A bad idea triumphs

Verizon: $500,000,000 — Public: $0
By JEFF INGLIS  |  February 27, 2008
INSIDEfeat_verizon_MeltyPho

Slow lane
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.
_JI

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.)

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