No raises — it gets better

Fewer workers are also part of FairPoint’s plan to remain solvent
By JEFF INGLIS  |  November 20, 2007

"Exclusive: No raises for seven years: That’s just one way FairPoint plans to pay for northern New England's Verizon buyout." By Jeff Inglis.

"PUC filings: Selections from the redacted text." By Portland Phoenix Staff.

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

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Related: Will FairPoint run out of money?, FairPoint's finances are failing fast, We told you so, More more >
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