Saturday, April 5, 2008

The Verizon/FairPoint Deal Is Done. What's Next?

Now that the sale of Verizon's northern New England wireline business to FairPoint Communications has been completed, the customers are waiting with bated breath to see if we've been sold a bill of goods.

Being intimately tied into the telecommunications industry due to my job, I must say I still have reservations about the deal.

First, FairPoint bought into a shrinking market, where the number of wired telephone lines has been falling off while cell phone usage has gone up. The increased cell usage has been influenced by expanded cell coverage and competitive pricing. Some people no longer have wired phones, using cell phones exclusively. Wired business lines have little or no growth. Anyone with even a little business knowledge knows that one of the ways to ensure going out of business is to buy an increasing share of a decreasing market.

Second, I think they may have overestimated how much business they'll pick up as they expand DSL service to previously unserved or underserved areas in Maine, New Hampshire, and Vermont. There will be an upsurge of new customers to start, but competitors will be hot on their heels offering faster/better/cheaper service in the somewhat more densely populated rural areas, which are FairPoint's 'low hanging fruit'. Competitors in this case will most likely be wireless for Internet and VoIP phone service, and municipal alliances wiring their towns with Fiber To The Home, which can provide phone, Internet and video services with bandwidth far exceeding that of the DSL service being offered by FairPoint.

Third, FairPoint is a small company buying into an operation that is five times larger than its existing business. I don't know if they have a management team capable of handling such a large undertaking. While I've heard little in the way of negative impressions of FairPoint management, I've also heard nothing positive about it either. Within the industry it's much the same - nobody seems to know anything about them. It's a crapshoot, and I don't like that when it comes to such an important utility.

I'll take a wait-and-see stance and see how the whole thing turns out. But I have a feeling we'll all be feeling we've been fleeced in a $2.3 billion con game and we'll have little to show for it.


Barnaby said...

I had a question for you, and I hope this doesn't come off as rude, its not meant to. I just read your post about Flatlanders, and I was wondering if locals are welcoming when someone new moves to town. I myself will be moving to NH sometime in the next couple months. I have no plans of changing anything when I get there, I accept that the town will be nothing like home. It's just that you sound like you form a bias as soon as someone moves in.
Also I recently saw where Burlington, VT fought to keep Home Depot out of town. I understand wanting to keep the look of a classic New England town, but blocking a business from coming in keeps jobs from coming. Where I am from we would wine and dine a company in order to persuade them to build in our town.
I was hoping you could shed some light on these obvious cultural differences. Again I hope these questions don't come off as judgmental or rude; I am just trying to understand a point of view that I currently don't understand.

Chan Eddy said...

First, let me state that Flatlanders aren't always from out of state. Plenty are born right here. It's more of an attitude rather than where someone is from.

My biggest 'problem' with Flatlanders is when they move into a town and the first thing they do is try to make their new town just like the place they left. If they liked the place they left so much, then why did they leave in the first place? Most of the Flatlanders we have to deal with aren't folks from the South, but folks from Massachusetts, Connecticut, Rhode Island, and New York. It's the big city attitudes that trip up most of those folks. You, being from Louisiana, are probably closer in attitude to the folks already living here.

There are plenty of folks that move to New Hampshire, Vermont, or Maine from away and fit in just fine. They like things just the way they are. Sometimes it takes them a little adjustment time to get used to how things are done in their new home town, but most townsfolk understand this and are more than willing to help the new folks any way they can.

In regards to Burlington, VT, you have to understand that in many ways Vermont is a contrary place. It can be very conservative in some ways, like preventing some of the 'big box' stores from coming into a city or town because folks like things the way they are, and very liberal, when it comes to social issues and government. It's difficult to tell when folks will take one position or another in the Green Mountain State. In Maine and New Hampshire, we're more like you, welcoming new businesses and the jobs that come with them. Here in our little town we welcomed Lowe's and were looking forward having Home Depot come in as well (That's been put on hold by Home Depot at the moment).

For the most part folks will welcome you no matter where you come from or which town or city you move to here in N'Hampsha. If you'd like, I can offer a few links that might help you understand things here in the Granite State.

Luc Perin said...

only a complete bonehead would vote republican at this point! Chan Boo!