FairPoint Communications is awaiting court approval this month of a supplemental plan for its reorganization, a key step on its path to emerge this fall from bankruptcy protection, according to the company.

Court action is pending in New York City as utility regulators in Maine prepare this week for two days of hearings on FairPoint’s reorganization plan, a process that will be followed later this spring in New Hampshire and Vermont.

The hearings and court filings are highly technical, but they suggest that FairPoint is making headway in its bid to reorganize under new ownership and shed $1.8 billion in debt.

“They should be able to go forward and be a profitable company,” said Richard Davies, Maine’s public advocate. “We are hopeful about that.”

To be profitable, Davies said, FairPoint must offset the industry’s ongoing loss of landline customers with revenue from expanded broadband and business services.

The public advocate is supporting a non-binding settlement reached in March between FairPoint and a special representative from the Maine Public Utilities Commission. It would let the company modify some conditions that the PUC ordered when it approved the $2.3 billion sale of Verizon’s landline business in northern New England to FairPoint in 2008.

Specifically, FairPoint is asking the PUC to delay — from April until December — a deadline for the first phase of its broadband expansion. The company also wants to reduce by 3 percent the number of lines that will be able to carry high-speed Internet service after its five-year expansion project ends. Additionally, it wants to change some broadband pricing restrictions set by the commission.

Those and other conditions were meant to bring better customer service and a rapid build-out of Internet lines after FairPoint took over the network from Verizon. Instead, problems with FairPoint’s new back-office computer system led almost immediately to lost connections, overwhelmed call centers and massive billing problems. Burdened by debt and losing customers, FairPoint filed for Chapter 11 bankruptcy protection in October.

Seven months later, FairPoint is working through a plan in which banks and other secured creditors would become the majority owners of FairPoint, and write off much of the debt in exchange. That plan, among other things, depends on agreements with bond holders, unions and state regulators.

Changes shouldn’t be made lightly, Amy Spelke, the PUC’s special representative, wrote in a report to the commission in March. But it was hard, she said, to anticipate all of the events that led Maine’s largest telecommunications company to file for bankruptcy protection.

The critical thing now, she wrote, is to improve FairPoint’s financial condition while preserving the core features of the sale approval, such as service quality and a commitment to expand broadband within a reasonable time.

“It is in the best interest of the state of Maine and FairPoint’s ratepayers,” Spelke wrote, “given the company’s well known and documented difficulties, for FairPoint to complete the bankruptcy process quickly and resume its focus on stabilizing the company’s telecommunications operations.”

The PUC will take up those and other proposed changes at the hearings on Wednesday and Thursday at its headquarters in Hallowell. While most of the sessions will be open to the public, no comment will be allowed.

FairPoint is asking for a nine-month extension, until December, for meeting its first build-out benchmark of 83 percent. It also wants to cut its original, overall requirement from 90 percent availability in 2013, to 87 percent.

That seems like a small change. But Jeff Nevins, a FairPoint spokesman, said it costs more to reach homes in remote areas. That’s why the company also is asking for permission to set pricing based on location, rather than on a statewide basis.

“If it costs $5,000 to hook someone up, and we’re only getting $29 a month, it doesn’t make sense from a business point of view,” Nevins said.

Since taking over the network, FairPoint has strung more than 400 miles of fiber and invested $100 million in broadband in the three states, the company said. Roughly 75 percent of its customers now have high-speed Internet access.

The company also has gotten a handle on many of its computer and operations issues. It continues to wrestle with billing errors, a problem that has been especially troubling for customers of independent phone companies that depend on FairPoint’s network.

The exact scope of the problem is difficult to quantify. The public advocate is receiving fewer complaints today than it did six months ago, Davies said. The PUC’s consumer assistance division keeps track of calls, but that information isn’t being released before the hearings.

The hearings in Maine are expected to be followed by sessions this month in New Hampshire and early next month in Vermont. Meanwhile, a confirmation hearing is set in bankruptcy court for May 11, when the judge will decide whether to approve the supplemental reorganization plan and a new board of directors.

Those and other steps could clear the way for the court to set a date when FairPoint could emerge from Chapter 11 reorganization and reissue stock.

 

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

[email protected]