The CWA and IBEW today commended the Maine Public Utilities Commission for setting a December 20 hearing date to determine whether and how to address the “partial, contested” settlement in the sale of Verizon Communications operations to FairPoint Communications.
The consequences of this deal for Maine residents are enormous and a rush to judgment would not have served the public interest, the unions said.
CWA and the IBEW maintain that the proposed deal does not even come close to the recommendations made by the PUC’s Hearing Examiner. Even with the nearly half a billion dollars in concessions that the two companies sought to make, Maine residents still will be left with a financially risky company without sufficient resources to improve service quality and expand high speed broadband. The amount of the concessions, though insufficient, shows that even the companies have been forced to recognize FairPoint’s financial weakness and proves that they have been caught in their attempt to pull a fast one on the regulators in the three states.
The unions are pleased that the Commission has refused to be stampeded into a settlement. The unions hope that if the Commission decides to consider the settlement that it will hold evidentiary hearings to analyze the full implications of the proposed settlement. For example, the proposed settlement will affect FairPoint’s financial viability since it would increase the company’s operating expenses and reduce its revenue which will adversely affect its profits and cash flow, among other issues, the unions said.
The CWA and IBEW continue to agree with the Hearing Examiner’s November 26 recommendation that the sale should be rejected because it is not in the public interest. If the PUC disagrees with this recommendation, the Examiner also recommended that it should condition any approval on requirements that Verizon reduce FairPoint’s debt by $600 million and reduce its Transition Services Agreement fees by approximately $130 million. Further, FairPoint should be required to reduce its dividends, increase capital expenditures and be subject to stronger service quality standards and penalties.
Thursday, December 13, 2007
Settlement proposed to Maine PUC by some intervenors fails to protect the public interest
Unions call on regulators to reject deal that falls short of earlier recommendations and hold new hearings
The CWA and IBEW are contesting a settlement reached by FairPoint Communications, Verizon Communications, the Office of Public Advocate, the Advocacy Staff of the Public Utilities Commission, and various other parties because it fails to protect the public interest. The settlement also falls far short of conditions recently proposed by the Commission’s advisory staff and the Office of the Public Advocate. The Commission is not obligated to accept the terms of the deal in whole or in part.
Although the settlement would modestly improve FairPoint’s finances, Mainers still will be left with a financially risky company without sufficient resources to improve service quality and expand high speed broadband. While some issues affecting workers have been addressed, the deal falls drastically short of these critical concerns.
The CWA and IBEW -- joint intervenors in the regulatory proceedings -- have formally asked the Commission to reject the proposed settlement -- or at the very least -- suspend its deliberations and hold hearings to address the problems posed by the settlement. Commission rules allow intervenors the opportunity to present arguments against such a proposed settlement and to request hearings.
“If the PUC allows this deal to be part of the case, then it should follow its own rules and hold a hearing to examine all of its implications,” said Pete McLaughlin, Business Manager of IBEW Local 2327. For example, the Commission should examine the impact of the deal on FairPoint’s financial viability since it would increase the company’s operating expenses and reduce its revenue which will adversely affect its profits and cash flow.
“We are surprised that the Public Advocate settled for much less than what he recommended only a few weeks ago,” added McLaughlin.
The unions were only invited to participate in settlement discussions last Friday December 7, even though such talks had been going on for some time. The unions unsuccessfully tried to ensure that the parties in the settlement discussions addressed the deal’s shortcomings through a number of proposals. After these attempts failed, the unions were again shut out from any discussions. The proposed deal is deficient in a number of areas including the following, because it:
· Requires Verizon to reduce FairPoint’s debt significantly less that the $600 million recommended by the Hearing Examiner and previously by the Public Advocate.
· Permits FairPoint to pay out common stock dividends greatly in excess of FairPoint’s level of net income in each and every year.
· Does not enable FairPoint to weather foreseeable adverse financial circumstances (such as reductions in revenues, increases in expenses, or increases in capital expenditures) without jeopardizing the financial health of FairPoint.
· Does not provide FairPoint with the financial capability to eliminate or substantially modify its plan to dramatically reduce its workforce through attrition during the next eight years.
· Allows FairPoint to invest $40-$50 million a year less in capital expenditures than Verizon’s historic annual levels in Maine, New Hampshire, and Vermont.
· Does not require FairPoint to fund any of the more than $400 million in projected retiree health care liabilities it will incur through 2015 and does not provide FairPoint with the financial capability to reasonably meet these liabilities.
· Changes significant aspects of FairPoint’s previously filed financial model, including its projections of revenues, expenses, capital expenditures, and cash flows (not even taking into consideration changes to which FairPoint may be required to agree in New Hampshire and Vermont.)
The CWA and IBEW continue to agree with the Hearing Examiner’s November 26 recommendation that the sale should be rejected because it is not in the public interest. If the PUC disagrees with this recommendation, the Examiner also recommended that it should condition any approval on requirements that Verizon reduce FairPoint’s debt by $600 million and reduce its Transition Services Agreement fees by approximately $130 million. Further, FairPoint should be required to reduce its dividends, increase capital expenditures and be subject to stronger service quality standards and penalties.
“The stakes are very high because it concerns the future of the dominant provider of telecommunications services in this state and the northern New England region,” said Cheryl Ahern, president of CWA Local 1400. “Our current and future economic well-being depends on the financial health of this provider. We cannot afford to be saddled with a financially shaky company without the resources to improve service and provide high speed broadband.”
The CWA and IBEW are contesting a settlement reached by FairPoint Communications, Verizon Communications, the Office of Public Advocate, the Advocacy Staff of the Public Utilities Commission, and various other parties because it fails to protect the public interest. The settlement also falls far short of conditions recently proposed by the Commission’s advisory staff and the Office of the Public Advocate. The Commission is not obligated to accept the terms of the deal in whole or in part.
Although the settlement would modestly improve FairPoint’s finances, Mainers still will be left with a financially risky company without sufficient resources to improve service quality and expand high speed broadband. While some issues affecting workers have been addressed, the deal falls drastically short of these critical concerns.
The CWA and IBEW -- joint intervenors in the regulatory proceedings -- have formally asked the Commission to reject the proposed settlement -- or at the very least -- suspend its deliberations and hold hearings to address the problems posed by the settlement. Commission rules allow intervenors the opportunity to present arguments against such a proposed settlement and to request hearings.
“If the PUC allows this deal to be part of the case, then it should follow its own rules and hold a hearing to examine all of its implications,” said Pete McLaughlin, Business Manager of IBEW Local 2327. For example, the Commission should examine the impact of the deal on FairPoint’s financial viability since it would increase the company’s operating expenses and reduce its revenue which will adversely affect its profits and cash flow.
“We are surprised that the Public Advocate settled for much less than what he recommended only a few weeks ago,” added McLaughlin.
The unions were only invited to participate in settlement discussions last Friday December 7, even though such talks had been going on for some time. The unions unsuccessfully tried to ensure that the parties in the settlement discussions addressed the deal’s shortcomings through a number of proposals. After these attempts failed, the unions were again shut out from any discussions. The proposed deal is deficient in a number of areas including the following, because it:
· Requires Verizon to reduce FairPoint’s debt significantly less that the $600 million recommended by the Hearing Examiner and previously by the Public Advocate.
· Permits FairPoint to pay out common stock dividends greatly in excess of FairPoint’s level of net income in each and every year.
· Does not enable FairPoint to weather foreseeable adverse financial circumstances (such as reductions in revenues, increases in expenses, or increases in capital expenditures) without jeopardizing the financial health of FairPoint.
· Does not provide FairPoint with the financial capability to eliminate or substantially modify its plan to dramatically reduce its workforce through attrition during the next eight years.
· Allows FairPoint to invest $40-$50 million a year less in capital expenditures than Verizon’s historic annual levels in Maine, New Hampshire, and Vermont.
· Does not require FairPoint to fund any of the more than $400 million in projected retiree health care liabilities it will incur through 2015 and does not provide FairPoint with the financial capability to reasonably meet these liabilities.
· Changes significant aspects of FairPoint’s previously filed financial model, including its projections of revenues, expenses, capital expenditures, and cash flows (not even taking into consideration changes to which FairPoint may be required to agree in New Hampshire and Vermont.)
The CWA and IBEW continue to agree with the Hearing Examiner’s November 26 recommendation that the sale should be rejected because it is not in the public interest. If the PUC disagrees with this recommendation, the Examiner also recommended that it should condition any approval on requirements that Verizon reduce FairPoint’s debt by $600 million and reduce its Transition Services Agreement fees by approximately $130 million. Further, FairPoint should be required to reduce its dividends, increase capital expenditures and be subject to stronger service quality standards and penalties.
“The stakes are very high because it concerns the future of the dominant provider of telecommunications services in this state and the northern New England region,” said Cheryl Ahern, president of CWA Local 1400. “Our current and future economic well-being depends on the financial health of this provider. We cannot afford to be saddled with a financially shaky company without the resources to improve service and provide high speed broadband.”
# # #
Saturday, December 8, 2007
Verizon's Savings From Tax Loophole in FairPoint Deal Would Fund High-Speed Internet in Northern New England
The $600 million tax windfall Verizon is due to receive in its proposed sale of telephone operations in northern New England, if invested in network upgrades, would be enough to provide high-speed Internet access to every residential customer in the company's service area, according to a new report released today.
Verizon has structured the sale of its phone business in Maine, New Hampshire and Vermont to financially strapped FairPoint Communications so as to avoid paying any federal taxes on the profits through an arcane tax loophole, the report by the Communications Workers of America and the International Brotherhood of Electrical Workers states.
That $600 million, if put into a Broadband Infrastructure Fund – as the unions have recommended to the Federal Communications Commission as a condition for approval of the sale – would allow for:
-- Providing lightening-fast fiber optic service (such as Verizon's FiOS Internet) to 84 percent or 857,000 of the residential customers served by Verizon in the three states;
-- Or, providing access to DSL high-speed service to nearly 100 percent of homes and FiOS to 75 percent of customers in the three states.
According to the report, data from the FCC show that the three states currently rank at or near the bottom in terms of broadband availability in the United States. New Hampshire is last, Vermont is next to last and Maine is fourth from bottom of the 50 states in the percentage of homes with DSL access. Only 64 percent of homes in the three states have broadband access as compared with the national average of 79 percent. Taxpayers are providing a $600 million tax break to Verizon through a loophole called the "Reverse Morris Trust," according to the report entitled, "You Make the Call – High Speed Broadband for All or Tax Loopholes for Verizon?"
Verizon can qualify for the tax loophole because FairPoint, a small telecom company based in North Carolina, is smaller than Verizon's northern New England operations and Verizon's shareholders will own more than 50 percent of FairPoint if the deal is approved. If Verizon sold its properties to a larger corporation for the same price of $2.7 billion, it would owe more than $600 million because its proceeds from the sale would be taxed at the corporate tax rate of 35 percent, according to the report. Because of the advantage of the Reverse Morris loophole, Verizon has an incentive to sell to a small company with limited financial resources rather than rural telecom companies such as Embarq or Citizens, which would be better able to invest in advanced communications networks, the report stated.
"If this deal is approved as currently structured, U.S. taxpayers will be subsidizing Verizon for abandoning its operations in northern New England and leaving these states as a communications backwater for years to come," said Kenneth Peres, PhD economist for CWA and the report's author.
Advisory staff for the public utilities commissions in all three states, as well as the offices of the consumer and public advocates in New Hampshire and Maine, all have urged rejection of the proposed deal, and have called for stringent conditions to be imposed if the commissioners ignore their advice and approve the transaction. The Maine and New Hampshire commission staff urged that, at the very least, Verizon's sale price be cut substantially – the Maine PUC staff recommended $600 million -- to reduce the debt burden that the deal would load onto FairPoint.
The regulatory commissioners in the three states are expected to announce their decisions on whether to approve, reject or impose conditions on the proposed sale later this month.
The report is being sent to governors and every member of the state legislatures in the three state region.
The report is available at www.stopthesalenow.org and www.cwa-union.org.
Tuesday, December 4, 2007
Nearly 90 percent of letters to NH Public Utilities Commission oppose sale of Verizon to FairPoint
Concord, NH – With just a few weeks remaining before a decision is expected by the New Hampshire Public Utilities Commission on the proposed sale of Verizon to FairPoint Communications, an analysis of the correspondence sent to the Commission shows that public comments on the sale are overwhelmingly opposed to the deal.
Jobs with Justice -- a community coalition that supports employment rights -- obtained copies of all comments received by the PUC on the sale. As of November 16, the commission had received a total of 252 letters and emails taking a position on the proposed sale. A surprising 225 comments, or almost 90 percent were against the sale while only 27 were for it. Another 10 comments expressed concerns, but did not take a position either for or against the proposed sale.
Many of the letters were from state and local elected officials. Sixty-two or 97 percent of the 64 comments submitted by elected officials opposed the sale while only two were in favor.
“As the Commissioners deliberate, we really hope they will take into consideration the wisdom of the people of New Hampshire,” said Mark MacKenzie, President of the New Hampshire AFL-CIO. “A clear majority of citizens are very concerned that this sale is not in the public’s interest.”
A public opinion poll conducted in early Sept. by Fingerhut Granados Opinion Research for the International Brotherhood of Electrical Workers and the Communications Workers of America showed that in the northern states, New Hampshire had the highest level of opposition to the proposed deal with 38 percent against to 18 percent in favor. When survey respondents learned more about the deal, opposition rose to 70 percent.
For a copy of the Jobs with Justice report summarizing public comments at the New Hampshire PUC, please contact Rand Wilson at the above number or by email at rand@mindspring.com.
More information about why citizens are mobilizing to stop the Verizon sale to FairPoint is at: www.stopthesalenow.org and www.no-deal.org. For information about ending the digital divide visit: www.speedmatters.org.
Jobs with Justice -- a community coalition that supports employment rights -- obtained copies of all comments received by the PUC on the sale. As of November 16, the commission had received a total of 252 letters and emails taking a position on the proposed sale. A surprising 225 comments, or almost 90 percent were against the sale while only 27 were for it. Another 10 comments expressed concerns, but did not take a position either for or against the proposed sale.
Many of the letters were from state and local elected officials. Sixty-two or 97 percent of the 64 comments submitted by elected officials opposed the sale while only two were in favor.
“As the Commissioners deliberate, we really hope they will take into consideration the wisdom of the people of New Hampshire,” said Mark MacKenzie, President of the New Hampshire AFL-CIO. “A clear majority of citizens are very concerned that this sale is not in the public’s interest.”
A public opinion poll conducted in early Sept. by Fingerhut Granados Opinion Research for the International Brotherhood of Electrical Workers and the Communications Workers of America showed that in the northern states, New Hampshire had the highest level of opposition to the proposed deal with 38 percent against to 18 percent in favor. When survey respondents learned more about the deal, opposition rose to 70 percent.
For a copy of the Jobs with Justice report summarizing public comments at the New Hampshire PUC, please contact Rand Wilson at the above number or by email at rand@mindspring.com.
More information about why citizens are mobilizing to stop the Verizon sale to FairPoint is at: www.stopthesalenow.org and www.no-deal.org. For information about ending the digital divide visit: www.speedmatters.org.
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