Wednesday, April 23, 2014
A recent request by FairPoint Communications for nearly $68 million in additional revenue from the state will prompt state utility regulators to consider these questions: In the age of Skype and smartphones, who still relies on basic, landline telephone service, and how much should all other Maine phone customers pay to help subsidize it?
Maine is the first state to do this analysis, according to Tim Schneider, the state’s public advocate. The review will require not only profiling who uses basic telephone service today, but how to allocate the cost of providing it, versus Internet access and other communication services that can travel over the same wires.
“Are we willing to continue providing this subsidy?” Schneider said. “That’s the bigger policy question. The obligation to serve has been bedrock telecommunications policy in Maine for 100 years.”
FairPoint wants the Maine Public Utilities Commission to let it collect more money to provide bare-bones, local phone service for the 29,000 or so Mainers who want it. Some of these customers are in rural areas and the cost of maintaining service there is high, FairPoint says.
FairPoint is a statewide company that operates the legacy network of the old Bell Telephone system. By law, it has to offer “provider of last resort” service to anyone connected to a phone pole.
To raise enough money, FairPoint is asking for two things. The first is a $2 a month rate increase for its 29,000 basic-service customers, who now pay $14.69.
But the $2 hike only scratches the surface in making up the cost of providing basic service, according to FairPoint officials. The company also wants to tap into the Maine Universal Service Fund, which was set up to help small, rural phone companies serve their customers.
All Mainers pay into the universal fund, whether they have cellphones or landlines. A person with a $75 wireless bill, for instance, now contributes $1 a month to the fund. That would jump to $5 a month, if FairPoint received all the money it’s seeking.
FairPoint has never received money from the universal fund. But every year, it loses roughly 7 percent of its landline business to competitors, according to Jeff Nevins, a FairPoint spokesman. The company had over 457,000 access lines last year, but as the number shrinks, there are fewer customers to help pay for the basic-service requirement.
People who want basic service today aren’t just at the end of a country road, Nevins said. Some customers have a cell phone, but also want a corded phone with a dial tone and local calling.
“People think it’s primarily rural, but it isn’t,” he said. “It could be a person living in an apartment on Congress Street in Portland.”
Increasingly, those people have new options that compete with basic landline service in pricing. One example is U.S. Cellular’s Home Phone, which allows users to plug their standard handset into a wireless device that sends and receives signals in the company’s coverage area. It includes voicemail and caller ID, for $19.99 a month.
Schneider said he thinks FairPoint’s $2 a month request is reasonable and that the state Public Utilities Commission may consider that quickly, as FairPoint is requesting. But the broader issue of Fairpoint tapping into the Universal Service Fund is likely to take more time to consider, he said, and the rate request is likely to be adjusted down as the case proceeds. That’s typically what happened prior to 2007, when Verizon operated the state’s largest phone network.
“I think it’s fair to view that $68 million request as FairPoint’s opening bid,” Schneider said.
The process at the PUC also will be watched closely by lawmakers. Constituents, especially those in rural areas where cell phone service is poor, still rely on corded phones for reliable communications, especially in a medical emergency, said Sen. John Cleveland, D-Auburn, co-chair of the legislative committee that deals with energy and telecom issues.
Lawmakers will be interested in learning the make-up of those 29,000 basic-service customers, he said.
At a time when people can pick up a pre-paid cell phone at a store, maybe some of these customers have other options, Cleveland suggested.
“It’s a real challenge,” he said. “How do we meet the original goal, which was to provide universal telephone service across Maine? What obligation is there, and how do we find a way to meet it?”
Tux Turkel can be contacted at 791-6462 or at: