When your pay, benefits, or job are in jeopardy, there's little satisfaction in saying, "We told you so!"

But that's exactly what 3,500 northern New England telephone workers are entitled to tell state officials who approved Verizon's sale to FairPoint. Their flawed regulatory decisions in Vermont, Maine, and New Hampshire have put employees, customers, local businesses, and the whole regional economy at risk.

As predicted by members of the Communications Workers of America and the International Brotherhood of Electrical Workers during their two-year Stop-the-Sale campaign, FairPoint is teetering on the brink. FairPoint does not now — and never did — have the capability to maintain decent land-line service, much less provide real high-speed Internet connections as promised. If Govs. Douglas, Lynch, and Baldacci don't act quickly with a coordinated rescue plan — funded, in part, by federal stimulus money for rural broadband upgrades — FairPoint will end up in Chapter 11 bankruptcy. Because that's exactly what happened in Hawaii in December, after Verizon fled that state, leaving its successor drowning in debt.

Shares in equally troubled FairPoint are now what's called a "penny stock" (i.e., trading for less than a dollar).

Dividend payments have been suspended, and last year's losses neared $69 million. In March, FairPoint's credit rating was downgraded by Standard & Poor's, due to its staggering $2.5 billion in debt and generally "negative" outlook. The company is also experiencing what S&P calls "ongoing and accelerated access line losses" (Translation: customers are fleeing to wireless and cable TV competitors even faster than they did under Verizon).

To make matters worse, horrendous technical problems and service delays occurred — as CWA and IBEW warned they would — during this winter's "cut-over" to new FairPoint operating systems. The result was thousands of customer service complaints that forced all three states to hold emergency oversight meetings.

At an April 3 hearing in Concord, the New Hampshire Public Utilities Commission was bombarded with public criticism of FairPoint and Capgemini, the systems developer that botched the cutover. PUC member Graham Morrison, the only regulator in the entire region who voted against Verizon's $2.4 billion sale last year, blasted Capgemini's performance, saying: "You have placed the economic health of a large corporation and three states in jeopardy. You have tarnished the image of these three states. Your company is responsible for that."

At the same hearing, a leader of FairPoint's unionized service reps described their long hours of mandatory overtime trying to make the Verizon-to-Fairpoint transition less difficult for customers.

A FairPoint "stabilization plan" is now being developed which requires big service improvements within three months. To reach that goal, regulators want FairPoint to hire even more outside consultants and contractors. If they stumble (as Capgemini already has), the Vermont Public Service Department wants "a change of FairPoint management."

All of this is too little, too late. It just diverts public attention from the original failure of state utility regulation and the federal tax loophole that propelled an unwise deal in the first place. (Verizon used a "Reverse Morris Trust" to save $600 million in taxes by structuring its land line sale with a buyer that was among the least qualified, financially, to serve the region.) No matter how long or hard FairPoint employees work today, customers will not experience "business as usual" by June.

So now is the time for all three states to take responsibility for the mess they helped create by allowing a $100 billion company to leave town and then handing the keys over to the telecom equivalent of a lemonade stand operator, with predictable results.

Fortunately, in response to labor lobbying and America's larger economic crisis, Congress in January allocated $7 billion for new public spending on rural broadband connections. FairPoint's survival strategy depends on broadband upgrades — even though it clearly lacks the cash flow and investor confidence to finance them now. So the three states that so mistakenly approved the Verizon sale better start accessing a big chunk of those federal dollars, in pro-active fashion.

If they don't, Vermont, Maine, and New Hampshire will end up begging for help later on, as Michigan has for the auto industry, under much less advantageous circumstances for everyone.



Steve Early was a Verizon union representative for 27 years and aided the Stop-the-Sale campaign in northern New England. He is a Boston-based lawyer and labor journalist.