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Monday, April 16, 2012

Maine law on phones is calling

In a move that may herald the future of telephone service in New Hampshire, and which reflects how technology has scrambled the Ma Bell legacy, the state of Maine is about to change much of its regulatory framework that dates back to the era of operators and party lines.

“I’ve been told this is the first major rewrite like this in Maine since 1913,” said Mike Reed, Maine state president for FairPoint Communications. “We have high hopes that the New Hampshire Legislature is going to do the same thing over there.”

New Hampshire does have a bill proposing telephone deregulation – SB48, passed by the Senate and awaiting a hearing before the House Science, Technology and Energy committee on Tuesday – but it differs in many respects from what Maine did.

Maine’s new legislation and rules were signed into law Thursday by Gov. Paul LePage. It differs from the telephone deregulation that occurred in several other states, largely because Maine kept regulated the oversight for “provider of last resort” service that applies to everybody in the state.

Any Maine address that wants a basic telephone landline can keep it at rates guaranteed by the state Public Utilities Commission, although prices and availability of other services, including long distance, will be open to market forces.

“It was reasonable compromise between competing interests,” said Wayne Jortner of the Maine Office of Public Advocate, which opposed earlier versions of the deregulation effort. “It doesn’t throw the consumer out of the window, but it does quite a bit to help the industry.”

Among other changes, FairPoint won’t have to print a telephone directory after this year.

The change is part of the reshaping of telephone service that has been going on for years. This has produced some unpleasant side effects, such as some homes losing all connection during snowstorm power outages because cable and Internet phone service needs electricity, unlike central-office-powered landline phones.

FairPoint is the biggest telephone carrier in Maine just as it is in New Hampshire and Vermont, but it is struggling like all telecommunications firms built atop the remnants of the old national AT&T – an industry sometimes called POTS, for Plain Old Telephone Service.

Notably, people are dropping the traditional landlines which have been the basis of the business.

Figures are hard to come by, but back in 2010, FairPoint had about 250,000 access lines in New Hampshire, smaller incumbent phone companies like TDS in Hollis and Wilton had 129,000 lines, and cable companies like Comcast had 203,000 lines. In other words, FairPoint had less than half New Hampshire’s market for customers using landline phones.

Further, one survey estimated that 16 percent of New Hampshire customers had no landline phone service at all, just cell phones.

These sort of figures have led FairPoint and other phone companies to say that they should no longer have to work within regulatory constraints that date back to the AT&T monopoly, which was often called Ma Bell.

Monopoly regulations include some benefits for the company, notably a guaranteed rate of return on expenses, but also force companies to get government permission to change their rates or products.

“Suppose I want to roll out a new service tomorrow. The process is I have to file a tariff, there are hearings, reports, they have to approve it. … The approval process is 30 days, minimum, to an indefinite period,” said Reed.

Once the new law kicks in, FairPoint will be able to roll out services just as Comcast and Time Warner do.

Regulation also can lead to hefty automatic penalties. FairPoint faced a lot of service-quality penalties – on the order of $10 million a year in Maine, estimated Jortner – because of the many service and billing issues it had after buying Verizon’s landline service in 2008.

Under the new laws, penalties are no longer automatic for missing certain “metrics,” such as taking too long to answer customer calls, although they can be imposed again under a hearing process.

Jortner of the consumer office said most consumers won’t even notice the different when the new law goes into effect late this summer, since for all practical purposes extra services in telecom bundles, such as caller ID, long distance, voice-over-Internet-Protocol (VoIP), Internet service, and the like, haven’t been regulated.

Jortner said the public advocate’s office fought against the original industry proposal that would have removed provider of last resort service – known as POLR, pronounced “polar” – from some areas.

“It doesn’t matter what you buy, every connection has the POLR service. That’s what everything rides on: monitoring the network, wireless rides on it, VoIP rides on it. It’s an extremely important consumer protection issue,” he said.

Jortner said several other states have more completely deregulated telephone service, with the result that rates have soared.

“Usually, when you’re trying to meet competition, usually you reduce your rates, but this doesn’t really work that way because there’s almost no competition for basic level exchange service,” he said.

“Maine is not the most dramatic example of deregulation. The Legislature did a pretty good job of maintaining common-sense protections.”

David Brooks can be reached at 594-6531 or