Vermont + Fairpoint = WiMax

Mike Q sent along a link from Information Week titled WiMax Coming To Remote Regions Of Vermont. The article describes how FairPoint, Nortel, and Airspan Networks are investing in building out the 3.65 GHZ spectrum to help spur the use of fixed WiMax in many regions of Vermont.

I've written here in the past about Verizon's sale earlier this year of Maine, New Hampshire and Vermont networks to Fairpoint Communications. I've also written about a successful WiMAX implementation in Alaska and questioned the use of WiMax in rural areas to close the broadband divide.

Here's a couple of quotes from the Information Week article:

Nortel and Airspan Networks reported this week that they will supply 802.16d WiMax equipment for the Vermont deployment, which, because it will operate in the 3.65 GHz band, is unlicensed and relatively inexpensive. Scott Wickware, general manager of Nortel, said he believes the Vermont rollout is the largest 3.65 GHz WiMax scheduled for installation to date.

Noting that it is less expensive to use wireless in many regions, Nortel said the FCC's decision last year to approve the use of the 3.65 GHZ spectrum is helping spur the use of fixed WiMax in many regions that previously weren't able to obtain broadband technology.

The article quotes range of a few miles with up to 10 miles where signals have little or no interference and have no obstructions. Transmission bandwidths are quoted ranging from 1 Mbps to as much as 5 Mbps in some cases.

Fairpoint Commits To DSL Rollout in Maine, New Hampshire and Vermont

I've written in the past about the Verizon Northern State (Maine, New Hampshire and Vermont) sell off to Fairpoint Communications and have expressed my concerns about the lack of bandwidth in these states. An article in the Benninton (Vermont) Banner on July 12 described DSL rollout by Faipoint in Bennington County and also discussed expansion in all 14 Vermont counties. Fairpoint spokeswoman Beth Fastiggi is quoted in the piece as follows:

By 2010, we hope to have at least 80 percent of households in the state with DSL access and.... we hope to have every customer in half of our exchanges access by 2010 as well.

The piece makes it clear that initial rollout coverage will not be available to everyone. Fastiggi is further quoted:

We're doing certain areas in each town — nothing we're doing encompasses the entire town. I don't want to say we're expanding bit by bit, but we are moving neighborhood by neighborhood.

Regarding the future for Maine, New Hampshire and Vermont customers, Fastiggi is quoted:

The current expansion is all using DSL. The network we're building is capable of being upgraded. It can use the higher-speed DSL service, and can use fiber.

The Banner piece also claims Fairpoint's DSL service starts at $17.99 per month which (at the time of this writing) I have not been able to confirm. I could also not confirm downstream and upstream bandwidths.

Fairpoint Communications April 17 Investor Call Update

Last week I wrote about the April 17 Fairpoint Communications Investor call that was help last Thursday. The call was a long one, lasting 107 minutes (!). I've listened to it, looked at the slides, etc - here's the major technology and integration highlights I got from the call.

With the Verizon Northern States (Maine, New Hampshire and Vermont) acquisition, the company currently:

- Is the 8th largest local telephone company in the U.S.
- Operates in 18 states
- Serves 1,616,171 Voice Access Lines
- Serves 290,577 Broadband Lines that represent approximately an 18% penetration

Broadband penetration rates are currently low compared to peers and the company admits this. FairPoint penetration is 18% while peer average is 25%.

Fairpoint believes the increased size, economies of scale and extensive network are expected to improve cost structure and enhance product capabilities and sees opportunities for revenue in four areas:

- Increased broadband availability and IP based services

- Buildout of IP / MPLS networks will support new services
- Broadband addressability will be expanded from 68% of access lines to over 90% within five years

- New product bundles

- The IP / MPLS network upgrade will provide flexible business platforms

- Increased focus on local sales and marketing

- New local and experienced sales force of 50 employees being deployed
- Significant DSL build-out will increase availability to all customers

- Strong focus on business segment

I've listed on only some of the technology components and integration issues here - there is also a lot of good business & financial information for investors and Fairpoint employees.

You can download the full set of slides, listen to the audio presentation, and watch the webcast for detail information. All content can be accessed here.

Fairpoint Teleconference on Purchase of Maine, New Hampshire and Vermont on Thursday

Fairpoint Communications will be hosting a teleconference on Thursday, April 17, 2008 at 10:00 a.m. ET to discuss the Company's recently completed transaction in which FairPoint acquired Verizon Communications' landline and certain related operations in Maine, New Hampshire and Vermont.

Scheduled for the call from Fairpoint:

Chairman and Chief Executive Officer, Gene Johnson
President, Peter Nixon
Chief Financial Officer, John Crowley

According to a Fairpoint press release posted on Fox Business, a slide presentation will be made publicly available prior to the conference call in the "Presentations" section of their Investor Relations page linked here. This morning (Sunday, 4/13/08) the presentation had not been posted yet. The press release also says the call will allow ample time for a Q&A session.

Here's the live call in information:

Lines open at 9:50 a.m. on Thursday, April 17, 2008
Call in number: (888) 253-4456 (US/Canada) or (706) 643-3201 (international)
Request the FairPoint Communications call or Conference ID# 4335773

The teleconference will be recorded and made available if you cannot make the live call. Here's the replay information:

Number: (800) 642-1687
Confirmation code 43357737
Recording Availability: Thursday, April 17, 2008 at approximately 1:00 p.m. ET through Thursday, May 15, 2008 at 11:59 p.m.

In addition, an online Webcast replay will be available beginning at 1:00 p.m. ET on April 17, 2008 and will remain available for one year.

If you've been following my writing you know I have great concerns about the availability of broadband services in rural parts of the United States. This will be an interesting teleconference - I'll be listening and writing about it here.

Verizon "Northern States" Deal is Complete with Fairpoint

Yesterday, the New Hampshire Public Utilities Commission held a last minute meeting to approve the Verizon sale of Maine, New Hampshire and Vermont to Fairpoint Communications. Regulators were concerned when they learned last week that Fairpoint had to spend an additional $17 million on bonds in order to finance the Verizon deal for the 3 states.

Today, a Verizon press release explained some detail on how the transaction has been handled. Here's a piece from that press release:

Verizon Communications Inc. (NYSE:VZ) today announced the completion of the spin-off of the shares of Northern New England Spinco Inc. (Spinco) to Verizon stockholders. Spinco held specified assets and liabilities that were used in Verizon's local exchange business and related activities in Maine, New Hampshire and Vermont. Immediately following the spin-off, Spinco merged with FairPoint Communications, Inc. (NYSE: FRP), resulting in Verizon stockholders collectively owning approximately 60 percent of FairPoint common stock.

Verizon stockholders are receiving one share of FairPoint common stock for every 53.0245 shares of Verizon common stock they owned as of March 7, 2008. This is equivalent to 0.0189 shares of FairPoint common stock for each share of Verizon common stock owned as of March 7, 2008. FairPoint will pay cash in lieu of any fraction of a share of FairPoint common stock.

Here's a brief summary of the deal collected from various sources:

Verizon received a $1.16 billion cash payment from Spinco
Verizon will receive $551 million of 13 1/8% senior notes due in 2018 issued by Spinco
Verizon loses over $1.4 billion in debt
Verizon gets over $500 million in tax writeoffs
Fairpoint gets 1.6 million new landline customers
Fairpoint gets 230,000 new DSL customers
Fairpoint gets over 2,500 new employees from Verizon
Fairpoint becomes the eigth largest telecom company in the United States

It was a big effort for the 3 states, Fairpoint and Verizon to get this deal done.

Verizon/FairPoint Just About A Done Deal in ME, VT and NH

Well, it looks like another one of my 2008 predictions has bit the dust and this just a little over three weeks after the Patriots loss in the Super Bowl!

Yesterday, the New Hampshire Public Utilities Commission (PUC) approved the Verizon sale to FairPoint Communications. The New Hampshire PUC voted 2-1 with some attached conditions that include the creation of a trust fund for future retiree's health benefits. According to WMUR in New Hampshire, FairPoint will also be establishing a call center in Littleton and a data center in Manchester and will not be able to move them without state approval. One other condition requires FairPoint to notify the state whenever the companies debt rating is downgraded.

Both Maine and Vermont have already approved the $2.35 billion deal. FairPoint currently services approximately 300,000 phone lines in 18 states and the Verizon deal will add an additional 1.7 million lines. The sale will eliminate $1.7 billion in Verizon debt and provide the company with a $600 million tax write off.

According to WMUR, PUC Commissioner Graham Morrison dissented, saying:

.... he couldn't agree that the settlement can "provide a reasonable basis to conclude that FairPoint will not become insolvent, or otherwise be unable to meet its service commitments. ... I am equally concerned and dismayed that the technology plan offered is not consistent with the state's best interests and need to be a competitive global participant in the business and education market in the coming years.

A FairPoint press release yesterday stated:

FairPoint and Verizon are in the process of reviewing today’s written order for any additional provisions or changes not covered in the previously announced stipulation with the staff of the New Hampshire PUC.

The decision can be appealed by opponents who must request a rehearing within 30 days but to me, it looks like this is a done deal.

Verizon has been installing FiOS is parts of Southern New Hampshire so it will be interesting to see how those customers that have fiber coming into their homes will be handled.

Will these decisions come back to haunt these three states? Time will tell.

Update: Verizon's Sale of Maine, New Hampshire and Vermont

I've written here in the past about Verizon's pending sale of their Maine, New Hampshire and Vermont networks to Fairpoint Communications. Here are some highlights on the sale taken from a Burlington Press piece written yesterday:

• The sale represents roughly 1.6 million land lines in the three states.
• Sale price is $2.72 billion which, without any dept relief, would put FairPoint into $2.5 billion of debt
• Proposed deal has Verizon giving Fairpoint $235 million in debt relief.
• Maine has approved the sale but has not written a final order yet.
  
• Last week the staff of the New Hampshire Public Utilities Commission recommended state regulators sign off on the deal.
  
• Vermont's Public Service Board is currently meeting on FairPoint's proposal.
• Fairpoint has agreed to cut dividends to shareholders by $50 million a year and will not be permitted to raise the dividend until its debt ratio has been lowered.

Each state must approve the sale individually so each is also negotiating based on their own needs. For example:

• In New Hampshire, the proposed deal calls for Verizon to give FairPoint $50 million over two years to help build infrastructure and make high-speed Internet access available to 95 percent of the customers by a certain date.
• In Vermont, the proposed deal calls for 80 percent high-speed Internet availability by 2010 -- and a requirement that all customers in at least half of FairPoint's telephone exchanges have access to broadband Internet service.
• In Maine, FairPoint has agreed to freeze DSL rates for existing Verizon customers at $15 to $18 a month for two years.

Much of the discussion has been around the huge amount of debt Fairpoint would assume if the sale happens. Saddled with this debt, many are concerned about Fairpoint's ability to upgrade existing services as expensive higher bandwidth technologies go mainstream. Sure, current ADSL offerings scream when compared to dial-up but - we won't be saying that in a few years.

I'm trying to remain optimistic - is there another more cost effective technology (perhaps WiMAX, higher bandwidth DSL or even Broadband over Power Line, etc....) that will make these concerns moot? Time will tell if the sale gets final approval.

FCC, Vermont and Maine OK Verizon / Fairpoint Deal

The state of Vermont has tentatively reached an agreement with Verizon and Fairpoint Communications on Fairpoint's $2.7 billion purchase of Verizon landlines in Maine, New Hampshire and Vermont. The Vermont proposal still has to be approved by the Vermont Public Service Board. According to an Associated Press article:

The proposal, which must be approved by the three-member Vermont Public Service Board, essentially mirrors a stipulation already reached by Maine regulators. It calls for a $235 million reduction in the purchase price, reduced dividend payouts that would free more money for debt service and some special accommodations for Vermont.

The Maine Public Utilities Commission approved the purchase last week with New Hampshire still awaiting approval. Perhaps jumping the gun, the Federal Communications Commission voted 3-2 yesterday to approve the sale.

Here's a quote from a Burlington Free Press article written today:

Two FCC commissioners voted against approving the transaction. "If the seller is not committed to ubiquitous broadband deployment, then letting someone else with more commitment do the job makes sense. But if the buyer is shackled by the costs of the agreement, it becomes more difficult to see how the public interest is served," FCC Commissioner Michael Copps wrote in a dissenting opinion.

Commissioner Copps has also questioned why the FCC is issuing a ruling before all three of the state's regulatory agencies have reached decisions.

Vermont Public Service Board Denies FairPoint Communications’ Planned Purchase of Verizon Landline

The Vermont Public Service Board has denied Fairpoint Communications planned purchase of Verizon landlines in the state. The $2.7 billion deal also involves the purchase of Maine and New Hampshire land lines. If one state kills the deal it is dead for all three states.

Here's a piece from the Burlington Free Press:

The Board found that FairPoint had not demonstrated that it would be financially sound as it seeks to operate the newly-acquired territories in Vermont, Maine and New Hampshire — a service territory that has five times the number of access lines as FairPoint presently has. However, the Board also explained that except for the financial risks associated with the transaction, it could approve the merger, subject to a series of conditions.

The Board did say that it was open to FairPoint submitting revisions that addressed its financial concerns.

Closing the Digital Divide: Vermont's e-State Initiative

On a recent trip to Vermont, while scanning FM radio somewhere near Bellows Falls, I came across an interview with Lieutenant Governor, Brian Dubie. In the interview he described an integrated mobile satellite and terrestrial communications pilot project Vermont is involved with in partnership with TerreStar Networks. This partnership is in response to Vermont Governor Jim Douglas' e-State Initiative to provide universal cellular and broadband coverage everywhere and anywhere within Vermont’s borders.

If you've been to Vermont you know it is rural - basically lots of mountains with homes and businesses spread out across the state. Cell service is poor in many areas along with broadband availability.

The TerreStar Networks project will be an interesting pilot that should provide broadband speeds to even the most rural areas of Vermont. Here's a piece from the company website:

The company's first satellite, TerreStar-I, currently under construction by Space Systems/Loral, will be the world's largest and most powerful commercial satellite ever deployed. With an antenna almost 60 feet across, and up to 500 dynamically-configurable spot beams, TerreStar-I will surpass current satellites in terms of signal sensitivity and the number of spot beams it can generate.

The satellite's powerful antenna will enable TerreStar to deliver services over a broad range of commercially available consumer-style wireless devices utilizing existing commercial chip technology including cell phones, PDAs, laptops and legacy devices such as Land Mobile Radios (LMRs)-effectively outdating bulky and cumbersome satellite phones.

The system will be fourth-generation wireless (4G) all Internet Protocol (IP) based and use two 10-Mhz blocks of contiguous spectrum in the 2 GHz band. TerreStar Networks says the spectrum footprint will cover almost 330 million people across the United States and Canada. TerreStar Networks currently has a Launch on Demand contract with Arianespace that commenced last month (November 2007). The contract includes two additional launch options which TerreStar Networks could use to cover other parts of the world.

According to Brian Dubie, the Vermont pilot project will not require state funds and, once in place, the network will be available for all voice and data service providers currently operating in Vermont, as well as new providers.

If all proceeds on schedule, Vermonters could have access by late 2008 or early 2009.