Sitting pretty: The guy with the cash can play a waiting game if he wants

Published in the Portland Phoenix

There are two players in this daily-newspaper game: the Blethens, and whomever Richard Connor is working with. Connor has cleverly cornered the market on the Portland Press Herald and its sister papers, and is now in what can only be called the catbird seat.

By keeping his interest in buying continually in the public eye, and by occasionally signing letters of intent that lock out other buyers for 30-day periods, Connor has blocked any other prospective suitors (a few were reportedly considering making an offer back at the beginning of the sale process), and he is now in a position to wait. And wait. And wait.

For what? For anything he wants. He's only putting up $250,000 of his own money, and his "financial backer" is only pledging $1.1 million more. Frankly, he could wait until the Blethens are so broke they will accept that pitiful amount as the total purchase price for something they bought 10 years ago for $230 million. That day may not be far off.

And he can wait until more newspapers shut down, which is happening about daily now. That strikes fear into the heart of the Blethens and the Maine employees. Connor, a union-buster from way back, has already gotten the Maine unions to agree to slash salaries and staff numbers for the sake of preserving at least a few union jobs — if they get more worried, they'd probably take almost any carrot Connor might dangle before them, even if it's a rotten one.

If he can line up investors to offer a price the Blethens will take, everyone's happy. If he can't, and waits until desperation sets in even more deeply with both the current owners and employees, the price will drop — as will the prospective salaries, benefits, and employee numbers the unions will accept. He can basically name his price, and pick his time. And if he can't find a deal he's happy with, he can walk away with no penalty and watch the Press Herald die.

Is anybody home? FairPoint finally responds — but not to customers

Published in the Portland Phoenix

As the Portland Phoenix went to press, FairPoint Communications was supposed to submit to state regulators its plan for fixing the problems that have plagued the company — and brought in legions of customer complaints about service interruptions, billing, and even about the process for resolving customer complaints — since it took control of the northern New England telephone lines it bought from Verizon for $2.3 billion last year.

Suggesting that regulators' demands — not customers' feelings — are the best means to force the company to provide proper service, customer dissatisfaction deteriorated to the point where, at the end of last week, the Maine Public Utilities Commission gave the company less than three business days to finish making its "stabilization plan." FairPoint spokesman Jeff Nevins has limited his public comments on the matter to promises that the company would respond by the commission's deadline.

The commission asked FairPoint to describe how it would deal with long-delayed service orders from residential and business telephone customers, as well as with backlogged service requests from phone- and Internet-service resellers such as Biddeford-based GWI.

On top of that, the company was asked to explain what it is doing to "improve its customer call-center performance" (a reference to the high numbers of complaints from FairPoint customers seeking help with their service), as well as "resolve billing errors and related customer confusion" (a reference to, well, billing errors and related customer confusion).

As of press time, the plan had not yet been filed with state regulators, but there is no penalty — apart from additional public embarrassment — if FairPoint meets the deadline.

Text of the same-sex marriage bill Key sections from "An Act To End Discrimination in Civil Marriage and Affirm Religious Freedom"

Published in the Portland Phoenix

Language and careful word choice are important in this discussion. Here is the full official legislative summary of the bill that would legalize same-sex marriage and key excerpts (with explanations) from its legal language. Read the full text of the bill here.

The legislative summary
This bill repeals the provision that limits marriage to one man and one woman and replaces it with the authorization for marriage between any 2 persons that meet the other requirements of Maine law. It also specifies that a marriage between 2 people of the same sex in another state that is valid in that state is valid and must be recognized in this State.

This bill also clarifies that the authorization of marriage between 2 people of the same sex does not compel any religious institution to alter its doctrine, policy or teaching regarding marriage or to solemnize any marriage in conflict with that doctrine, policy or teaching. It also specifies that a person authorized to join persons in marriage and who fails or refuses to join persons in marriage is not subject to any fine or other penalty for such failure or refusal.

The legal language, explained
Be it enacted by the People of the State of Maine as follows:

• Sec. 1. 19-A MRSA §650, as enacted by PL 1997, c. 65, §2, is repealed.
Repeals the "Maine Defense of Marriage Act," which specifies that the legal definition of "marriage" is "the union of one man and one woman."

• Sec. 2. 19-A MRSA §650-A is enacted to read: § 650-A. Codification of marriage: Marriage is the legally recognized union of 2 people. Gender-specific terms relating to the marital relationship or familial relationships, including, but not limited to, "spouse," "family," "marriage," "immediate family," "dependent," "next of kin," "bride," "groom," "husband," "wife," "widow" and "widower," must be construed to be gender-neutral for all purposes throughout the law, whether in the context of statute, administrative or court rule, policy, common law or any other source of civil law.
Replaces the previous definition with a new legal definition of marriage as "the legally recognized union of 2 people."

•Sec. 3. 19-A MRSA §650-B is enacted to read: § 650-B. Recognition of marriage licensed and certified in another jurisdiction: A marriage of a same-sex couple that is validly licensed and certified in another jurisdiction is recognized for all purposes under the laws of this State.
All marriages from other states and countries, whether same-sex or heterosexual, are automatically recognized in Maine.

• Sec. 4. 19-A MRSA §651, sub-§2, as amended by PL 1997, c. 537, §12 and affected by §62, is further amended to include the sentence: The application may be issued to any 2 persons otherwise qualified under this chapter regardless of the sex of each person.
Specifically states that the gender of the two people seeking a marriage application is not a criterion for their eligibility.

• Sec. 5. 19-A MRSA §655, sub-§3 is enacted to read: 3. Affirmation of religious freedom. This Part does not authorize any court or other state or local governmental body, entity, agency or commission to compel, prevent or interfere in any way with any religious institution's religious doctrine, policy, teaching or solemnization of marriage within that particular religious faith's tradition as guaranteed by the Maine Constitution, Article 1, Section 3 or the First Amendment of the United States Constitution. A person authorized to join persons in marriage and who fails or refuses to join persons in marriage is not subject to any fine or other penalty for such failure or refusal.
Clarifies that this act does not affect the rights of any church or other religious group to define "marriage" in its own terms for religious purposes; clearly separates "civil marriage" from "religious marriage," and specifies that this bill is only addressing the legal implications of "civil marriage."

• Sec. 6. 19-A MRSA §701, as amended by PL 2007, c. 695, Pt. C, §4, is further amended to remove the specific statutory bar to same-sex marriage contained in paragraph 5, which now reads: 5. Same sex marriage prohibited. Persons of the same sex may not contract marriage.
Deletes the line in Maine law that bans same-sex marriage.

• Other parts of the bill involve: 1) gender-neutral rewording of marriage-related language (example: changing the language prohibiting marrying close relatives from words barring a man from marrying his mother, grandmother, and so on, to language barring all people from marrying their parents, grandparents, etc.); 2) deleting the specific denial of marriage rights to Maine residents who got same-sex marriages elsewhere; 3) language that is not being changed by the bill, or is only being changed in minor clerical ways (such as to correctly count the number of paragraphs or sections in the bill).

FairPoint's finances are failing fast

Published in the Portland Phoenix

Two major safety valves in the financial house of cards that is New England's largest landline telecommunications service provider blew last week, leaving FairPoint Communications in a position of significant weakness, even as the company admits that its financial picture will worsen in the short term.

The North Carolina-based company, which bought Verizon's northern New England operations last year, had always made questionable assumptions when arguing it had the financial wherewithal to do the deal. (See "No Raises For Seven Years," November 16, 2007, and "No Raises — It Gets Better," November 20, 2007, both by Jeff Inglis.)

Regulators at the Maine Public Utilities Commission and its counterparts in New Hampshire and Vermont were so concerned that when they approved the $2.3 billion deal, they specified several limitations intended to preserve FairPoint's long-term financial stability.

But recent documents filed by FairPoint with state and federal regulators show that "stable" isn't exactly the right word for its current status.

The company has asked regulators in Maine, New Hampshire, and Vermont for permission to miss a March 31 $11.25 million quarterly payment to creditors, saying that while the states' public-utilities commissions had required the payment as a condition of the Verizon purchase, FairPoint's actual lenders don't require any money until the end of June.

"FairPoint is essentially reneging on the agreement," says Wayne Jortner, senior counsel in Maine's Office of the Maine Public Advocate, a state agency charged with defending customers' interests in utilities regulation.

The company is promising to make up the payment by the end of the year, to meet its state-mandated obligation of paying $45 million annually to reduce the heavily leveraged company's debt load. And Jeff Nevins, FairPoint's Maine spokesman, says the request will allow "more financial flexibility." But that flexibility may not help it keep that promise, based on the company's March 4 filing with federal securities regulators.

In that document, the company announced that it is suspending dividend payments entirely, and offered no date on which they may resume. This is alarming for two reasons. First, FairPoint is a holding company designed and intended to pay shareholders the kind of significant dividends earned from operating telecommunications companies (in previous quarters, it has paid as much as 36 percent). The company lost $68.5 million last year — down more than $100 million from a $32.8 million profit in 2007 — but had nevertheless been projecting paying out $93 million in dividends in 2009. The Maine PUC, through spokesman Fred Bever, calls the move "consistent with the commission's order" because it protects "customers against financial issues FairPoint might encounter." It nevertheless is a shift in the company's business model, though Nevins is quick to note that the company intends to continue "returning cash to shareholders over the long term."

But perhaps more important, ordering a reduction or elimination in dividends was one of the tools state regulators had in reserve to force FairPoint to strengthen its financial position if the regulators believed the company was in trouble. Now that tool is no longer available — and therefore, the means by which state officials could try to protect telephone customers is weakened.

"Our biggest concern is that this is not the start of something bigger," Jortner says. "We really need to get some reassurances." He expects to get that data and have formed an opinion based on it by March 13, and the Maine PUC may hold a hearing on March 16.

The picture gets worse. FairPoint is losing customers at a steeper-than-expected rate, which is, in turn, reducing its income. At the same time, FairPoint has warned federal regulators that its troubled transition to a new billing system — which meant delays in sending out bills, leading to receiving payments later than projected — could mean further cash shortages, even taking into account the suspended dividend.

And that's actually a best-case scenario. While Nevins says the billing system is now working properly, dozens of other systems still need to be transitioned. And buried in pages of boilerplate warnings about the future (such as the non-startling "the price of our common stock may fluctuate substantially"), the March 4 filing warns that "Due to, among other things, the size and complexity of our Northern New England operations, . . . we may be unable to integrate the (former Verizon) business in an efficient, timely and effective manner."

Even if they get it working, there will be far fewer customers to serve than FairPoint was hoping for. While numbers are not yet in for the first quarter of 2009, which includes the first months that FairPoint was actually running the show, 97,000 Maine residential customers have dropped their landlines since January 2007, when the sale was announced. Residential subscriber numbers dropped 7.3 percent in 2007, but as the sale approached, the decline accelerated, with an additional 10.5 percent of residential customers dropping service in 2008.

Many of them have gone to cellular phones or telephone service provided over the Internet, often via phone-Internet-TV packages sold by cable television companies. And FairPoint has recently re-emphasized its longstanding position that the key 21st-century telecom technology, fiber optics, is not in its plan — the company told the Wall Street Journal that a private plan for several Vermont communities to build their own fiber network "isn't necessary." Rather, FairPoint plans to bring them much-slower DSL service — eventually.

Press Releases: Countdown

Published in the Portland Phoenix

With last week's news that Portland Press Herald managing editor Bob Crider has been summoned back to the state of Washington to run a Blethen-owned paper there, the countdown to the end of the Press-Herald-as-we-know-it has begun in earnest.

In 2006, the Blethens moved Crider from the Blethen-owned Yakima Herald-Republic, where he had spent nine years as managing editor, to Portland to be the ME here. Now, they're bringing him back to be the top editor in Yakima.

In the advertising and management departments, Blethen family members have already departed; last to go was Rob Blethen, who left his job as director of advertising at the PPH six months ago for a post as the associate publisher of the Walla Walla Union-Bulletin, another family-owned paper.

This withdrawal is unsurprising, but it lays the groundwork for three possible outcomes: two bad, one uncertain, and all three potentially leaving the city without an established daily paper.

• First up, of course, is the continuing prospect that the Portland Press Herald and its Maine siblings might fold entirely, leaving their buildings to a real-estate deal (see "After the Fall," by Jeff Inglis, August 1, 2008).

Richard Connor, a Bangor-raised Pennsylvania newspaperman, continues to claim he is trying to buy the papers, but of his three 30-day letters of intent to purchase them in the past year, two expired because the needed financing didn't come together. The third, signed February 17 — which, like the previous two, included an escape clause in case the money fails to materialize a third time — is just days away from running out. (No other players are in the running, though Connor and the Blethens could sign a fourth letter of intent if they were so inclined.)

If the paper closes, the buildings it occupies might fetch $30 million for their property value alone (see "Herald or Harbinger?" by Jeff Inglis, July 4, 2008). But that's probably a high estimate, given the Blethens' eagerness to get out of Maine, and the economic collapse, which has led to a drop in commercial-property values.

• The second bad possibility is that the Press Herald will continue publishing in limbo indefinitely, but without effective leadership. While plenty of media watchers around town will say that's been true for ages, the perennially just-over-the-horizon appearance of a new owner (who's likely to signal regime change by ordering top management to pack their desks) will surely vaporize whatever clout Jeannine Guttman, editor at the PPH, and Eric Conrad, executive editor of the Kennebec Journal and Morning Sentinel, still hold. Neither is likely to follow Crider to Washington: Both arrived pre-Blethens, in 1994 and 1995 respectively; Conrad left in 2006 for a job in Connecticut but returned to the Blethen Maine fold less than a year later.

• The third outcome — the uncertain one — is what might happen if Connor actually closes the deal. He has been a hands-on editor-publisher in Wilkes-Barre (even writing a 1450-word personal endorsement of John McCain to counter his editorial board's 375-word Barack Obama endorsement; both appeared in the October 26, 2008 issue of that city's Times-Leader).

He is remembered in union circles as a vicious strike-breaker and union-buster (dating back to the late '70s), and though Maine union officials speak of him in positive and even cheery tones, he's driving a hard bargain. His offer: union workers get a collective 15-percent ownership stake in a near-valueless company and the prospect that some of them will keep their jobs, in exchange for a wage freeze, longer working hours, and what even union folk expect will be significant layoffs — on top of the massive staff-slashing that went on in 2007 and 2008.

Whether it collapses, pokes along aimlessly, or takes an all-new form, tomorrow's Press Herald will be nothing like today's.