FairPoint wants rejection overturned

Tuesday August 3, 2010

MONTPELIER -- FairPoint Communications may ask a federal court to overturn Vermont regulators' rejection of its reorganization plan as northern New England's dominant landline phone company tries to emerge from bankruptcy, a company executive said Tuesday.

Michael Smith, president of FairPoint's Vermont operations, said that's one of two broad options the company is looking at after the Public Service Board nixed the company's reorganization plan on June 28. That decision put Vermont at odds with New Hampshire and Maine, which had approved the reorganization plan.

"There's two options that we're exploring," Smith said. "One is to go back to the board with amended financial information and see if we can address some of their concerns. The second option is to go to federal bankruptcy court and seek relief there."

He said he expects the company will decide what to do within the next several weeks.

In its order, the Public Service Board took issue with FairPoint's plan to trim costs by pushing back to mid-2011 its promised deadline for providing broadband Internet service throughout its territory in Vermont. The goal had been to do it by the end of this year.

The board also rejected the company's request to be excused from paying penalties to customers for service problems after it took over Vermont's regional phone networks early last year from their previous owner, Verizon Communications. And it dismissed FairPoint's promises that its performance was improving, saying the company had "provided virtually no explanation as to why its projections are reasonable."

Smith said he and the company were surprised and disappointed by the board's ruling. In early July, the company wrote to the board in part to tell it that it "must reserve its rights to seek relief before the Bankruptcy Court with respect to the matters that the Board considered."

FairPoint operates in 18 states, and Vermont regulators are the only ones who have rejected its plan to emerge from a bankruptcy it filed last October, Smith said. He said the company had hoped to get out of bankruptcy by the end of this summer, a prospect placed in doubt by the Vermont board's action.

If FairPoint asks for relief from the Vermont ruling in the bankruptcy court, the company would be "in a reasonably strong position here," said Don Kreis, associate director of the Institute for Energy and the Environment at Vermont Law School and a former New Hampshire utility regulator.

He said the supremacy clause of the U.S. Constitution, which says that federal law trumps state law when they conflict, would put the federal Bankruptcy Court in the driver's seat.

"When the federal government regulates something its regulatory authority supersedes any state law to the contrary," Kreis said.


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