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OCA Activity - Telecommunications

Case Update: Modified: 8/7/09

This update contains information about selected dockets with activity since the last Board meeting.

1. DT 07-011 Verizon NH Transfer of Assets to FairPoint Communications, Inc.
2. DT 07-027 TDS Petition for Alternative Regulation – Phase 2
3. DT 08-130 Metrocast application for certification as a Competitive Local Exchange Carrier (CLEC) in the service territory of Union Telephone (a rural carrier).
4. DT 09-039 BayRing Complaint
5. DT 09-044 Regulatory Status of VOIP
6. DT 09-067 FairPoint PAP Waiver
7. DT 09-113 FairPoint PAP Waiver of Bill Credits

1. DT 07-011 Verizon NH Transfer of Assets to FairPoint Communications, Inc.

For more detail about the procedural history of this case, please see OCA Case Updates dated prior to April 2009. On January 30, 2009 FairPoint began the transition to its new systems and has experienced many difficulties since it began operating with these new systems on February 9. These difficulties include extended delays in service installations, billing errors, and inadequate customer service. Since that time, the PUC has held two status conferences, one in April and one in June, on issues related to cutover. The participation of the OCA and other parties has been limited to making public statements at the conclusion of the PUC’s questioning of FairPoint. Also, during this time, FairPoint has filed several iterations of a “Stabilization Plan” and various daily and weekly reports, in addition to the reporting required by the order approving the merger. Staff of the PUC, as well as the staffs of the Commissions in Vermont and Maine, with the assistance of their consultant, Liberty Consulting, have been in regular contact with FairPoint throughout this time. In response to FairPoint’s problems, and public reports about FairPoint’s financial circumstances, the OCA has asked that the PUC convene a formal adjudicative process to monitor FairPoint’s compliance with the terms of the order approving the merger, as well as its efforts to stabilize its post-cutover operations. The OCA has also asked that the PUC include the OCA in its informal monitoring activities. On June 9, FairPoint attended a technical session with the parties to discuss financial issues, and, on June 24, 2009, FairPoint commenced a private exchange offer for all of FairPoint’s outstanding 13 1/8% Senior Notes due 2018, which it consummated for 82% of these bonds on July 20. According to FairPoint, t he Exchange Offer was necessary to reduce FairPoint’s cash interest expense for the second and third quarters of 2009 and to help FairPoint maintain compliance with the interest coverage ratio maintenance covenant contained in its senior secured credit facility for the measurement period ending June 30, 2009. Notwithstanding FairPoint’s ability to exchange most of its 13 1/8% bonds, FairPoint has stated that it still faces significant financial hurdles, including the need to restructure this debt and a possible a breach of the interest coverage ratio maintenance covenant for the measurement period ending September 30, 2009. On July 28, and July 30, FairPoint met in a technical conference with the parties to DT 07-011, to discuss its Stabilization Plan Status Report filed by the Company on July 8. On or before August 21, Staff is required to file a report with the PUC on the technical session and make any recommendations for further action, and the other parties may do the same.

On July 30, FairPoint was informed that it might be delisted from the NYSE due to its low average level of capitalization.

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2. DT 07-027 TDS Petition for Alternative Regulation – Phase 2

In March 2007, TDS filed petitions for Commission approval of an alternative form of regulation for four subsidiaries: Merrimack County Telephone (Merrimack), Kearsarge Telephone Company (Kearsarge), Wilton Telephone Company (Wilton) and Hollis Telephone Company (Hollis). Following an adjudicative process, including discovery and the filing of testimony by the OCA, the Commission approved in part a settlement agreement filed by the Staff, TDS, the OCA and segTEL, a competitive local exchange carrier. Specifically, the Commission approved the portion of the settlement agreement allowing for alternative regulation of Wilton and Hollis. However, the Commission denied the portion of the settlement agreement allowing alternative regulation for Merrimack and Kearsarge. The Commission’s order allowed TDS to return within one year to provide further proof of the availability of alternatives to TDS’s wireline service within the Merrimack and Kearsarge exchanges. In January 2009, TDS filed additional testimony concerning Merrimack and Kearsarge, and asked the Commission to authorize an alternative form of regulation within the exchanges served by these affiliated companies. In response, the Commission resumed the adjudicative process for review of the Company’s new testimony. The scope of this phase of the proceeding includes whether there are competitive alternatives available to the majority of the customers of Merrimack and Kearsarge. The procedural schedule for phase II included an expedited period for discovery and a technical session on May 29. On July 18, 2009 the OCA filed testimony, recommending that the PUC deny TDS’ request for alternative regulation of Merrimack and Kearsarge. The OCA took the position that the Merrimack and Kearsarge’s supplemental filing did not provide sufficient evidence that competitive alternatives existed for a majority of customers in all of the exchanges served by these Companies, as required by the controlling statute. The Companies now have an opportunity to propound discovery upon the OCA, which they did on July 31, and other non-company parties who filed testimony. A hearing is scheduled for the end of September.

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3. DT 08-130 Metrocast application for certification as a Competitive Local Exchange Carrier (CLEC) in the service territory of Union Telephone (a rural carrier).

On September 30, 2008 the Commission approved Metrocast’s application for certification Competitive Local Exchange Carrier (CLEC) to provide telecommunications services in the territory of Union Telephone, a rural Independent Local Exchange Carrier (ILEC). On October 14, 2008, Union filed a Motion to Rescind Authority Issuance for Procedures Consistent with Law, and for Rehearing, claiming that a hearing was required prior to approval pursuant to RSA 374:22, which was amended in the last legislative session to address competition issues. Metrocast objected, and NHTA filed a letter in support of Union. Comcast filed a letter of disagreeing with Union and NHTA. The Commission issued Order No. 24,939 denying Union’s motion, and Union has appealed the decision to the Supreme Court. The Supreme Court accepted the case and docketed as 2009-0168. On July 8, the Supreme Court vacated the briefing schedule pending screening of another Union appeal, 2009-0432, and a ruling on an assented-to motion to consolidate the two dockets.

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4. DT 09-039 BayRing Complaint

On March 2, 2009, Freedom Ring Communications, LLC d/b/a BayRing Communications filed a complaint against FairPoint for its failure, following cutover, to provide BayRing with Operational Support Systems that are “adequate, operationally ready, just and reasonable, and non-discriminatory.” BayRing contends that FairPoint has violated the PUC’s order approving the transfer of assets from Verizon and a Performance Assurance Plan, as well as state and federal law. BayRing requested that the PUC require FairPoint to respond to its complaint, pay reparation to BayRing, and that the PUC open an investigation. On April 20, after reviewing FairPoint’s response to the complaint, the PUC determined that further investigation was warranted. The PUC directed FairPoint representatives to meet with BayRing representatives and PUC Staff before April 29, as well as to provide certain documents prior to the meeting including the PAP reports for December 2008, and January, February and March 2009. On June 5, BayRing filed a letter with the PUC, alleging that FairPoint has not complied with the PUC’s directive to provide complete copies of the PAP reports, and that FairPoint has unilaterally changed the metrics that it includes in its PAP reports. BayRing requested that the PUC order FairPoint to compensate BayRing at the maximum amount of liability allowed by the PAP.

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5. DT 09-044 Regulatory Status of VOIP

On March 6, 2009, the rural carriers of the New Hampshire Telephone Association (RLECs) filed a petition for an investigation into the regulatory status of IP Enabled Voice Telecommunications Services. According to the filing, affiliates of Comcast Corporation are offering a fixed voice service using internet protocol in New Hampshire, under the name of Comcast Digital Voice (CDV). The RLECs assert that Comcast claims CDV is an information service that is free from any regulation by this Commission. The RLECs contend that CDV is not an information service. Instead they argue that CDV meets the definition of a public utility under RSA 362:2 and should therefore be regulated and be subject to intraLATA access charges. On June 24, 2009, the PUC held a prehearing conference. On July 2, the PUC approved a procedural schedule, which provides for Staff-selected discovery, the filing of stipulated facts, and a hearing on the merits in December.

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6. DT 09-067 FairPoint PAP Waiver

On March 26, 2009, FairPoint filed a petition for waiver of certain requirements under the Performance Assurance Plan (PAP) to remove certain PAP and carrier-to-carrier (C2C) reporting obligations, and associated penalties. According to the filing, the PAP and C2C reporting guidelines were established in the context of Verizon’s system capabilities. FairPoint states that, as a result of the implementation of its own systems, it will no longer be able to report the results of certain measures. FairPoint requests a permanent waiver of the reporting requirements and associated penalty requirements for those metrics. FairPoint also submitted a request to the PUC for a temporary one month waiver of the reporting requirements and any associated penalties for eleven specific metrics listed in the request. FairPoint asserts in their request that a waiver may be requested due to situations beyond their control saying that the criteria for such a waiver are met in this case. FairPoint also asserts that the circumstances leading to the request for a waiver are of an extraordinary nature. On July 8, the PUC held a prehearing conference and technical session. Participants included representatives of FairPoint, BayRing, CRC Communications, One Communications, Comcast Phone, segTEL, the OCA and PUC Staff. The parties agreed that the proceedings in DT 09-113 (see below) should be the PUC’s priority in advance of DT 09-067, and that the two dockets should not be consolidated.

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7. DT 09-113 FairPoint PAP Waiver of Bill Credits

One June 10, 2009, FairPoint filed a petition for waiver of the incentive payment requirements of the PAP, or modification thereto, which was made applicable to FairPoint pursuant to the PUC’s order approving Verizon New England’s transfer of assets to FairPoint. Specifically, FairPoint requests relief from the payment of PAP bill credits to competitive local exchange carrier (CLEC) customers for the months of February through June 2009, which resulted from missing applicable performance metrics attributable, by FairPoint, to system cutover issues. FairPoint reports that CLEC customer bill credits total $2,859,471, across the three Northern New England states for February, March and April, with New Hampshire bill credits alone totaling $639,738 for March and $874,726 for April. FairPoint expects to miss PAP metrics for the months of May and June as well. FairPoint bases its request for the waiver on the “unprecedented” and “unforeseen” issues related to the system cutover launched in February 2009. A prehearing conference and technical session is scheduled for August 13, 2009.

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