Maine Deregulates FairPoint, Sets Phased End to POLR Requirements

“We’re very pleased that we’re moving forward on it,” said FairPoint Maine President Mike Reed, who said in an interview the issue goes back five years. “It puts FairPoint on a level playing field in the areas that are clearly competitive, and it puts a path forward for additional movement as competition continues to increase, while at the same time maintaining some consumer protections for those people who do not have a competitive choice.”

The Maine law marks “an improvement over the status quo” in the state, providing “concrete gains for consumers,” Maine Public Advocate Tim Schneider said in another interview. AARP, which has taken the position of “neither for nor against,” supports consumer protections added by the law even as AARP continues to oppose deregulation, the organization’s Maine advocacy director Amy Gallant said. “Our primary concern was that landlines would be cut,” but the new law strengthens protections against abandonment “even from what we have on the books currently,” she told us.

POLR obligations, also called carrier of last resort (COLR), require ILECs to provide a flat-rate basic phone service in rural areas where the customer base is too small to cover the costs. About half of the states continue to require ILECs to provide last-resort service, while the other half have revised or removed them. In 2011, the FCC declined to pre-empt state POLR obligations as long as they are applied in a technology and competitively neutral way. As a large price-cap carrier, FairPoint wasn't allowed to access state universal service funding in Maine to cover its costs.

Under the Maine law, FairPoint will no longer be obligated to provide POLR services in Auburn, Bangor, Biddeford, Lewiston, Portland, Sanford and South Portland. The obligations lift 120 days after the current legislative session ends. The law identifies 15 other municipalities where FairPoint can shed POLR requirements if the company meets service quality standards. Every six months, if FairPoint has maintained good service quality for the previous two quarters, the PUC will relieve the company of POLR obligations in five of the 15 additional markets, the law states. After POLR obligations are removed in those areas, FairPoint can petition the PUC for relief in additional municipalities, the law states.

FairPoint and AARP voiced different opinions on the impact to consumers in the state. “Customers aren’t going to know it,” Reed said. Out of 1.2 million people in Maine, about 26,000 are POLR customers, he said. “It’s a very, very small subset.” And most POLR customers don’t know they’re POLR, he said. But Gallant said “it’s a lot of people who may not have any other options, either because they can’t afford another option that’s on the market, or they don’t have the technological literacy to research and switch to another provider.”

Initially, AARP Maine opposed outright proposals deregulating FairPoint, but the organization shifted into a neutral position, Gallant said. AARP opposes removing any regulation that requires the carrier “to provide a basic landline telephone service with guaranteed affordability and reliability,” she said. Many older Mainers rely on their landlines for communication, health devices and security systems, she said. But AARP moved to neutral during stakeholder talks when the deregulation proposal was combined with a pro-consumer plan to add teeth to FairPoint service quality requirements, standards that the telco “has never met since being in Maine,” she said. Gallant praised amendments that narrowed deregulation to a limited number of towns and in a phased approach. This requires FairPoint to meet service quality requirements to keep the deregulation ball rolling across more municipalities, she said.

Schneider praised the bill for requiring penalties for poor service. In the past, FairPoint has “repeatedly missed service quality benchmarks,” but the state commission declined to impose penalties, he said. Under the law, failure to meet those standards for two consecutive quarters makes the service quality reports public record and requires the Maine PUC to investigate. “If the commission concludes after investigation that the failure to meet a service quality requirement is due to factors within the control of the price cap ILEC, the commission shall, by order, direct the price cap ILEC to take such steps as the commission determines necessary to meet the requirement,” the law said. If the company fails to comply, the commission “shall impose a penalty … in an amount sufficient to ensure compliance with that order,” it said.

Reed defended the company’s commitment to good service. “We’re in agreement about providing service quality at a high level and, very importantly, keeping that confidential” from competitors, he said. FairPoint is “the only competitor that has service quality standards, so one company having service quality standards in a competitive environment is absurd on the face of it,” he said. “That said, in this stakeholder process and this bill that we’re very pleased with, we were able to reach an agreement that in the areas absent that competition, there is a mechanism by which the regulators can still keep an eye on the service quality of people who can’t … go somewhere else.”

The Maine Public Advocate also praised the bill for imposing a cap on rate increases. The law requires the telco to maintain the same rates, terms and conditions of phone service in a given municipality for one year after it’s relieved of POLR obligations. The law says the monthly charge for POLR service can't exceed $20 for any residential customer on the law’s effective date, but FairPoint can increase rates by up to 5 percent annually. FairPoint "may not discontinue, reduce or impair the service that it provides in a municipality, or part of a municipality" where it had POLR obligations, unless it gets the PUC’s approval.

POLR obligations aren't relevant to a competitive telecom market, and every state should consider a process to remove “these monopoly-era relics,” said Free State Foundation President Randolph May. “As competitive alternatives become more widely available, POLR obligations are increasingly obsolete and should be eliminated in line with the new marketplace realities. It looks like Maine is instituting a measured process to do that in a way that balances the POLR’s interests as well as the interests of customers.”

AARP will be watching the impact of deregulation in Maine, said Gallant. It will listen to AARP members, keep in touch with the state legislature, and work closely with FairPoint, she said. The negotiation on the bill strengthened AARP and FairPoint’s relationship, she said. “That’s the result of really hard legislative work.”