Press Releases: Shields up

Published in the Portland Phoenix

Reporters around the state should mark two dates on their calendars. One is July 18, the day the state’s journalist-shield law takes effect, protecting journalists’ confidential sources and information from governmental intrusion. The other is April 24, the day the Maine Supreme Court told government officials in Maine that they can be protected from public scrutiny, even if they mislay or misuse millions of taxpayer dollars.

The journalist-shield law passed the Legislature unanimously and was signed into law by Governor John Baldacci right as the legislative session drew to a close in April. Proposed by Portland Democratic Representative Jon Hinck, it protects journalists from being forced by courts to disclose the identity of confidential sources or the information they reveal, on the principle that such protection will help preserve the free flow of information to the public. (Disclosure: In my role as president of the Maine Pro Chapter of the Society of Professional Journalists, I testified in favor of the bill and in favor of several suggested amendments, some of which survived the legislative process.)

The shield law does lay a groundwork where none previously existed in Maine, but it still doesn’t address the kind of problem that arose late last year when a Maine judge ordered 15 media organizations to open their notebooks to lawyers for a company that was afraid it might be sued in connection with a 2006 fire in Biddeford. (See “Legislature Moves to Protect Maine Journalists,” by Jeff Inglis, October 19, 2007.) Journalists typically object to having their work used for purposes other than to inform the public — such as to benefit a private party in a lawsuit.

But because the information given to reporters at the fire was not confidential, it would not be protected under the shield law, though “that seemed like a very reasonable thing to have included ... and I was sorry to have it dropped,” says Hinck.

The bill also fails to include a legal definition of the term “journalist.” While that does allow anyone — full-time reporter, Web publisher, blogger, pamphleteer — to make the case that they are one, Hinck worries that it might take several cases in which people are denied shield-law protection before state courts clarify who qualifies and who does not.

On the other hand, you’re screwed
State government agencies picked up a shield of their own recently when the Maine Supreme Court ruled on April 24 that giving the public access to information discussed in a Portland School Committee executive session would be “absurd” — even though what was discussed was the degree to which the superintendent and other employees were responsible for a $2.5-million budget deficit.

The school officials argued that the school staffers’ roles in the egregious shortfall was a “personnel matter.” The Portland Press Herald argued that knowing how $2.5 million in taxpayer money went missing is a matter of great public interest.

And while the school ultimately ended up releasing most of the information the Press Herald had requested, the Supreme Court’s ruling provided all government agencies cover for hiding budget-management problems behind closed doors, if they just call those problems “personnel matters” — as opposed to “who lost the taxpayers’ money matters.”

Preti Flaherty attorney Sigmund Schutz, who argued the case for the Press Herald, says the court has placed the public’s right to know about how taxpayer dollars are managed below public employees' interest in keeping job-performance shortcomings secret from the people they serve.

“The court has put great emphasis on the need for secrecy in governmental affairs,” Schutz says, marveling at the ruling that the newspaper’s argument might “lead to the absurd result that there could never be a discussion in executive session about personnel whose responsibilities are fiscal or monetary.”

But as Schutz notes: “It’s never absurd to find in favor of the public’s right to know.”

Portland Phoenix Best Music Poll on WCSH's 207 (with Dominic and the Lucid)

Aired on WCSH's 207

Union seeking rich person to purchase daily newspaper

Published in the Portland Phoenix

Newspaper employees, 600 +/-, and their labor union in search of rich, secure sugar daddy (or mommy, or daddies, or mommies, or some of each) for long-term relationship to provide stability, income, employment.

The union representing most of the employees at the Portland Press Herald/Maine Sunday Telegram and its sister paper, the Waterville-based Morning Sentinel, is hoping to find a wealthy local resident (or more than one) to put up the cash that would enable the union, Portland Newspaper Guild Local 128, to buy the papers (and the Augusta-based Kennebec Journal, whose workers are in a different union) from the Seattle Times Company, controlled by the Blethen family, which has owned the Maine papers for the past decade.

The union took out a color ad in Sunday’s paper, asking for people to “invest in local news.” Union officials wouldn’t say how much they paid for the ad, but admitted the paper gave them a discount from the “open rate,” which is the rate charged to one-time advertisers who walk in off the street. The cheapest possible rate, according to the Press Herald’s official rate information, is the 53-percent discount given to the paper’s largest contract advertisers, which would have totaled $3907.50 for the union ad.

At a union press conference Monday — attended by several Press Herald reporters, none of whom took notes — Local 128 administrative officer CJ Betit (a former sports staffer at the paper) said the union is “hopeful in partnering with local investors,” though neither Betit nor other union officials, nor the consultant the union has hired to help construct a bid, would say how much money they’re seeking from contributors.

But the consultant, Chris Mackin, said anyone who comes forward would have to be looking for lower profit margins than Wall Street has sought from publicly traded newspaper stocks in recent years. “I think we’re really headed into a new era of newspaper ownership,” said Mackin (president of Ownership Associates, a Massachusetts firm specializing in employee-ownership arrangements), an era in which private investors partner with employees at newspapers and other media organizations to keep them going, at more modest rates of return than the double-digit newspaper profits of the ’80s and ’90s.

The union’s bid is moving slowly — Mackin said they have not yet signed a non-disclosure agreement, which would allow him to see confidential Blethen financial information that would inform a bid price. Such an agreement, Mackin said, might include a provision that would bar him from disclosing specific details to Betit or other union leaders. Mackin said he had made similar arrangements when representing unions in other deals.

James Oldershaw, vice-president of Dirks, Van Essen & Murray, the New Mexico-based broker the Blethens are using to handle the sale, refused to comment “on any aspect of the sale,” including whether the company would allow union representatives to see internal financial information, or any timetable for further progress toward finding a buyer.

Also on Monday, the union signaled its intention to play a role in any deal, sending to its members a copy of a letter Betit sent last week to Press Herald labor-relations director Maryann Kelly, warning that any prospective buyer would have to agree to the terms of the union’s contract — which was negotiated earlier this year and runs through May 31, 2011 — and citing a 2007 federal arbitrator's ruling that a Connecticut newspaper’s buyer had to preserve the union contract as a condition of the sale.

Press Releases: Staying focused

Published in the Portland Phoenix

Now that the Portland Press Herald/Maine Sunday Telegram and its four Maine sister papers (two dailies and two weeklies) are looking for a new owner, the speculation is rampant about who might buy such an operation, and how much they might pay.

Sure, there are a few snickers along the way, at things like PPH editor Jeannine Guttman’s March 23 column describing the sale announcement as a tear-jerking session with family patriarch Frank Blethen, ending with PPH managers “spontaneously” giving him a standing ovation after he announced the paper was for sale.

But a week before that meeting, before she knew the paper would soon have a new owner, Guttman alluded to a relationship other media outlets have with her paper (and other papers around Maine and elsewhere). In a March 16 column defending the paper’s latest layoffs (“Cuts Won’t Affect Paper’s Mission”) she wrote, “What you see on television and hear on radio often is a pickup of news and information that we have reported first ... We have more journalists, more boots on the ground, than any other news organization in Maine."

Guttman told the Portland Phoenix in an interview that she wasn't accusing the broadcasters of stealing, but rather alluding to the Associated Press's "AP Broadcast" wire service, which transmits to broadcast outlets stories from the Press Herald and other AP-member newspapers.

Her point is a good one. Newspapers are under tremendous pressure, due to radical shifts in their business models. Without newspapers, a huge portion of the news that consumers take for granted would not be available.

It's too bad there's not some kind of service that goes the other way, though.

Last week, all three local TV stations scooped the Press Herald on a major local story, one that happened right across the street from PPH headquarters.

The PPH and the TV folks have been closely following the play-by-play of Portland's budget problems, which came to a head on Thursday, April 3, when city manager Joe Gray announced the elimination of 98 city jobs, 22 of which were vacant, and 76 layoffs, including one of the city's highest-profile officials, transportation director Captain Jeff Monroe, who oversees the waterfront and the airport, and has testified before Congress on port-security issues.

NBC affiliate WCSH (Channel 6) had the story Thursday evening; ABC affiliate WMTW (Channel 8) and Sinclair-owned CBS affiliate WGME (Channel 13) had it Friday, including interviews with Monroe. Not until Saturday did the Press Herald tell its readers about Monroe's pink slip (a Friday story was thin on details, saying layoffs were "expected," but with no mention of Monroe).

Guttman called Channel 6's work "a really good scoop" for which "they are to be congratulated." She also said she wants "to take the long view," accepting that sometimes even the state's largest newsgathering organization will get beaten. And though regular readers of this column may be shocked to find me granting the Press Herald two points in a row, she is right.

But there is a problem. It's not the terrible luck that perhaps the "boots on the ground" just needed to traverse a crosswalk, from PPH HQ at 390 Congress to City Hall at 389 Congress, to get this particular story earlier. The real hard part is timing in the larger sense.

Because it’s up for sale the paper needs to perform at peak level, to keep readers, advertisers, and, yes, prospective buyers interested. Reporters and editors need to dig even deeper at this confusing time of tears and applause; it's their chance to prove how vital they are to Portland. This city needs a strong daily paper staffed with people who know the territory. If current PPH newshounds don't stay sharp, they might as well be writing on the wall.

Press Releases: Pressure is on

Published in the Portland Phoenix

The execs over at the Portland Press Herald are notoriously tight-lipped when it comes to talking about their newspaper to other media organizations. Publisher Chuck Cochrane and editor Jeannine Guttman don’t normally seem to notice that other media outlets exist — they don’t take phone calls from reporters even when they’re in the office, and never return phone calls or e-mails.

Lately, though, Guttman has not only noticed, but also responded to, comments about the paper published by a less traditional outlet — even holding a meeting with her staff to claim that certain comments were all wrong, and that she did not, in fact, engineer the ouster of MaineToday.com chief Web honcho Joe Michaud, as a PPH-watching blog reported.

Who provoked this startling development? Local blogger and Munjoy Hill resident “Thomas Cushing Munjoy” (not his real name) with a post on his daily-updated blog, PressingTheHerald.

Munjoy “started out sort of simply,” he says in a phone interview. Frustrated with the quality of the local daily, he would send Guttman roughly one e-mail a week with feedback, occasionally asking her questions. But he never got responses, and after a few months, he started blogging instead, hoping public shame would work, as indeed it did.

Many of his critiques are basic editing questions, seeking — or providing — missing context and perspective. Since taking a month-long hiatus in which he dealt with some sudden and severe medical problems, Munjoy’s tone has been more positive, though still strongly critical. A recent post slammed a reporter for failing to look at the facts in a January story that claimed Maine’s home-foreclosure rate was better than the rest of the nation's. But that same post praised another reporter’s more recent story, which disclosed that Maine actually has more foreclosures than the national average.

Munjoy's efforts have even attracted competition of sorts; several months after his debut “T. Flushing Funjoy” appeared, blogging at PortlandPressHarried.blogspot.com with a more acerbic tone (including referring to the Press Herald regularly as “the snooze organ of record”).

All Munjoy wants is for the Press Herald’s leadership to “start taking the coverage of local news seriously,” and not just pay lip-service to it, touting their “commitment” while ignoring waterfront issues and running wire-service stories about days-old international events on the front page.

“These guys just can’t get out of their own way,” says Munjoy, who says he uses a pseudonym because he works locally — not in journalism — and occasionally encountersPress Herald bigwigs at professional and social events. (The ethics of using a pseudonym while trying to make the paper more transparent are questionable, though Munjoy says he has no present or past connection to the Press Herald or any of its corporate siblings in Maine or elsewhere.)

It’s his frustration — amplified by the fact that Guttman still won’t return his e-mails — that has led Munjoy to seek to draw even more attention to the Press Herald’s shortcomings.

He has repeatedly reminded his readers that the Press Herald is in bed with the Plum Creek Timber Company CEO (who sits on two boards that supervise the paper’s parent companies; see “Plum Creek Watchdog,” by Jeff Inglis, December 21, 2007) and that the paper failed to disclose that fact for 18 months, during which it reported extensively on Plum Creek’s plans for the largest land-development project in Maine history.

But in late January, he asked the American Society of Newspaper Editors to weigh in on the ethical implications of issue. Nearly two months later, he has received no responses, and suspects the reason is that the ASNE board includes an exec from the Seattle Times — the Press Herald’s parent paper.

But it still disappoints him. “I just don’t understand why they won’t try to improve,” Munjoy fumes.

Maine's journalist-shield law on MPBN's Maine Things Considered

Aired on Maine Public Broadcasting Network's Maine Things Considered

Sidebar: Slow lane

Published in the Portland Phoenix

Under the terms of the deal, by 2013, 90 percent of FairPoint’s customers in northern New England will have access to DSL Internet service. (Unless, of course, FairPoint takes the extra year Maine regulators have allowed with no penalty, which would mean waiting until 2014.)

In that time, FairPoint plans to provide exactly none of its customers with the option for fiber-optic connections, which is the real high-speed Internet, already available to 10 million homes in the US, but none in northern New England (except a handful around Portsmouth, New Hampshire; see “Internet Disconnect,” by Jeff Inglis, August 24, 2007).

DSL is the slowest of all the services that can be called “broadband,” though it is faster than dial-up. In 2007, as many as 40 percent of DSL customers were dissatisfied with the speed of their service, according to a report by Michael Render, a fiber-market analyst for RVA Market Research in Tulsa, Oklahoma. Imagine how many people will think DSL is too slow in 2014!

By 2010, three (or four) years before FairPoint’s rollout of DSL will be complete, 25 million homes nationwide (22 percent of all homes) will have access to fiber, Render says.

As everyone else is eagerly awaiting the connection of fiber-optics, we in Maine, New Hampshire, and Vermont will have our feet up, enjoying life in the slow lane.

A bad idea triumphs: Verizon: $500,000,000 — Public: $0

Published in the Portland Phoenix

From time to time, we all wonder how bad public-policy choices make it through “the democratic process,” being vetted and scrutinized by “the appropriate agencies,” and incorporating “public input.”

The Verizon-FairPoint Communications deal (in which Verizon will sell its landlines in Maine, New Hampshire, and Vermont to FairPoint for $2.4 billion) is an ideal case study. It’s roundly criticized by nearly everyone. Even the regulators who were asked to approve the deal are wary. At first, Vermont’s regulators rejected it outright, then later voted to approve a revised version. Maine Public Utilities Commission chairman Kurt Adams made it clear he was holding his nose while voting to approve it, and New Hampshire PUC chairman Thomas Getz declared that the initial version was “not in the public interest,” though his board voted 2-1 to approve a revised proposal Monday. (The dissenter, commissioner Graham Morrison, wrote that “the public interest ... requires something more than ... good intentions.”)

Apart from Morrison in New Hampshire, regulators in all three states have chosen the devil they don’t know over the devil they do, by agreeing to let Verizon sell out (and avoid tax obligations of more than $500 million) in the hope that promises from a financially strapped communications company (FairPoint) will give us something better than neglect from an incredibly wealthy communications company.

Bad ideas like this one survive first and foremost because someone thinks they’re good ideas. Not surprisingly, FairPoint and Verizon love the idea — FairPoint gets to collect more money from more customers and pass it on as dividends to shareholders; Verizon gets to keep $500 million it would have paid in taxes and use that money to invest in fiber-optics and cellular technology elsewhere in the country. (Those of us in mountainous rural areas are stuck with older, slower technology, and that’s just our bad luck, as far as Verizon is concerned.)

But even more important to the survival of bad ideas such as this merger is that state utility regulators behave like powerless functionaries whose job is to moderate corporate rapaciousness, rather than seeing themselves as empowered defenders of the public interest.

Even when regulators are presented with fundamentally terrible deals that endanger the public interest, threaten economic development, and may end up risking people’s very lives, they see their responsibility as exacting just enough concessions from massively wealthy companies to let the regulators claim they got something for the people, even when they have given away much more.

It’s not as if they haven’t been warned. Union representatives and industry experts have been railing against various aspects of the deal since it was announced back in January 2007. Customers have expressed significant concerns, in letters, e-mails, and phone calls to regulators in Augusta, Concord, Montpelier, and even Washington DC. And the consumer advocates who represent the public in utilities proceedings in Maine, New Hampshire, and Vermont have all expressed reservations about this deal in uncharacteristically bold language — saying FairPoint’s assumptions are “inappropriate” and “do not reflect reality.”

Wimpy regulators
One member of the three-person Maine PUC didn’t even ask any questions of Verizon or FairPoint during the public hearings. Sharon Reishus remained silent, even though this deal is the largest and most controversial piece of business to come before Maine utilities regulators in state history, and despite the fact that the telecommunications sector is the one that state officials, economists, and activists alike see as a key to Maine’s prosperity for decades to come. But her silence is not the problem: It’s the symptom of the real problem.

Regulators have expressed frustration with Verizon’s well-documented lack of attention to serving residents and businesses in northern New England. The solution, though, is not to hand Verizon a pass on its $500 million tax liability on profit from the sale. Regulators have standards (and can increase the standards), and they have enforcement tools to punish companies that don’t meet the standards, such as fines and penalties.

They have not used these tools very much, or very well. And they don’t seem to feel they are in a position of strength, with Maine officials making the “demand” that if North Carolina-based FairPoint does not roll out its slow-speed “broadband” Internet service, DSL, to enough homes by the end of 2013, the company would get an extra year to meet the same goal, with no penalty. “Our history with some utilities enforcing merger conditions after we issue a decision has not been great,” Maine PUC chairman Kurt Adams admitted in a January 3 hearing.

But rather than hold themselves to a higher standard of performance and actually enforce their rules, regulators have passed the buck — hundreds of millions of them, really — to us, by letting Verizon off the hook. And it is we, the public, who will pay for their complacency.

In the first place, FairPoint’s economic projections were shockingly optimistic (see “No Raises For Seven Years,” November 16, 2007, and “No Raises — It Gets Better,” November 20, 2007, both by Jeff Inglis). And those fragile projections were made before we entered the economic downturn most economists now believe we are in.

Financial peril
There has been a lot written about FairPoint’s financial problems, both current and future. Normally, when seeking to impose conditions on a sale, regulators ask for financial guarantees from the buyer.

Not this time. State officials are so worried that FairPoint is — or will be — in financial peril, that they’ve wrung more money out of the seller, Verizon, making the multi-billion-dollar behemoth throw a few bucks our way as it heads out the door, almost like a charity contribution for the privilege of abandoning northern New England.

Indeed, when Vermont’s Public Service Board initially rejected the deal, it ruled that “FairPoint had not demonstrated that it would be financially sound” after the sale went through, and could end up incapable not just of expanding phone or Internet service, but even of keeping service at the current, below-standards level.

Put charity aside: we are paying Verizon to leave. State officials will probably deny that, but think again. The cost to us is more than just the missing $500 million in tax revenue.

FairPoint is taking on more than $2 billion in debt to do this deal, and the company is expecting not only to pay off that debt, but also to make a profit. Every dollar the company spends on Verizon’s landlines will have to come back in, paid by the customers in our monthly bills. The more FairPoint pays, the more we, the public, will ultimately have to pony up over time.

If FairPoint isn’t making enough money to make its executives or shareholders happy, the company will come back to regulators in all three states, crying poor, and asking for higher rates. Of course, FairPoint really will be cash-strapped and poor, so the regulators will find it hard to refuse. And if they approve rate increases, they and their agencies won’t feel the pinch; we will.

The regulators may even forget that Verizon overcharged telephone customers in Maine more than $30 million in 2005 alone, and that our state made FairPoint promise to cap its rates for five years to help make up for those excess charges. The only way the regulators could abandon their duties more would be to develop amnesia in addition to their weakened spines.

Beat the clock: Does anybody really know what time it is?

Published in the Portland Phoenix and the Boston Phoenix

“The Earth is a terrible timekeeper,” says Geoff Chester, the spokesman for this country’s official clock-master, the US Naval Observatory in Washington, DC.

The first problem is the Earth, but the second problem is us. We cheat to make the movement of the Sun and Moon match up with the calendars on our office walls, and, at a more rarefied level, we cheat so that physicists and astronomers can synchronize their scientific watches.

The Earth doesn’t rotate exactly 365 times during a full revolution around the Sun. (It rotates 365.2422 times, on average, if you must know.) To make up for that, since the time of Julius Caesar (45 BC), we have added a LEAP DAY to the calendar every four years. In 1582, Pope Gregory XIII made a slight modification, saying a leap day would not be added in years that are evenly divisible by 100, unless the year was also evenly divisible by 400 (which is why 2000 was a LEAP YEAR; 1900 was not, and 2100 won’t be, either).

That’s still not good enough, though, so we need more cheating.

The Earth doesn’t cooperate with physicists’ super-specific definition of “one second” (derivation of which is so complicated we’ll just mention the outermost electron in a cesium-133 atom and skip the parts about microwave radiation, vacuums, and magnetic fields). That definitely doesn’t change, but the Earth’s rotation is generally slowing (because of resistance from ocean tides and the movement of molten rock at the planet’s center). From time to time, to keep things matching, we need to add a LEAP SECOND. The last one happened on December 31, 2005; the next may happen on December 31, 2009, but maybe not, Chester says, depending on how much the Earth’s spin actually slows between now and then.

We could avoid leap seconds altogether if we were like the physicists who want time to run based solely on the atomic clocks. But that would force some other adjustment at some point. Some propeller-heads have proposed passing the buck to future generations via a scheme requiring someone to add an entire LEAPHOUR to some year a little more than 1000 years from now. Not likely. So we’re probably stuck with leap seconds. Adjust your watches accordingly.

Could be worse: some people are burdened with much, much more. Accountants and other people who need a fixed number of exactly-seven-day weeks per year use an occasional LEAP WEEK, giving some years 52 weeks and some 53. That makes them happy, but is too confusing to the rest of us and generally of very little import.

And then there are the people who use a LEAP MONTH. “The Moon does not go around the Earth exactly 12 times in a solar year,” says Chester. It’s about 11 days behind, which is why events on a lunar schedule (such as Easter in the Christian calendar, and nearly every holiday in the Jewish calendar) are “movable feasts” — i.e. their dates move around a bit from one year to the next. The Hebrew calendar uses a leap month every two or three years to keep itself relatively close to the solar calendar.

Perhaps you’re ready to give up. (I know I am.) If so, try out the Islamic calendar, which is a purely lunar calendar, and ignores the solar calendar completely, not using leap days, weeks, months, or years. Happy February 29!

Press Releases: Gender confusion?

Published in the Portland Phoenix

Press Herald watchers have long since tired of editor Jeannine Guttman’s roughly weekly “Editor’s Note” columns, which more often than not should be called “Painfully Obvious Self-Promotion.”

At least then we’d be warned in advance about the rewritten corporate memos that Guttman passes off as her thoughts on the news business and running the paper. Take as an example her January 27 quote from a middle-level sports editor that the writers the Press Herald spent thousands of dollars to send to Arizona would “cut through the media circus that is Super Bowl week.” She went on to say those writers would bring “Maine perspective and insight” to an event on the other side of the country in which a team from another state competed for a national title.

But Guttman shows herself to be even more out of touch with reality in her latest column, “Poll Shows Gender Gap in News of Interest.” After the muddled headline, Guttman spends 1000 words (including nearly 300 words of direct quotes) summarizing a 980-word report from the Pew Research Center, and still somehow completely ignores the study’s most interesting finding.

She spends most of her space explaining why “gender differences” are the reason “newspapers offer different kinds of content sections and pages — from lifestyle to sports, from recipes to NASCAR.” That’s not entirely accurate: newspapers publish niche-topic sections as much to draw advertisers as readers.

Guttman even appears to find the major point, but then skips over it — twice. She does discuss the study’s report that both men and women are very interested in breaking news and the top stories of the day — including topics such as the presidential campaign and the assassination of former Pakistani prime minister Benazir Bhutto. But she treats that idea as an aside, going on to highlight more differences between what topics men and women are interested in, and from what mediums they get their news.

Even in a study attempting to delineate differences, the Pew researchers found similarities. Among the study’s lists of specific recent news stories preferred by one gender over the other were subjects in which both genders reported very significant interest: tensions between the US and Iran, tornadoes in the South and Midwest, and the recall of toys made in China.

This was a national study, so it didn’t test people’s interest in Maine’s biggest stories. It did look at general subjects, though, and found large proportions of both men and women follow news about local government, consumer issues, and the weather. The biggest gender “split” is in sports; the rest are in niche areas such as science, religion, finance, and health.

But when concluding her column, Guttman observes that the Press Herald is a “general-interest medium,” and professes uncertainty about “how to keep the content useful, valuable and newsworthy to a broad audience that includes both men and women.”

The Pew study’s road map is clear: cover major news stories, which are of very strong interest to both genders. Maybe she missed that while looking for story ideas on NASCAR or cooking.

Three firsts at NEPA

Published in the Portland Phoenix

Portland Phoenix contributing writers and staff took three first-place awards at the New England Press Association’s annual awards banquet February 9, and three second-place honors as well.

In first place were: for LOCAL ELECTION COVERAGE, the staff and freelancers, for work published between September and November 2006; for COVER DESIGN, “Why Bath Stinks,” a gas mask against a fetid background by Phoenix staff, published April 6, 2007; and for HEALTH COVERAGE, “What’s Wrong With Healthcare in Maine?,” first-person accounts of dealing with the healthcare system by contributing writers Sam Pfeifle and Caitlin Shetterly, published July 27, 2007.

In second place were: for RACIAL OR ETHNIC REPORTING, “‘I’m Done Killing Hyenas,’” excerpts from a Telling Room non-fiction writing project by local high-school students Ali Mohamed, Aruna Kenyi, and Kahiye Hassan, published May 4, 2007; for GENERAL NEWS, “Unvarnished,” former staff writer Sara Donnelly’s story about the Brookings Institution study of Maine’s economy commissioned by GrowSmart Maine, published September 29, 2006; and for GOVERNMENT REPORTING, “State: One Santa Okay; Another No Way,” about state censorship of beer-bottle label graphics, by managing editor Jeff Inglis, published December 8, 2006.

Behind the mask: What we don’t know about the Valentine’s Phantom — and why that’s a good thing

Published in the Portland Phoenix

The identity of Portland’s Valentine’s Phantom is the city’s best-kept secret, bar none. And that’s not changing here, so if that’s what you expect from this article, turn the page and see what someone else will do for love, because we won’t do that.

In a city where secrets are few and far between — the PortlandPSST blogger; how much Reynolds Wrap the Tinfoil Man uses each year; the real meaning of the “Tracing the Fore” sculpture — this one has lasted. And lasted.

Each year since 1976, someone (or some group) hangs white pieces of paper with bright red hearts on doors, windows, and walls all over town, and caps off the display with a few large banners and flags slung from prominent buildings (though not the Time and Temp Building yet — we’re waiting...). A similar phenomenon has been going strong in Montpelier, Vermont, since the early 1990s, and someone from Portsmouth, New Hampshire, posted a Craigslist note in December expressing interest in bringing the tradition there.

The most surprising thing is that people don’t actually want to know who is doing it. Even here in the office, as we tried to score an interview with one of the perpetrators, we didn’t want to know. It would have been an anonymous interview. It’s much nicer to not know, really. (One person we talked to did relay a message said to be from the Phantom, saying the Phantom doesn’t want to be contacted, and that if the Phantom wanted to surface, it would have happened long ago.)

The first report of a Valentine Phantom in Portland was in the February 14, 1976, issue of Portland’s Evening Express: a photo and a long caption describing the sudden appearance of red hearts on white paper taped all over the city on Valentine’s Day morning. (The three-year-old girl pictured with the unexplained decorations, now an adult living in Wisconsin, says she remembers it “like it was yesterday,” and has a copy of that picture in her family photo album, but disclaims any knowledge of the people behind the hearts.)

There have been other media mentions throughout the years, in local papers and TV stations, and even on CNN. But only once has anyone actually interviewed the Valentine’s Phantom (and nobody has asked him, or her, or them, whether “Phantom” is the preferred term — “Bandit” is the word as often used in conversation).

That was back in 2005, when Portland City Council candidate Carol Schiller claimed to have started the tradition in the early 1980s (see “City Council Race Hearts Up,” by Beatrice Marovich, October 21, 2005).

As we said earlier, the Valentine’s Phantom doesn’t like publicity, but he apparently likes even less the idea of someone else taking credit for his work. He promptly responded with both paper evidence and a phone call to the Phoenix offices, in which he provided, among other tidbits, a receipt from a now-defunct Forest Avenue printing shop, purportedly for making the signs for the 1977 banditry (see “She Said, He Said,” by Sam Pfeifle and Sara Donnelly, November 11, 2005). And he offered more info on the phone, including the night-time temperature on February 13, 1979 (8 degrees), and the number of people helping out that evening (six).

It’s that last tidbit — long assumed by those who spend much time thinking about it — that makes this annual tradition most interesting. The fascination goes beyond amazement at the increasingly brazen and difficult nature of some of the displays — hanging a heart on Fort Gorges (the same night a Casco Bay ferry reported just barely avoiding running over a small boat containing as many as seven people), running a flag up the Central Fire Station flagpole, hanging huge banners from the Portland Museum of Art and the Gulf of Maine Research Institute. The mystery surrounding the Phantom/Bandit’s secret identities is an integral part of the tradition.

If there were just one person involved, the secret could be easily kept, even for more than 30 years. But if six people helped in 1979, how many more have participated over the years? How many of them have roommates, partners, parents, children who might have noticed a door opening and closing late on Valentine’s Eve?

There are a lot of people who claim to know someone who is involved; we’ve talked with dozens of them this week. Perhaps we have actually talked to the Phantom him- or herself, but nobody admitted anything. That’s the most fascinating part of the secret — we’re keeping it from ourselves. We really don’t want to know.

“Historically, graffiti has been about fame,” says local legal-graffiti artist Tim Clorius. (He denies being part of the Phantom group or even knowing anyone who is; we are pretty sure we believe him.) Graffiti artists seek to get their tags in as many visible public places as possible, earning props from peers for particularly difficult-to-reach or especially prominent spots. But in this effort, the tag being distributed is simply a heart, making the anonymity itself the art.

Clorius sees the hearts as a suggestion for something more. He would love to see small, simple, non-destructive works of art all over the city. There is potential, Clorius says, for “all this site-specific work” to move beyond the basic, friendly message of a red heart on Valentine’s Day and raise deep, pressing questions about our society.

The Phantom’s pioneering work in this realm has made for us a model of direct artistic action, aimed dead-on at the general public — unfiltered by the media or a gallery — and with a message whose impact is heightened by serendipity.

Which, it seems, is the precious Valentine the Phantom is really giving us. That secret, at least, is out.

Heart history
1976 The first Valentine’s Phantom strikes in Portland, and garners reports in the Evening Express and Maine Sunday Telegram newspapers.

1977 Printing the flyers cost $22 at Colonial Offset Printing on Forest Avenue; a Portland Press Herald effort to discover the Bandit’s identity fails.

1978 Hearts went up a day late, and bore a note: “It’s not only ONE day!”

1979 The weather was 8 degrees and windy, according to notes made by one of the six bandits.

1984 Massive heart banners, roughly 20 feet by 35 feet, hang from the Cumberland County Civic Center and the Portland Museum of Art.

1986 A heart banner is hung on Fort Gorges in the middle of Casco Bay.

1991 Down East magazine imagines that “the phantoms roam the city in a pack, dressed in red or white capes emblazoned with huge hearts.”

2001 A heart flag flies from the roof of Portland’s Central Fire Station; a fire lieutenant denies any knowledge.

2005 A heart banner hangs from the roof of the Gulf of Maine Research Institute on Commercial Street.

OCTOBER 2005 Portland City Council candidate Carol Schiller claims to be one of the phantoms.

NOVEMBER 2005 An anonymous phantom responds with information that his effort predated hers, and that she has never worked with them.

2006 CNN mentions Portland’s Valentine’s Phantom in a national report.

DECEMBER 2007 A would-be Portsmouth Valentine’s Bandit posts a message on Craigslist, hoping to get some pointers from Portland. No dice, apparently: “If anything does happen in Portsmouth, it won’t be any of my doing.” Sure. Like we’re supposed to believe that.

Defending the universally loathed: TV: Shopping channels

Published in the Portland Phoenix, the Boston Phoenix, and the Providence Phoenix; part of a multi-part story

TV: Shopping channels
As detestable as they are, someone loves those shopping channels on TV. They bring in more than $10 billion a year to the washed-up non-celebrities pitching second-rate knives, dresses, jewelry, and cleaning supplies.

There is, however, a very compelling reason you, too, should love the shopping channels, and thank your lucky stars they exist: your cable bill would be higher than it is now — by as much as a few bucks a month, depending on where you live — if the “basic cable” package did not include shopping channels.

In many markets, cable companies are required by federal regulations to carry shopping channels. As a result, the cable companies don’t pay to transmit shopping channels (just as they don’t pay to carry other local broadcast stations or community-access channels). But unlike those other channels, shopping networks kick back a percentage of their sales revenues. So the more knives sold, the less likely your cable bill is to rise.

(Sure, nothing is stopping your cable company from racking the rates, except competition from satellite TV and Internet video, but if the feds require cable companies to sell channels individually, you’ll pay more for the same channels, and losing that shopping-network revenue is part of why.)

So every now and again, when you’re feeling bored, check out a shopping channel, and make sure you have a knife for every occasion. If you’re missing one for, say, cutting out your own appendix, go ahead and buy it. It’s just $9.99, you can pay in 15 easy installments of just 67 cents each, and you’ll keep your future cable bills down, too.

Verizon angles to keep state business

Published in the Portland Phoenix

Democratic governor John Baldacci had a private sit-down with Ivan Seidenberg, the president and CEO of Verizon, November 30. The meeting wasn’t publicized in advance and got only a small amount of coverage after the fact.

None of that coverage mentioned the roughly $6 million Verizon earns from providing state agencies with telephone services (that total doesn’t include in-state and out-of-state long-distance calls, which, according to state technology chief Dick Thompson, are also provided by Verizon at a rate of 2.98 cents per minute).

The meeting came just days after the staff of the Public Utilities Commission issued a devastating report recommending that regulators reject the proposed buyout of Verizon’s telephone landlines by FairPoint Communications (see “No Raises for Seven Years,” November 16, and “No Raises — It Gets Better,” online November 20, both by Jeff Inglis).

Neither Verizon nor Baldacci’s folks will say specifically what was discussed, but Verizon Maine spokesman Peter Reilly says the meeting was intended “to discuss Verizon’s role in the state in the future,” specifically the fact that “Verizon is going to be continuing to invest in businesses in the state.”

It’s fair to ask what business, given that PUC analyses of Verizon’s investment in landlines and consumer services such as Internet access suggest the company has done little, if any at all, in recent years (see “Internet Disconnect,” by Jeff Inglis, 24).

The answer may explain why Seidenberg wanted to talk to the business-friendly Baldacci: Verizon will continue to invest in wireless service in Maine, as well as “enterprise services,” Reilly says. He wouldn’t explain what “enterprise services” are, but the company’s Web site does — telephone service and high-speed Internet communications for large businesses.

The meeting between Seidenberg and Baldacci was first reported on VerizonVsFairPoint.com, a blog closely monitoring the merger’s progress, where speculation ran rampant about whether Verizon was trying to cut a deal with Baldacci. All sides deny that.

Asked if Seidenberg was trying to make nice with Maine officials after the PUC staff’s report repeatedly accused Verizon of hurting Mainers by spending too little on service quality and upgrades, Reilly's answer was short: “All I can confirm is that Mr. Seidenberg met with Governor Baldacci.”

But if Verizon was trying to hang onto its revenue from public coffers, Thompson (who heads the state agency that arranges phone service for state offices) may have killed it: if the sale goes through, he says, the state’s phone provider would become FairPoint. Unless the gov says otherwise, of course.

Press Releases: Plum Creek watchdog

Published in the Portland Phoenix

Thanks to a Phoenix reader, Maine residents now know something the Portland Press Herald was not telling them: that the chief executive officer of the development company that wants to build nearly 1000 units of homes and condos plus two resort hotels in Maine’s North Woods joined the board of directors of the newspaper’s parent company 18 months ago.

To call the Plum Creek project controversial is an understatement, as attested by the 60 or so stories and editorials that the Press Herald has published on the subject in the past year and a half.

Yet none of those pieces — not even the editorials that questioned the deal — disclosed that Rick Holley, CEO of Plum Creek Timber, the project’s proposed developer, joined the board of directors of the Blethen Corporation (the family-owned company that owns the Press Herald) back in May 2006. Nor did they disclose that Holley joined at the personal request of patriarch Frank Blethen, as a Plum Creek spokeswoman told the Portland Phoenix last week.

In a December 2 article, PPH environment reporter John Richardson detailed Plum Creek’s donations to Maine politicians, quoting Bruce Freed, executive director of the Center for Political Accountability in Washington DC: “What they’re trying to is develop relationships and influence decision-making and policy.”

But Richardson’s story didn’t mention another way Plum Creek could influence decision-making and policy — namely, through close connections with the newspaper’s owner.

It’s possible, as Poynter Institute ethicist Kelly McBride notes, that the paper’s editorial team may not have actually known that Holley had joined the board. (If they did know, she says, they should have disclosed it earlier.) As it was, the disclosure came after the Phoenix, prompted by posts on thePhoenix.com, called Richardson and others at the Press Herald.

On Sunday, a Richardson article about Plum Creek added that Holley also sits on the board of the Seattle Times Company, though he (or his editors) took pains to distance Holley from the Press Herald, specifying that the company’s Maine newspapers (the Press Herald, the Kennebec Journal, the Morning Sentinel, and the Coastal Journal) have “a separate board of directors” on which Holley does not serve.

But not every article addressing Plum Creek in Sunday’s paper carried the disclosure: columnist Bill Nemitz left out the relationship between the people who sign his paycheck and the man at the helm of the largest private landowner in the country, who just happens to be the proposer of one of the largest land-development projects in Maine history (see “Up Plum Creek Without A Paddle,” by Yanni Peary, November 30).

That omission, and the 18 months of silence throughout the paper, fit a pattern of concealing the connections between the newspaper and Plum Creek: in the 20 mentions of Plum Creek in the Seattle Times since May 2006, none have disclosed Holley’s involvement.

Corey Digiacinto, communications manager for the Seattle Times Company, would not say how many directors the company has, nor whether Holley is a voting member of the board (versus an advisory one). She says the company doesn’t normally talk about its corporate structure, but did so “in this case, for reasons of disclosure.”

Why now, though, if Holley has been on the board for 18 months? Digiacinto referred that question to Press Herald/Telegram editor Jeannine Guttman.

Guttman and Richardson did not return phone calls seeking comment, as is the paper’s general practice when receiving inquiries from other media organizations.

But with Phoenix readers keeping watch where the Press Herald fears to tread, they’ll have to do better next time.

Disclosure: I like plums, and have swum in creeks. With a tip of the hat to the poster named “Jay” on thePhoenix.com.

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)