Unions Blame Verizon For Fairpoint Disaster - Not to say they told you so, but unions would like to say they told you so...
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Unions Blame Verizon For Fairpoint Disaster
Not to say they told you so, but unions would like to say they told you so...
03:32PM Thursday Oct 15 2009 by Karl Bode
tags: dsl · legal · coverage · business · telco · trouble · consumers
Tipped by Bob61571
The unions employees who warned regulators that Fairpoint wasn't equipped to handle the acquisition of Verizon's New England DSL and landline networks last year are rightfully saying "we told you so." As Fairpoint teeters toward possible bankruptcy, union officials tell Vermont locals that they can thank Verizon for all the fun everyone's having. Instead of simply selling to the highest bidder, Verizon used a Reverse Morris Trust to incur huge tax savings while dumping a huge debt load on Fairpoint. That debt load may ultimately be what crushes Fairpoint:
"Verizon’s use of the RMT loophole prevented other communication companies with the essential financial resources from making bids on the northern New England properties,” Montefusco wrote recently in The Rutland Herald. "Verizon’s desire to avoid paying taxes apparently was so great that it did not auction the properties or entertain other offers from more financially qualified firms. This left the northern New England states to be served by a debt-laden company and is the root cause of what we’re dealing with today."
For their part, Vermont regulators insist that allowing the Fairpoint sale was "the least imperfect choice" in "in a universe of imperfect choices" given that Verizon simply had no interest in upgrading any of the networks in New Hampshire, Vermont or Maine. That doesn't really answer why they approved a Reverse Morris Trust deal instead of a straight sale, or why regulators have continually allowed Fairpoint to set their own secret improvement goals.

Meanwhile, Fairpoint has announced several bits of good news despite their possible looming bankruptcy. The company says they've completed a core network upgrade, hired 45 new Maine customer support reps, and have expanded DSL availability in Southern Vermont.

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bgraham @ 15th Oct 04:27PM:
Management Failure?

It seems Fairpoint management were pretty dumb to accept a poor deal from Verizon. Can't really blame Verizon management for getting the best possible deal from Fairpoint.

Verizon management probably walked away from the deal laughing to themselves.
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anon @ 15th Oct 04:31PM:
Fairpoints Disaster

Regulators be damned, they didn't regulate or review anything about this transaction. Always using the excuse Verizon didn't want to be here. Verizon expanded slowly, but was expanding the network non-the-less. Fairpoint hasn't been able to get out of its own way. Regulators were given a choice and failed to do their jobs.
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MTU @ 15th Oct 04:56PM:
Reverse Morris Trust

Interesting example of corporative 'creative' financing. Reading up on the "Reverse Morris Trust" hat-trick was illuminating. Avoiding paying of taxes is what makes Wall Street hum.
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cdru @ 15th Oct 05:23PM:
Why they went with a RMT

quote:
Verizon’s desire to avoid paying taxes apparently was so great that it did not auction the properties or entertain other offers from more financially qualified firms.
Make money and lose debt, or make money and keep depth. Geez. I wonder why they went the way they went.

Verizon's a company...a for-profit publicly traded company. They have one goal in life, to make money for their shareholders. EVERY SINGLE THING they do ultimately goes back to the question "does this help make a profit for the shareholder?"

If they are looking at divesting a large chunk of their territory, they really aren't all that worried about what happens to the customers once they are out of the picture. The success or failure of whoever buys the lines from them really isn't Verizon's concern. If they can make more money by doing a RMT and offloading their debt, then they are going to go that route rather then auctioning it off piecemeal. If they can make more auctioning it off peacemeal rather then a RMT, then they go that route.

Does it suck for customers? Probably if the buying company fails. If it's a big enough deal, the PUC, FCC, FTC, SEC, IRS, or the FBI and CIA (did I miss any TLA?) should have objected or closed the ability to do the RMT. But the fact is that all those groups in one way or another approved it or at least didn't object.
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GenBlood @ 15th Oct 05:32PM:
The regulators are at fault ...

The regulators should have done their job better ...
They should have protected the end user NOT Verizons
bottom line ... So, in the end the consumers get stuck

I figure FairPoint will be filing in by mid November ... An
we will need to find a new provider ....
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Jim Gurd @ 15th Oct 05:36PM:
Re: Reverse Morris Trust

said by MTU :

Interesting example of corporative 'creative' financing. Reading up on the "Reverse Morris Trust" hat-trick was illuminating. Avoiding paying of taxes is what makes Wall Street hum.
It seems to me that the government is at fault for creating the loophole in the first place. I don't blame Verizon for exploiting it. They simply used tax laws to their maximum advantage just like anyone else would do.
--
The Mogambo Guru economic newsletter, an avocational exercise to heap disrespect on those who desperately deserve it.
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gorehound @ 15th Oct 05:53PM:
this deal sucked

And this is just one more reason why we have to have a goverment that watched out for its citizens.
we need to have regulation whether you agree or not big companies do not care about the little guy and only care about lining their pockets.
and note there is a big difference in owning a business and making money plus being fair and not losing your scruples as opposed to having a business and being greedy and uncaring
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steveymacjr @ 15th Oct 05:56PM:
why believe a union official?

and we are to believe this simply because a union official said so?

The bankruptcy might actually be a good idea for the company, they can use it to get rid of the union contracts, which would be a good idea!
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SnowyOne @ 15th Oct 07:13PM:
Dump the debt & buy back the leaner bankrupt company

Verizon dumped a bunch of debt on Hawaiian Telcom in it's sale to them too. Hawaiian Telcom dumped the debt in it's bankruptcy filing. That's how you get rid of debt, let someone assume it who will eventually file for bankruptcy.
It's a shame & shouldn't be allowed.
»Fairpoint Will Fold
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anon @ 15th Oct 07:41PM:
Re: why believe a union official?

A good idea? Get rid of the people that have worked for the phone company for 30 years. Get rid of the people that worked 20 hours a day in the ice storms for weeks? Get rid of the people who protested this sale to this ill-equiped company from NORTH CAROLINA, STEVE. Should the people that gave you a contract for lets say, your mortgage, car loan, health care, etc be allowed to just get rid of it because they overspent to buy, and had no cash on hand. There are about 2000 union members that will tell you the same thing that the union officials have said. Get the facts straight Steve. You can't push New Englanders and not expect them to push back.
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cptmiles @ 15th Oct 07:39PM:
Lessons learned

Yes Fairpoint will file for bankruptcy. It is inevitable. This is the 3rd or 4th time Verizon has done this very thing. When are the states going to learn their lessons from other states. Indiana, please do not let Verizon walk away from the state. Threaten them with fines until they make every single person in their rotten territories DSL capable at the very least. If they do not or cannot then fine the crap out of them until they are willing to sell it for what it is worth. Maybe 300 bucks a line at the most. Give tax breaks and incentives to the buying companies. Verizon is the smart ass kid with the poop eating grin in the corner everyone wants to take a shot at.

I think Frontier is a descent company that may make a go of it, but should these state take a chance. If I haven't said it enough yet...Make 1.5M MANDATORY for 30 bucks or less and make them do it before they take their money and run. Do IT.
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openbox9 @ 15th Oct 08:38PM:
Re: this deal sucked

said by gorehound :

And this is just one more reason why we have to have a goverment that watched out for its citizens.
we need to have regulation
The telcos are already regulated and the regulators allowed this transaction. Should Fairpoint fail, it is the government that dropped the ball.
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tshirt @ 15th Oct 08:59PM:
Re: why believe a union official?

Why just union contracts? (people actually working to keep thing running) Why not tell the suppliers to take a leap? ("We've got your equipment, try and take it back!!") or the lenders ("sorry, no money for you")

The problem started with the regulators (and regulations (some dating far back) which allowed verizon to escape and even profit for it's OBLIGATION to serve those areas (in return for previous favorable tax treatment, exclusive access, etc. etc.) if anything the should have had to BUY themselves out of those commitments by funding/guaranteeing service to existing customer.
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tshirt @ 15th Oct 09:16PM:
Re: Lessons learned

Frontier is an decent company, but they aren't prepare or capable of taking managment control of x00% of there current customer load, and x00 times 10 of debt. (no company is unless they intend to 'strip the assets' and sell the bones)
This isn't even about a set broadband speed or assuring RELIABLE basic telephone service.
It about"...by allowing this, have regulators allowed the creation of an ongoing viable (porfitable) business that can and WILL continue to serve the public OR is this a process of shedding debt? (assets to be later reabsorbed)

Regulations need to change to coordinate the balance of protective benfit to corp's( and individuals) vs RESPONSIBLITIES to meet their OBLIGATIONS.
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SnowyOne @ 15th Oct 09:50PM:
Re: Lessons learned

said by tshirt :

...OR is this a process of shedding debt? (assets to be later reabsorbed)

Regulations need to change to coordinate the balance of protective benfit to corp's( and individuals) vs RESPONSIBLITIES to meet their OBLIGATIONS.
You've hit that proverbial nail on it's head!
Imagine buying into debt of Verizon only to wake one morning to find that Verizon dumped it's obligation to pay you back into an entity that you would have never considered buying into.
It's a disgraceful situation, par for Verizon.
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BosstonesOwn @ 15th Oct 10:06PM:
Re: The regulators are at fault ...

Oh please , the regulators did their job.

Verizon wanted no part of those states and needed to offload it.

If Verizon didn't offload they would have just kept jacking the rates and you would be griping just the same.

Welcome to america.
--
"It's always funny until someone gets hurt......and then it's absolutely friggin' hysterical!"
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lorennerol @ 15th Oct 11:30PM:
Darwin

Uh, seems like Fairpoint should have walked away from the deal if it was that bad. Did their CFO attend the John "Bluto" Blutarsky MBA program or something?

If the applicable laws were followed this is nothing more than corporate survival of the fittest: Companies whose boards make very bad decision cease to exist.
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tim_k @ 16th Oct 05:06AM:
Re: why believe a union official?

said by steveymacjr :

The bankruptcy might actually be a good idea for the company, they can use it to get rid of the union contracts, which would be a good idea!
Once again the government fails to do its job. Once again they look the other way as pockets are lined. If Steve's wishes come true the rank & file will take large pay cuts. But never fear, the executives will still make out like bandits »www.fiercetelecom.com/story/fair···09-05-06 like they always do.
--
RIP my babies Buttons 1/15/94-2/9/07, Beamer 7/24/08, & Bows 12/17/94-10/11/09
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cableties @ 16th Oct 06:41AM:
Re: Management Failure?

Don't forget the previous CEO from Failpoint and CapGemini *along* with Verizon had a part in this. And the states regulators that *approved* this.

And I fail to see "cdru" argument that Verizon shouldn't be held liable as a utility (they are accountable to Public Utilities Commission) and not a profitable company. If they were "profitable" they wouldn't have needed to unload those states DSL lines.

Greed. Its what will kill you and make someone else's wallet fatter.
--
Splat
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mocycler @ 16th Oct 07:49AM:
Re: why believe a union official?

Why blame Verizon? All they did was get the best deal they could. Can you blame them for that?

If you sold your house and the next owner let it get run down and junky, would it be fair for the neighbors to blame you? Do you have a responsibility to sell it to a lower bidder because they will take better care of the place?

Fairpoint is in charge now. They and they alone are responsible.

The unions are going to do what they have to to line their own pockets. If Fairpoint had offered them a ton of dough, the union would have happily looked the other way and probably would have even lobbied in favor of the sale no matter how it would affect customer service.

The line about how the union "cares about the customers" is horse shit.

mocycler
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dogo88 @ 16th Oct 08:16AM:
Re: Why they went with a RMT

Exactly. Finally someone who get's it.
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Harddrive @ 16th Oct 08:46AM:
Re: why believe a union official?

said by mocycler :
The line about how the union "cares about the customers" is horse shit.


sorry mocycler, your unionized technician is about the only one who actually cares about the customer. when i was a Unionized technician, my sole purpose was to take care of the customer. i'm the guy that the customer actually sees from the company. i'm the guy that works the trouble until it is resolved, no matter how long it takes. that's my job as a technician, to take care of the customer. management? well, they exist to manage. rarely do they venture out to a customer's site.
--
I've come here to chew bubblegum and kick ass and i'm all outta bubblegum.
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lesopp @ 16th Oct 09:49AM:
Re: Darwin

said by lorennerol :

Uh, seems like Fairpoint should have walked away from the deal if it was that bad. Did their CFO attend the John "Bluto" Blutarsky MBA program or something?

If the applicable laws were followed this is nothing more than corporate survival of the fittest: Companies whose boards make very bad decision cease to exist.
Caveat emptor!
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lesopp @ 16th Oct 09:52AM:
Re: why believe a union official?

I am reminded of the lating phrase, "cave laborem".
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Harddrive @ 16th Oct 10:02AM:
Big Business Debt.

ok, i get it....
i go to a very busy restaurant such as the Old Mexican Inn located in Corsicana TX (great Texmex food and the orange chip dip is awesome). order something. eat it. waitress brings me the check. i tell her that myself or someone else will be right back to pay. i go out to the waiting area. find someone at the back of the line (Wednesday nights its out the door into the parking lot). offer them my table if they will pay my check. they agree. they go to my table. order more food. start eating that and tell the waitress that they might not be able to pay for their meal much less the one they acquired from me.
guess i got a free meal at Old Mexican Inn. how awesome is that!
--
I've come here to chew bubblegum and kick ass and i'm all outta bubblegum.
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Sammer @ 16th Oct 11:29AM:
Re: The regulators are at fault ...

Agreed the regulators didn't have to go along with this Reverse Morris Trust crap and should have said no! The regulators in other states should learn from history and say no to the Frontier deal.
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anon @ 16th Oct 11:54AM:
Re: The regulators are at fault ...

said by GenBlood :

The regulators should have done their job better ...

Yes the regulators could have said no to the Reverse Morris Trust. For Hawaii, shame on Verizon, for Northern New England shame on the utility commissioners of ME, NH and VT, and if it happens a third time the utility commissioners who approve it should be prosecuted for corruption and sent to prison!
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tim_k @ 16th Oct 12:22PM:
Re: why believe a union official?

said by Harddrive :

said by mocycler :
The line about how the union "cares about the customers" is horse shit.


sorry mocycler, your unionized technician is about the only one who actually cares about the customer. when i was a Unionized technician, my sole purpose was to take care of the customer. i'm the guy that the customer actually sees from the company. i'm the guy that works the trouble until it is resolved, no matter how long it takes. that's my job as a technician, to take care of the customer. management? well, they exist to manage. rarely do they venture out to a customer's site.
All management cares about is having you making your quota of tickets for the day. Heaven forbid you take extra time to try to do a good job.
--
RIP my babies Buttons 1/15/94-2/9/07, Beamer 7/24/08, & Bows 12/17/94-10/11/09
reply
Harddrive @ 16th Oct 01:35PM:
Re: why believe a union official?

correctamundo!
they have to watch the metrics and make sure that their numbers look good. god forbid that a tech has less than 65% direct time or that a job goes over the ETW set by the metrics because of unforseen circumstances.
--
I've come here to chew bubblegum and kick ass and i'm all outta bubblegum.
reply
mocycler @ 16th Oct 01:37PM:
Re: why believe a union official?

And what does being in a union have to do with it?

As an individual employee, you either take pride in your work or you don't. You don't need some organized labor goon to tell you to do a good job. Union membership is not a prerequisite for quality work.

Stop thinking so highly of youself. You're not better because you're union.

mocycler


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SnowyOne @ 16th Oct 02:42PM:
Re: Big Business Debt.

said by Harddrive :

guess i got a free meal at Old Mexican Inn. how awesome is that!
Toss in the tab you were running at the restaurant also becoming no longer your responsibility too & that sums it up nicely.
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Harddrive @ 16th Oct 03:04PM:
Re: why believe a union official?

mocycler, have you ever worked for a major telecommunications company that had a unionized workforce?
--
I've come here to chew bubblegum and kick ass and i'm all outta bubblegum.
reply
anon @ 16th Oct 03:22PM:
Re: why believe a union official?

What have you got against unions? Unions played an important role in the evolution of the middle class. Without them you would see even greater divergence between rich and poor then we have now. Union goons? I don't know what you mean by that. The people running the unions are the same people who have worked the front lines at the company for years. Every three years anyone who wants to run for a union job, like steward, business manager or president can do so. All union officers are democratically elected by a majority of their peers. So whats wrong with that? The work can be dangerous and risky and was low paying, so after years of wrangling with the company, the employees voted for form a union. It was the union that forced better, safer working conditions, wages and benefits. Can't see a damn thing wrong with that either.
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anon @ 16th Oct 03:46PM:
Re: Darwin

Are you kidding me? Look at the bonuses these boneheads get for failure. The execs don't care if the buy-off succeeds or not. They walk away with bulging wallets no matter what. The real victims of this whole debacle, those who have no say in the matter and are ignored, and are not the bribed and lobbied pols or the corrupted PUC-sters, but the people and employees living in the area served. If that's darwinian, maybe we need a little intervention, devine or otherwise.
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Harddrive @ 16th Oct 05:26PM:
Re: why believe a union official?

and this comes from some anonymous poster from the Fairpoint.com domain. outstanding!
this guy that happens to live in the northern New England area that is being destroyed by Fairpoint. my hat is off to you sir. i hope something good comes out of all this mess that Verizon created and Fairpoint is continuing.
--
I've come here to chew bubblegum and kick ass and i'm all outta bubblegum.
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