Corporate Albatross Dept.: FairPoint's struggles continue

Published in the Portland Phoenix


It has been a very long time since our last FairPoint update, but you can rest assured that the North Carolina-based landline provider's downward slide has continued, as the company attempts to restructure its way out of crushing debt through bankruptcy-court protection. Here are a few gems from the past few months.


First up, and most recently, on August 5, MAINE TAXPAYERS GAVE FAIRPOINT A $1.1 MILLION GIFT, when Maine Revenue Services agreed to accept just shy of $400,000 as payment "in full" of a $1.5 million tax bill the company owed the state.

But new math appears to be the way, as the COMPANY'S ACTUAL VALUE IS IN SERIOUS DOUBT. In its October 2009 bankruptcy filing, the company claimed its assets, as of June 2009, were $3.236 billion, with debts of $3.234 billion. An independent valuation of the company, however, set its total worth at between $1.8 billion and $2.1 billion. In another filing, FairPoint says its northern New England assets are worth $1.2 billion — far less than the $2.3 billion the company paid (including $1.7 billion in actual cash), to Verizon to take over landline service in Maine, New Hampshire, and Vermont, a takeover that was delayed several times before finally becoming effective at the end of 2008.

Also, ITS BUSINESS MODEL IS FAILING. The bankruptcy filing is clear: "FairPoint has been unable to attain the performance levels it projected at the time of the acquisition" of Verizon's northern New England business. In 2008, 8.5 percent of customers who had been with FairPoint before the merger cut their landlines. That's pretty bad, but customers who joined FairPoint in the Verizon switch left even more quickly: 12.3 percent of them bailed in 2008 alone, according to court documents. That's a big increase from the 7.3 percent subscriber loss Verizon experienced in 2007, which FairPoint's plan had projected it would beat (meaning lower losses, not higher).

The COMPANY HAS TROUBLE FORESEEING THE FUTURE in other ways, too. Beyond FairPoint's bizarre pre-merger projections, Vermont's Public Service Board (its equivalent of Maine's Public Utilities Commission) ruled in late June that "FairPoint has provided virtually no explanation" for its service-quality promises, saying that "based upon the record before us, we cannot find that FairPoint has demonstrated the financial capability to meet its obligations under Vermont law and its (state license) as a telecommunications carrier."

For that matter, FAIRPOINT HAS PROBLEMS VIEWING THE PAST ACCURATELY. In February, the company announced that it had overstated 2009 revenue by 3 percent, or $26 million.

The COMPANY HAS LEVERAGED ITS BANKRUPTCY TO TAKE ADVANTAGE OF STATE REGULATORS in Maine and New Hampshire, getting permission to delay paying millions in poor-service-quality penalties, and even the potential for them to be waived altogether, if service improves. FairPoint also was given extra time in those two states to roll out its outdated version of broadband Internet access to rural customers. Vermont regulators have so far held firm, but FairPoint is asking them to reconsider, and if that fails the company is expected to ask a federal judge to overrule the state officials.

This is particularly ironic in Maine, because FAIRPOINT HAS SPENT MONEY TO LOBBY AGAINST A HIGH-CAPACITY BROADBAND NETWORK to be built with state, federal, and private funds. The company has argued that such an effort would unfairly compete with the slower-speed and later-arriving service FairPoint promises it will one day get around to providing. But federal funds aren't the real issue: having failed to receive any of the $38 million in economic stimulus money it applied for a year ago, the company has nevertheless applied again, this time seeking $20 million in federal funds to build out its network.

In the past five months, two TOP EXECUTIVES HAVE LEFT, AND ARE BEING REPLACED WITH EXECUTIVES WITH PRIOR CORPORATE BANKRUPTCIES ON THEIR RESUMES. Alfred Giammarino, who became FairPoint's chief financial officer in September 2008, resigned March 31 for what were called "personal reasons." He was replaced July 18 with Ajay Sabherwal, who was CFO for Choice One Communications leading up to, during, and after that company's 2004 bankruptcy restructuring. And David Hauser, appointed CEO in June 2009, was asked to resign by the company's major creditors and did so in mid-August. He has been replaced with Paul Sunu, who was CFO of Hawaiian Telecom when that company, another former Verizon landline property, entered bankruptcy protection in 2008.

And then, if all that wasn't enough, FAIRPOINT HAS ARGUED THAT IT SHOULD FACELESS SCRUTINY FROM STATE AND FEDERAL REGULATORS after it emerges from bankruptcy. Specifically, the company told Vermont regulators that their oversight puts the company at a competitive disadvantage when offering Internet and television services that are not regulated by the state, in combined packages with landline service, which is regulated.

In making this argument, FAIRPOINT HAS FORGOTTEN THAT IT PROMISED THE PUBLIC MORE AND FASTER INTERNET ACCESS as a key element in its argument that its takeover of Verizon would benefit the public. Now that it has sought — and received — permission from state regulators to delay and renege on those promises, the public benefit is reduced. No wonder FairPoint wants less regulation.

Press Releases: Maine's broken e-mail system

Published in the Portland Phoenix

When Naomi Schalit of the Maine Center for Public Interest Reporting asked for electronic copies of e-mails between the chairman of the Maine Public Utilities Commission and representatives of companies the PUC dealt with, she did not expect to receive a cost estimate of $10,000 from the state — nor to be required to pay $80 for the privilege of receiving that estimate.

And when she wrote back asking for that exorbitant fee to be waived, as allowed in state law, because she is a reporter for a non-profit organization publishing its material in more than 20 newspapers around the state, she did not expect to get a revised estimate of $36,239.52. (Happily, she was not charged to receive that new figure, though in a passing encounter with the PUC's chief lawyer, she did have to hear complaints about "all the work you're making us do.")

The cost is clearly outrageous, and a barrier to public access to information that belongs to the public. But here's the really surprising thing the Portland Phoenix has learned from just a little research into the matter: the estimate reflects the state's actual cost to extract the information from its e-mail archive, which is so cumbersome that it's next to impossible to actually use.

Greg McNeal, Maine's chief information officer, says he and his staff have calculated that responding to a similar request (from an attorney involved in a lawsuit relating to state government) would take one of his two e-mail technicians an entire year of full-time work.

Hence the sky-high dollar amount: Even with a statutory limit of $10 per hour of state-employee time responding to freedom-of-information requests, the process of e-mail recovery is so lengthy that expenses easily rise into tens of thousands of dollars.

This clearly is not just delaying — and inflating the cost of — Schalit's request, but court proceedings, and even internal state investigations performed at taxpayer expense (McNeal confirms that his agency bills other state agencies similar amounts for similar services.)

McNeal calls the backup mechanism "archaic," and says he has been lobbying to improve it for some time now, but the state lacks both funding and a working example to adapt to Maine's needs.

State archivist David Cheever uses the word "nightmare" to describe this situation, and goes on to say the e-mail backup system is "entirely unworkable."

But Cheever and McNeal both say this is not a problem unique to Maine, which has roughly 12,000 state e-mail accounts, with thousands upon thousands of actual messages, which must all be backed up in a way that must somehow or other be accessible to the public and yet secure from destruction (and, in e-mail messages with criminal-justice information, secured from prying eyes according to strict federal rules).

Neither of them is aware of a state government that has a timely, inexpensive storage-and-retrieval method for state officials' e-mail messages. (For that matter, Cheever says he just got back from a trip to the National Archives, which has also not yet devised a functioning system for billions of federal e-mails.)

The state can't afford to experiment to find something that might work: "We don't have the money to be wrong," Cheever says. But every state is in that boat, and so all of them are sitting around waiting for someone else to experiment long enough to make something work.

Schalit's reaction to this information was partially relief (that she apparently isn't being singled out for obstructionism by state officials wary of her reporting), but also outrage. Calling the existence of a system like this "mind-boggling for anybody who has an interest in history," she says, "If this is the kind of system they have installed for government business, there's something wrong with the system."

But it's Cheever who has the best summary of the way things are right now for anyone interested in how state government is actually functioning: "There's your haystack. Good luck with the needle."

Music Seen: Street musicians at First Friday Art Walk, Portland, August 6

Published in  the Portland Phoenix

With the Tower/Building of Song on hiatus while its creators move apartments (again), the street-music scene on First Friday was quieter than in recent months. But that left more aural room for buskers along Congress Street.

In a two-hour gallery-browsing stroll from Monument Square to Longfellow Square and back, we heard nine musical performances (two other people looked like they might be about to start playing, but didn't in the time we lingered in anticipation).

A traditional Americana fiddler outside the Maine College of Art got us going with a toe-tapping rhythm and a little shuffle of his feet. But something echoing down the street caught our ear, and it turned out to be a man smoothly playing soulful jazz on his saxophone very nearby — just outside SPACE Gallery.

Two guitar players were next, a female singer-songwriter with some original tunes outside Two Point Gallery and a man strumming Spanish-tinged airs on a classical guitar outside the Empire.

Outside the Green Hand Bookshop were three women merrily fingering their accordions, giving our turn to head back toward the Monument a little extra jaunt. At least until we encountered a young man with a synthesizer outside Strange Maine. He was working the electronica-plus-drum-machine end of his small keyboard, extracting haunting, ethereal sounds that in some cases seemed to surprise even their creator. (His abstraction meshed startlingly well with the classical guitar across the street. Perhaps there's a collaboration option there?)

Down by LL Bean, a man was playing two different-sized recorders simultaneously, fairly capably handling a pair of two-handed instruments without help. And then he switched to saxophone, with a big-band sound.

Next on our way was a woman strumming on a banjo and doing vocals that are best described as shouting. She was outside MECA (the fiddler had moved on), and her friends were whooping it up around her, possibly having too much fun than could be reliably ascribed to their muse of the moment.

Finally, as we left the Art Walk to go in search of sustenance, a lonely Cranky the Clown School Dropout was mournfully tending to his saxophone, sitting beneath the gaze of Portland, To Her Sons Who Died For The Union.

Press releases: Crimes and hoaxes

Published in the Portland Phoenix

Portlanders collectively sucked in their breath with fear when the story broke last Tuesday morning on Facebook and the local news media: a 20-something woman had reported to police that she had been attacked and sexually assaulted by a group of men while she was walking on Baxter Boulevard at 9:30 pm the night before.

The story, as told by the police to the press, was scary: the woman was followed by five men, who forced her to the ground, held her down, and assaulted her until a passing motorist yelled and scared the assailants off. After the bizarre one-punch killing of Eric Benson in Monument Square in May, it seemed like random horrific violence might really have come to Portland after all.

Tuesday afternoon, Portland Police Chief James Craig held a press conference near the suspected site of the attack, asking anyone who had seen or heard anything to come forward to help with the investigation. But less than an hour later, Craig was telling the media that the woman had made up the whole story and was herself being charged with the crime of filing a false report.

The city's mood went from terrified to bewildered. Why would someone make up a report like that? (The best, though still decidedly murky, answer on offer so far is that the woman had some kind of fight with her partner.) And then, how could someone have snookered the police and the media so thoroughly? The media and police have long had to deal with hoaxers and their ilk — but those isolated incidents are magnified with the power and speed of online social networking. So while both parties rushed to judgement — and will probably do so again — the audience was a lot bigger for the entire debacle than might have otherwise been the case.

It is sad but true that most assaults, even rapes and murders, in Portland and elsewhere are not random violence involving a victim and aggressor who have never met, but rather between people who know or are even related to each other. An attack may be horrific and tragic, but it rarely means there is a serial assailant on the loose. The incident is newsworthy, but less urgent, giving the police and the media a little bit of time to assemble facts and issue a more complete report.

But when information comes in that suggests that a group of unknown marauders is out attacking unknown victims, the police and the press rightfully get alarmed, and want to warn the public as quickly as possible — in hopes of preventing anyone else getting hurt for lack of timely warnings.

That urgency, though, means fact-checking time is limited. Even more than usual, the media are stenographers for officialdom — whatever the police say is broadcast, published, and posted online. And even more than usual, the police give an incomplete version of events — what they say is utterly dependent on a single person's anguished report.

This scramble happens a second time when the story is found to be a hoax. Police and the media rush to retract their earlier warnings, eager to reassure people that no, in fact, there is not a mob out attacking women, but rather a disturbed woman telling stories for unexplained reasons.

And then the rest of the information comes out — the police had known the woman was reluctant to go to the hospital to allow medical staff to collect DNA samples as potential evidence. And wait — isn't that specific stretch of the boulevard, between Hannaford and the road to North Deering, fairly well-traveled even after dark?

Those red flags might have caused a cop — or a reporter — to pause and ask more questions, but not in that rushed situation. Those inquiries came later, in the follow-up investigation and reporting. But just as Craig says he'll respond the same way to similar reports in the future, it's just as likely that the media will too.

Music Seen: Chris Teret + Man Forever + Guitar Cloud at SPACE Gallery, July 17

Published in the Portland Phoenix

When Kid Millions (Oneida) brought his new project, Man Forever, to SPACE Gallery, it was more than an opportunity to see a friend I have long known as a drummer with unusual intensity and stamina. It was a chance to see four more drummers like him — one even a local standout — at the same time, pouring sound and sweat in equal volumes into the cavernous SPACE.

Opener Chris Teret knew Kid from the past too — Kid had produced Old Baby, the 2008 Brah Records release by the band Company, of which Teret is part. He began with a few songs in his haunting voice, standing stock still, moving so economically it was almost as if the guitar itself birthed the notes and the vocals came from out of thin air.

But then, starting suddenly with a unanimous thunderous roll on snares, toms, kickdrums, and cymbals, Kid, Brian Chase (Yeah Yeah Yeahs), Shahin Motia (Ex Models, Oneida), Andrew Barker (Gold Sparkle Band), and local Andrew Barron (Cult Maze, Domino Harvey) put out a physically solid, powerful roar that Just. Kept. Going.

It was a nonstop half-hour of continuous pounding, a whirlwind of arms, legs, heads, and the occasional flying drumstick. The coordinated improvisation produced rumbles and resonance that shifted from subway-train-approaching to calving-iceberg (due not only to the performers' physical prowess, but also to Chase's pre-show efforts, tuning the drums precisely to B or F-sharp). One particularly furious collective flurry looked like a group seizure but sounded like the Earth was coming apart around us.

Bassist Richard Hoffman (Sightings) joined in after a time, and later gave the drum corps a break with a screeching, wailing solo that blistered whatever eardrums were left in the spare but rapt audience.

After the Man Forever inundation came Guitar Cloud, another planned-improv endeavor, with more than a dozen guitarists jamming together in a collective drone that broke apart into themes, anthems, and solos — sometimes soft, other times overwhelmingly loud, and always dancing on the edge between control and madness.