filings: Selections from the redacted text

Published as an online exclusive at thePhoenix.com

1: condition 1, p 3

The proposed transaction must be restructured to allow FairPoint to reduce its bond debt level by $600 million, thereby reducing the associated interest expense and debt leverage levels. A $600 million reduction in bond debt for the new enterprise is important and appropriate because:

the bond debt will carry a materially higher interest cost than the bank loan;

the bond debt issuance is at this point entirely uncommitted and subject to prevailing difficult credit market conditions;

bond debt reduction results in debt leverage ratios that are lower and more consistent with the Embarq and Alltel spin-offs (although still not as low);

bond debt reduction results in debt leverage ratios that are more consistent with investment grade bond ratings, which in turn are crucial for a public utility providing a necessary and essential service under challenging business conditions;

bond debt reduction will increase cash flow and permit further discretionary reduction of bank loan debt;

even if bond debt is reduced at this level, proceeds to Verizon [BEGIN SUPER CONFIDENTIAL] will still exceed the implied wireline valuation as calculated by Verizon. [END SUPER CONFIDENTIAL]

2. (footnote 17, p 12)
17 The amount of debt that would be borne by FairPoint was an important consideration for Verizon. Its original information letter, sent to sent to parties possibly interested in purchasing the NNE properties, asked for [BEGIN CONFIDENTIAL] “the specific total dollar amount of debt” that the FairPoint could support. [END CONFIDENTIAL]

3. (footnote 34, p 20)
34 There is no doubt about the risk that interest rates will rise, and FairPoint recognizes that risk. The federal funds rate that is contained in [BEGIN CONFIDENTIAL] the “Control” page of the FairPoint financial model is 4.75%. [END CONFIDENTIAL] However, the federal funds rate, as of July 12, 2007, was already higher -- at 5.25%. Brevitz Direct, p. 41, ll. 20-24.

4. p 21
FairPoint is not [BEGIN CONFIDENTIAL] making a commitment to use its surplus cash to reduce [END CONFIDENTIAL] its debt. 39 FairPoint’s financial model suggests that by the year [BEGIN CONFIDENTIAL] 2015, FairPoint would have reduced its debt by $318 million. However, as Walter Leach confirmed at hearing, that reduction is only an assumption, made for modeling purposes. FairPoint is making no plan and no commitment to reduce its debt over the next seven-year period. [END CONFIDENTIAL]40Id

5. p 21, footnote 38
38 Id., p. 43, ll. 1-3. Even with its limited ability to hedge interest rates, FairPoint remains exposed to trends of increasing interest rates, particularly since [BEGIN CONFIDENTIAL] its financial projections show that it will continue to have significant long term debt, and will have to refinance most if not all of that debt, $1.5 billion or more, at or before maturity. [END CONFIDENTIAL]Brevitz Direct, p. 43, ll. 3-8.

6. p 21, footnote 40
40 In its response to OPA-I-30-6, FairPoint states [BEGIN CONFIDENTIAL] “FairPoint has not made and is unwilling to make a binding commitment to use cash flows after dividends solely for debt reduction.” [END CONFIDENTIAL]OPA Exhibit# 25.

7. p 23, footnote 45
45 Originally FairPoint proposed a debt leverage ratio for the new entity of “3.25 to 3.5 times earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, which would result in a leverage ratio of 3.6 to 3.7 times EBITDA for the combined company.” FairPoint Communications Form S-4A, filed July 2, 2007, p. 55. FairPoint expressed reservations about taking on higher levels of debt: [BEGIN CONFIDENTIAL] “although we believe that pro forma leverage for NewCo could potentially be raised as high as 4.5x, providing maximum de-leveraging for Verizon, we do not believe this would be positively received by the equity markets as a more conservative leverage level.” [ENDCONFIDENTIAL]Brevitz Direct, p.24, ll. 21-24, fn.28. However, it appears that Verizon’s interests prevailed in negotiations because the debt leverage of the proposed transaction as announced is 4.1x. Brevitz Direct, p.25, ll. 1-3.

8. p 23, footnote 46
46 The advice provided to FairPoint by Lehman Brothers concludes: [BEGIN CONFIDENTIAL] “For tax reasons, a cash sale is not attractive for Viper whereas the Spin/RMT structure would be tax-free; to qualify as a tax-free transaction, Viper must retain 51% of equity following the transaction, but can own more; Viper also intends to use a debt-for-debt swap to achieve greater tax-free deleveraging.” [END CONFIDENTIAL]OPA #112 (FairPoint HSR documents, attachment 4(c)-3, Project Nor’easter Discussion Materials, Lehman Brothers, February 20, 2006, page 6.)

9. p 28
There is no “low hanging fruit” here.

[BEGIN CONFIDENTIAL]
2006 REVENUE PER LINE

Local
Services
& LD
$ 368 FAIRPOINT
$ 371 ALSK
$ 385 IWA
$ 400 CTL
$ 422 CNSL
$ 443 CZN
$ 465 NNE
$ 501 WIN
[END CONFIDENTIAL]

10. p 29
There is no “low hanging fruit” here.

[BEGIN CONFIDENTIAL]
2006 REVENUE PER LINE

Access
Services &
USF
$ 197 CZN
$ 210 NNE
$ 347 ALSK
$ 377 IWA
$ 399 WIN
$ 408 CTL
$ 486 CNSL
$ 524 FAIRPOINT
[END CONFIDENTIAL]

11. p 29
The results of the disaggregated analysis of the data & internet category are also shown in Table IV. It shows that NNE’s revenues per access line from this category are at the bottom of a wide range. There is revenue opportunity here, but it is not “low hanging fruit” due to the fact that DSL service revenues [BEGIN CONFIDENTIAL] as projected in the model are driven by very substantial penetration rate assumptions already accounted for. (“Detail” tab, rows 55 and 58). The model has consumed the fruit in its assumptions. [END CONFIDENTIAL]

12. p 30
Furthermore, the DSL model results show the importance of assumptions regarding charges between affiliates, in particular the DSL line sharing charge assumed in the model.

29

[BEGIN CONFIDENTIAL]
2006 Revenue Per Line

Data & Internet
$ 40 NNE
$ 51 WIN
$ 96 ALSK
$ 114 FAIRPOINT
$ 130 CNSL
$ 155 IWA
$ 163 CTL
$ 195 CZN
[END CONFIDENTIAL]

13. p 33, note 61
61 Loube Direct, p. 28, ll.14-16. According to FairPoint’s financial model, “Other ISP” revenue increases from [BEGIN CONFIDENTIAL] $5.6 million in 2008 to $16 million in 2010 and then drops back to $5.3 million in 2012. Those estimates are driven by percentage change estimates. However, there is no connection between the percentage change estimates and other features of the model. [END CONFIDENTIAL]Loube Direct, p. 28, ll. 14-19.

14. p 33, note 63
63 The Commission should also question the reasonableness of the assumptions made in FairPoint’s model regarding revenues from local service. However, it is difficult to identify those assumptions. [BEGIN CONFIDENTIAL] Reviewing the model, it is not possible to assess what FairPoint’s underlying assumption might be regarding loss of access lines over time. Nevertheless, it is clear from Verizon’s due-diligence materials that Verizon believes FairPoint is underestimating future line loss rates. [END CONFIDENTIAL]Brevitz Direct, pp. 76-77.

15. p 34
** Unrealistic Assumptions As to Annual Operating Expenses.
With respect to operating expenses, the assumption in the financial model is that for the 2008-2015 period FairPoint is expecting those expenses [BEGIN CONFIDENTIAL] to remain virtually flat [END CONFIDENTIAL]64

However, that assumption is completely unrealistic. For, example, it is not reasonable to assume, as the model does, that FairPoint NNE will have [BEGIN CONFIDENTIAL] zero [END CONFIDENTIAL] wage increases for seven years. There is no reason to believe that, over the next seven years FairPoint’s operating expenses will not be affected by cost increases from suppliers, increases in the cost of gasoline and electricity, wage increases, and other inflationary increases. Over the last five years, Verizon’s NNE properties have had a unit operating-expense growth rate of about 6% to 7%.65 In the twelve months ending March 31, 2007, FairPoint’s per-unit operating expense increased by 8.1%.66 Iunreasonable to expect that FairPoint can reduce that growth rate to the rate of growth assumed in its financial model.

16. p 35, note 67
67 For the key years of 2005, 2006, 2007, and 2008, [BEGIN CONFIDENTIAL] 79% to 82% of the operating expenses in the model cannot be tied to a verifiable source. [END CONFIDENTIAL]
Brevitz Direct, p. 81, ll.17-22.

17. p 35, note 68
68 FairPoint’s projections of the up-take for DSL over the next four years cannot be accurate because it has not been able to develop the specifics of its broadband deployment plans:[BEGIN CONFIDENTIAL] FairPoint will not have access to detailed plant records until after the closing of the proposed transaction. “Due to the fact that detailed plant and engineering records and resource relating to the to-be-acquired properties will not be available until after the transaction closes, FairPoint had to make a number of assumptions in generating the Maine Broadband Plan.…”[END CONFIDENTIAL]Brevtz Direct, p. 85, ll. 3-8, citing FairPoint’s response to OPA II-10-1.

18. p 36
** Different Balances for Shareholders Equity. The inputs to FairPoint’s financial model with respect to the balances of shareholders equity are not reasonable. The model projects negative balances for shareholders equity that are significantly different than the balances that FairPoint has projected in its Form S-4A report to the Securities Exchange Commission (SEC). Negative equity is an indication of the financial weakness of FairPoint. In its SEC report, FairPoint projects that starting in 2007 shareholders equity will decline almost $900 million dollars, to a negative $218 million in 2015.71 However, FairPoint’s financial model projects different balances for shareholders equity – balances that are significantly [BEGIN CONFIDENTIAL] more negative. [END CONFIDENTIAL] 72 In short, the inputs used in the model—which do not reflect reality -- appear to be part of an effort to “sell” the proposed transaction.

19. p 36, note 70
70 For UNE-L’s, for the years 2008 through 2012, FairPoint’s model projects [BEGIN CONFIDENTIAL] growth rates in the range of 14% to 20% annually. Those projected growth rates are substantially higher [END CONFIDENTIAL] than the annual growth rates experienced for UNE-L’s nationwide. Brevitz Direct,p. 86, ll. 4-13. Dr. Loube makes the same points at pages 33-34 of his Direct Testimony.

20. p 36, note 72
72 The financial model projects that, starting in 2008, the balances for shareholders equity will decline [BEGIN CONFIDENTIAL] by approximately $590 million dollars, to a negative $452 million in 2015. [END CONFIDENTIAL]Brevitz Direct, p. 87, ll. 9-11.

21. p 37, note 76
76 Indeed, in one of its Hart/Scott/Rodino documents, FairPoint’s senior management acknowledged the risk of unplanned capital expenditures that exists because FairPoint does not know the condition of the NNE operating plant. FairPoint acknowledged a “challenge” regarding [BEGIN CONFIDENTIAL] “unknown plant quality—probably poor—may consume a lot of capex to compete with Time Warner”. [END CONFIDENTIAL]Brevitz Direct, p. 60. ll.13-15; OPA Exhibit #112(FairPoint HSR Documents, Attachment 4(c)-11, at page 1). The FairPoint financial model simply [BEGIN CONFIDENTIAL] extends past Verizon capital-expenditure patterns forward, and does not adjust for the “unknown plant quality—probably poor” that it will begin operating after close of the proposed transaction. [END CONFIDENTIAL]Brevitz, Direct, p. 60, ll.16.19.

22. p 39, note 83
83 In its financial modeling, FairPoint did perform one “Material Adverse Change” scenario that was designed essentially to assume that no synergies occurred. That scenario shows that, with no synergy effect, [BEGIN CONFIDENTIAL] each year FairPoint would face climbing leverage ratios, and have essentially no cash left after payment of expenses, interest, taxes and dividends. [END CONFIDENTIAL]Brevitz Direct, p. 58, ll.4-11. That scenario suggests that the financial success of the transaction depends, in part, on full achievement of the estimated synergy savings – which, in turn, suggests that the proposed transaction is pretty risky.

23. p 42
** Employee Pensions or Other Post-Employment Benefits. The model makes the (inappropriate) assumption that, post closing, FairPoint will [BEGIN CONFIDENTIAL] have no expenses for either employee pensions or other post-employment benefits (OPEB). The model assumes (also inappropriately) that FairPoint will not incur those types of expenses for its newly hired “incremental” employees. [END CONFIDENTIAL] 95

24. p 47
This analysis indicated that, based on the Verizon stock price at that time, its wireline business had an [BEGIN CONFIDENTIAL] implied wireline multiple of 3.7x 2007 EBITDA. [END CONFIDENTIAL]99 Comparison of that EBITDA multiple to the proposed NNE transaction multiple of 5.6x 2007 EBITDA shows the extent to which FairPoint is overpaying for the NNE wireline business compared to the market’s judgment as to what that wireline business is worth.

25. p 48
Verizon’s valuation materials demonstrate that the upper end of valuation estimates is [BEGIN HIGHLY CONFIDENTIAL] produced by “acquisition comparables”, and is $3.04 billion, compared to the $2.715 billion proposed transaction price.100 The lower end of the valuation range is produced by discounted cash flow analysis, and is $2.064 billion. Hence, it can be seen that the transaction valuation as proposed is in the upper third of the valuation range—and for “a car without the engine”. [END HIGHLY CONFIDENTIAL]

Furthermore, the same document demonstrates that the proposed transaction price is well above [BEGIN HIGHLY CONFIDENTIAL] the implied valuation of Verizon’s wireline business in its stock price. Verizon’s own analysis demonstrates that the market values Verizon’s wireline business at 3.7 times 2007 EBITDA. On the other hand the transaction price results in FairPoint paying 5.6 times 2007 EBITDA. [END HIGHLY CONFIDENTIAL]

26. p 49
100 OPA # 94 Verizon HSR documents, “Confidential Presentation Materials prepared for the Verizon Board of Directors Regarding Project Noreaster”, Merrill Lynch, January 15, 2007, page 13.

101 CITE, Transcript, Brevitz, xxx.

Verizon’s own data and analysis support Mr. Brevitz’s statement at hearing that Verizon is charging FairPoint too much for the transaction, even though FairPoint has agreed to it. In effect, FairPoint has agreed to a “bad deal”.101 The fact that the transaction is for “a car without the engine” greatly exacerbates this “bad deal”. The Public Advocate’s recommendation that the amount of debt proposed for FairPoint be reduced by $600 million serves to bring the proposed transaction to a place that ameliorates the considerations above, but still results in proceeds to Verizon [BEGIN HIGHLY CONFIDENTIAL] that are well above Verizon’s implied wireline valuation of 3.7x, down from the transaction price of 5.6x to 4.4x. END HIGHLY CONFIDENTIAL]

27. p 73
Of particular note is the fact that FairPoint’s financial model assumes a monthly payment from the unregulated entity to the regulated telephone company of [BEGIN SUPER CONFIDENTIAL] $30.11 [END SUPER CONFIDENTIAL] per DSL line per month.133 See, Ex RL-10 of Loube Surrebuttal, Response to ODR-16. While examining super confidential exhibit RL-10 attached to the surrebuttal testimony of Dr. Loube, Mr. Leach agreed that, when viewed as a stand-alone business, the DSL business BEGIN SUPER CONFIDENTIAL: loses more and more money as time goes on:

MR. JORTNER: Okay, now let’s turn to the gross margin which is line 296 which is the line that the OPA added and this -- on the margin reported on row 296 are all negative and getting larger all the time, is that correct?

MR. LEACH: Generally that’s correct, yes sir.

MR. JORTNER: And if those numbers are correct it would indicate that the company is losing money on all these services correct?

MR. LEACH: No, that’s not correct. I think you cannot look at that number without the inner-company eliminations because part of the reason those margins are negative is because part of the cost structure is revenue being paid to the telephone company for providing these kind of services.

MR. JORTNER: Right and that’s what I’m getting to next because we’re trying to look at the DSL business by itself. So when we -- I’ll get to that issue. In fact the difference between the two pictures of profit has to do with the cost of goods sold, eliminations which are row 297, correct?

MR. LEACH: That’s correct. [END SUPER CONFIDENTIAL]. TR Oct. 3 at 45-46.

28. p 86
In addition, evidence in this proceeding reveals two other bases to conclude that FairPoint would be acquiring a utility with rates that are already inflated. [BEGIN CONFIDENTIAL]: On cross-examination, FairPoint witness King was asked to explain the large distinction between the higher costs allocated by Verizon to northern New England’s regulated utilities and the much lower comparable costs of other ILECs that Mr. King analyzed. Although Mr., King was hesitant to agree with Mr. Hagler that this necessarily represented “regulatory failure,” Mr. King candidly admitted that Verizon’s high cost allocations did not seem reasonable based on his experience. TR Oct. 5, at 11. Moreover, in Verizon’s HSR document, Confidential OPA Ex. 94, Verizon describes as one of FairPoint’s interests as (under “Access Line Market Characteristics), “Potential disposition lines are less dense, have fewer business customers and fewer areas targeted for FTTP, but produce higher margins than VZ average.144(emphasis added) [END CONFIDENTIAL]

No raises — it gets better: Fewer workers are also part of FairPoint’s plan to remain solvent

Published as an online exclusive at thePhoenix.com

FairPoint, as you might expect, has been in a tizzy since my story on the “unrealistic” financial assumptions underlying that telecommunications company’s attempt to swallow Verizon (see “No Raises for Seven Years,” by Jeff Inglis, November 16). Let’s hope the speed and quality of its response is not a sneak peek at how the company will respond to customer problems if it is allowed to take over phone service in Maine, New Hampshire, and Vermont.

After last week’s Phoenix story came out, the company took a day and a half to have a PR person call (and then, not even from FairPoint directly, but from a Portland flack firm). And after I told the PR guy who called that I would love to talk to someone at FairPoint, it took them another day and a half (plus a weekend) to get someone “authorized to speak” on the phone with me.

Walt Leach, FairPoint’s executive vice-president for corporate development, told me it was “misleading” to say that FairPoint wouldn’t give workers raises for seven years. Though he agreed that the company was expecting not to pay any more wages in 2015 than it will pay in 2008 (after the merger, if it goes through), Leach promised to “honor the existing contract” with Verizon’s 2700 or so union workers in Northern New England, and even to “extend it under existing conditions” if the unions would like.

But, Leach continued — and gave by far my favorite “explanation” from FairPoint about what was wrong with my story: FairPoint will hire 675 new workers, as promised to state officials (to tempt them into the deal), getting its total number of workers up to somewhere around 3400 in all three states. The company predicts that four percent of all those workers will leave within a year — including the equivalent of four percent of the 675 new hires! (Though “not necessarily” just-hired staffers, he says.)

Those workers will not be replaced (Leach calls it “attrition”), so, he says, FairPoint will have plenty of money to give raises to the ones left — the ones with more work to do (like handling billing and payments), with more equipment to install and maintain, the ones on whom residents of Maine, New Hampshire, and Vermont will be depending for reliable phone service (including E-911 service during life-threatening emergencies).

Leach says the company expects its employee numbers to drop by a little more than four percent every year — as landline-customer numbers decrease over time — and says the money those departed workers won’t be making will be enough to cover everyone else’s raises into the future.

Digging the hole deeper, Leach notes that the company’s financial model includes $142 million for dividend payments to shareholders, and says that money could be repurposed “if it’s needed” to improve service to telephone customers. But that puts dividends before service. Leach admits the company has not constructed its model to have $142 million in cash available to make service better (the company does not know how much it will cost to bring Verizon’s existing lines up to workable standards), and then — only if there is money left — to pay dividends.

While still trying to disprove my analysis of filings with the Maine Public Utilities Commission, Leach adds something new: I knew, based on PUC filings, that the company didn’t expect to spend any more money on its operations in 2015 than it would in 2008, but Leach revealed that the company also expects to make the same amount of money on its telephone service in 2015 as in 2008.

But even he calls the landline business “declining.” And sure, Leach says, FairPoint believes its service features can convince customers to stay longer and buy more services than Verizon’s customers do with their phone company now. But he has — and makes — no guarantees of that.

Reasonable doubt
All this — companies’ internal projections, market predictions, assumptions about revenue and the like — matters so much not because every company has to (or even does) behave rationally. Just this company — and any other corporation that is granted a government-approved monopoly to deliver vital services (such as water, sewer, electricity — and telecommunications).

“What our members intuitively know about FairPoint has come to light,” says Rand Wilson, who has been leading “stop-the-sale” efforts for the labor unions involved. The company, he says, is “run on a back-of-the-envelope, pie-in-the-sky basis.”

Pete McLaughlin, business manager for IBEW Local 2327, which represents many of the Verizon workers in Maine, says it seems to him that the company is “making business assumptions that are unrealistically optimistic.”

Normally, utilities companies’ full-scale business models and predictions over time are not of much concern to regulators, says Wayne Jortner, senior counsel at Maine’s Office of the Public Advocate, which works on behalf of the public in cases before the state’s Public Utilities Commission. In most mergers, the issues are “usually pretty clear. There’s really no issue of economic viability” after the merger, Jortner says.

In this one, however, there are significant questions, which have resulted in FairPoint being required to file detailed business plans, with which Jortner and his colleague, Deputy Public Advocate Bill Black, have found significant fault.

Which is not to say that Black, in particular, is glad this information is public.

“If somebody has gamed the system and used some sort of technological loophole to find and reveal information that we are bound to keep confidential by law, it is certainly unfortunate,” he says. When I tell him that a watchdog blogger (at verizonvsfairpoint.com) has posted confidential information from PUC filings, and a method for getting that information — by copying-and-pasting it right out of electronic documents provided by Black’s office — Black gets frustrated.

“The requirements of the proceeding have been violated,” he says. He won’t say by whom, but will admit to being “very unhappy.”

Keeping secrets
As the law now stands, companies involved in PUC proceedings have to answer a lot of questions about how they operate, and about their finances. As a trade-off for being forced to open themselves to scrutiny, companies can designate information as confidential, to keep some of their internal projections from becoming known to competitors, labor unions, and the public. The PUC staff, and the Public Advocate’s staff, “get absolutely everything,” says Jortner — the restrictions are on who else can see the information.

There is a process for claims of confidentiality to be challenged, but in this case, Black says, his office has spent time fighting for its own access to information, never mind fighting for others to be able to see it, too. And he adds, “these cases involve lots and lots of paperwork and lots and lots of information and it is not possible to ... object to everything.”

Maine House Speaker Glenn Cummings (D-Portland) is watching the proceedings closely, and says the confidentiality provisions are a concern.

With the “high level of public investment and a high level of public interest in the outcome” of the deal, he says Maine consumers need to be sure that the PUC’s ultimate decision is one in which they can have confidence.

Because “some of it can’t legally be transparent,” he says, “we all suffer.” As a result, he and other lawmakers are concerned about “making sure that those processes are transparent” and ensuring they can “hold the PUC accountable for that transparency.”

Cummings is worried that the process has allowed FairPoint to keep secret not just arcane technical and budgetary details, but sweeping assumptions underlying its entire business model. “Long term, it raises a question of public transparency and public access to vital information,” he says.

More questions
Now that the information is out, even more questions are coming up. Cummings is still uncertain about whether the deal would ultimately work out well for Maine, but is now even more concerned about FairPoint’s finances, asking, “was this simply a shell game to help Verizon avoid taxes, or is FairPoint a company that can build infrastructure and deliver?”

Governor John Baldacci, a business-friendly Democrat, is more circumspect, says his spokesman, David Farmer, who observes that Baldacci appoints members of the PUC and the OPA, and says the gov is therefore trying to stay out of the details. He “thinks that Maine needs more investment in broadband capabilities,” and wants to be sure that any company that promises investment can deliver it.

Numerous people have written letters to the Portland Phoenix, saying they want the deal killed, or at the very least expressing serious concerns about it. One Verizon worker wrote, “I am afraid of the repercussions this will have not only on the state of Maine but on my fellow union brothers and sisters. We are in fear of losing our jobs.”

The next development in Maine is a report from PUC staff, analyzing all the filings and suggesting a course of action for the commissioners to take. That may be released before Thanksgiving.

McLaughlin, from the Maine union, says he hopes that report and the OPA’s analysis will prove persuasive: “I just hope that the Public Utilities Commission is listening to the stuff they’re being told by the experts.”

The aftermath
The deal is unlikely to be killed outright by regulators in any of the three states that must approve it, say observers and insiders alike. And “nobody is projecting it would be approved with no conditions,” says the OPA’s Jortner.

Rather, all three states are expected to be planning to put significant conditions on it — the most onerous is Jortner’s and Black’s recommendation that the purchase price be reduced by $600 million. (That’s one of 24 conditions suggested in Maine; Vermont’s regulators have received recommendations for 56 conditions, including requiring FairPoint to create a Vermont-only subsidiary whose finances and performances would be tightly controlled by its Public Service Board. New Hampshire has yet to issue recommended conditions for the sale.)

Any one of those conditions, or some combination of them, may cause Verizon or FairPoint to walk away from the deal. Or they may continue with it. (Verizon’s Maine spokesman never returned any calls seeking comment.)

“I expect to see a substantial, major sum of money from Verizon,” says union spokesman Wilson — he estimates at least $200 million and perhaps as high as $600 million, which could be knocked off the deal’s price tag or otherwise kicked in by Verizon to get FairPoint off to a better start.

“It’s going to be a brand-new company,” says Wilson, noting that the deal would more than quadruple the number of customers — and employees — FairPoint now has. “Having it be nearly $2 billion in debt on day one is not seen as an auspicious beginning.”

Click here to read the full-length redacted text from the Office of the Public Advocate (PDF)

Anti-activist bill backed by Collins, Allen, and Michaud

Published in the Portland Phoenix

US Senator Susan Collins and both of Maine’s US representatives are backing legislation that could result in more incidents like the November 2 run-in between police and eco-activists in Greenville.

Environmental and civil-liberties advocates fear that the “Violent Radicalization and Homegrown Terrorism Prevention Act of 2007,” which has already passed the US House, would make such intimidation by police more common — and more legal.

The bill creates a commission to study ways the government can prevent “the use, planned use, or threatened use, of force or violence” by anyone, including American citizens, “in furtherance of political or social objectives,” or “to promote . . . political, religious, or social beliefs.”

US Senator Susan Collins, who is seeking re-election next year, is the bill’s lead Senate sponsor. Her chief challenger for re-election, 1st District Democratic representative Tom Allen, voted with the 404-member House majority in favor of the legislation on October 23. So did 2nd District Democrat Mike Michaud. (Six members of Congress were opposed, and 22 abstained.)

All three Maine lawmakers — through their spokespeople — say they support protestors’ First Amendment rights and reject any suggestion this bill could result in intimidation of peaceful protestors, but activists fear increased bullying all the same.

“It’s inappropriate for the government to determine what is or is not an extremist belief system,” says Shenna Bellows, executive director of the Maine Civil Liberties Union. “This bill goes too far in attempting to limit freedom of thought and expression.”

“Any folks who have a dissenting opinion could be endangered,” says Emily Posner, one of three Native Forest Network volunteers cited November 2 for trespassing on the parking lot of Plum Creek corporation’s Greenville office, while filming footage for a documentary on the company’s proposed resort-development project around Moosehead Lake, which the NFN opposes.

Plum Creek officials told the Bangor Daily News they have been rigorously enforcing their “no trespassing” signs since 2005, when the company’s equipment and property was vandalized, and some was stolen.

The encounter went beyond a parking-lot standoff: after the NFN volunteers were cornered by a private security guard, they were allowed to leave, but were later tracked down by members of three law-enforcement agencies (a Greenville policeman, two Piscataquis County sheriff’s deputies, and two Maine Game Wardens) and questioned further, including about whether the group — armed only with a video camera — was violent or had any explosives, according to Posner.

Posner says she denied an officer’s request to search her car because he lacked a search warrant, and adds that the officer responded that her answer made him suspicious. She quoted him as saying, “It seems like you really know your rights, but you’re trying to hide something.”

She fears the new law could make things even worse, with activists “being tied up the courts,” distracted from their constitutionally protected activism.

And even the proposal of the law is an obstacle, Posner says, noting that now people who would otherwise be calling attention to social and environmental problems have to lobby DC politicians to keep their First Amendment rights unsullied.