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FairPoint Files For Chapter 11

Its New England landline telephone operations, purchased from Verizon, will continue, company says.

Struggling FairPoint Communications filed voluntary Chapter 11 bankruptcy petitions after reaching agreements with bank lenders that will enable it to continue business in the Northern New England states where it took over unwanted assets from Verizon Communications.

The company, based in Charlotte, North Carolina, but with most of its telephone lines in the New England states of Maine, New Hampshire, and Vermont, said it will have enough resources to continue operations since key lenders have agreed to lower its debt by about 62%.

"The day-to-day operations of our business will not be impacted by today's actions," said David Hauser, chairman and CEO of FairPoint, in a statement Monday. "We want to assure our customers, employees, and vendors that we remain committed to continuing to provide reliable, uninterrupted service to all of our customers."

Consumer advocates, union representatives and state regulatory officials had questioned from the beginning -- when Verizon in January of 2007 announced it would shed the mostly landline assets for $2.7 billion -- that FairPoint didn't have the financial resources or the telecom savvy to successfully operate the assets.

"We recognized from the start that the business plan was flawed, the debt was too high and they were in over their heads in rolling into their new computer systems," said Pete McLaughlin of the International Brotherhood of Electrical Workers, according to media reports.

Governor John Baldacci (D - Maine) said government officials from the three states are coordinating their efforts to monitor the Chapter 11 proceedings. Subscribers in all three states have complained for months about problems with their FairPoint service ranging from long waits for service to billing errors.

Verizon has been shedding older landline assets in other mostly rural states so it can concentrate on higher revenue-producing assets like Verizon Wireless and its FiOS fiber optic broadband Internet solutions.

InformationWeek has published an in-depth report on new software models. Download the report here (registration required).

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