Verizon runs into Vermont Regulators

Vermont regulators are giving Verizon’s decision to sell 1.6 million lines in Vermont, Maine and New Hampshire the thumbs down. They are concerned that buyer of these lines, Fairpoint Communications of Charlotte, NC is too small and as a result the service will suffer, according to The Wall Street Journal.

Fairpoint will have to take on about $2.5 billion in debt to make the deal happen, which means there is real risk of quality of service will go down as Fairpoint starts to tighten the belts to pay off the debt. This is particularly bad news for Verizon which is counting on sales of these quasi-rural lines to fund its fiber optic network. The $2.5 billion can be revived if Verizon lowers the price.

This isn’t the last we have heard of Verizon’s problems with the state PSBs, and expect this to become a hot issue in the upcoming election year.

Update: A spokesperson for Verizon emailed me and said that the sale of lines is not for funding the fiber optic network.

We are NOT counting on this money to fund anything, including Fiber deployment. Our debt is very low and our cash flow is high. We have the capex already built into our funding plan. We are selling these lines simply because they are not a strategic fit for us given our broadband plans. Plus, we’ll continue to be heavily invested in Vermont with wireless and enterprise.

Why phone lines – 1.6 million in total – not strategic for a phone company, I don’t get!