Fairpoint+voip policyOne of FairPoint’s top strategic objectives for 2012 was regulatory reform.  And this week the company touted achievements on that front in three key New England states.

In Vermont, regulators said FairPoint would no longer need approval to offer what the company called “competitive pricing.” In addition, FairPoint said Vermont regulators are reducing the amount of service quality penalties to which FairPoint could be subject to a maximum of $1.65 million per year, down from $10.5 million per year.

In Maine, the state legislature passed a bill which, according to FairPoint, allows the company to “quickly adjust its pricing to respond to changes in the marketplace.” In addition, the amount of penalties to which FairPoint could be subject will be reduced from $12.5 million to $2 million per year.

As FairPoint noted in a previous press release, New Hampshire also has passed legislation deregulating telecom. That state, too, offered more pricing flexibility and, according to FairPoint, eliminated potential penalties of up to $12.5 million per year to which FairPoint could have been subject.

Although FairPoint operates in 18 states, the northern New England markets are the company’s largest, representing 80% of the company’s customer base.

Why the focus on fines
It’s not surprising that FairPoint made regulatory reform such a high priority. When the company bought lines from Verizon in several states including some in New England, the transition did not go smoothly and customer complaints quickly began to pile up. Before long the company had amassed millions of dollars in fines between New Hampshire, Vermont and Maine and had to file for bankruptcy.

The company has since emerged from bankruptcy and says it has made strides in improving and maintaining high customer service standards.

In this week’s announcement, Frontier CEO Paul Sunu argued that the New England reforms are pro-competitive. “The reforms recognize the need to promote a competitive marketplace and they encourage innovation and continued investment in telecommunications services.”

But not everyone would agree with that statement. By reducing fees for poor service, some consumer groups and others argue that telcos have little incentive to maintain service levels. And although FairPoint was careful to describe its new pricing flexibility in neutral terms, some would argue that what the company is really getting is the ability to easily raise prices.
Those opposing telecom deregulation certainly have their work cut out for them. Last month a representative from consumer group AARP told Telecompetitor that at least 15 states were considering legislation aimed at deregulating telecom.

Every state is approaching the task a bit differently, but there are many similarities. While some states are simply looking to exempt VOIP from telecom regulation, others aim to take some of the steps now taken in New Hampshire and Maine – including eliminating or minimizing penalties for poor service and giving telcos greater pricing flexibility.

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