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FairPoint Seeks Rate Increase, Access to Universal Service Fund
11/08/2013   Reported By: Mal Leary

FairPoint is asking state regulators for a rate increase, to offset the rising cost of providing service to rural telephone customers in Maine. As Mal Leary reports, the request is drawing close scrutiny from the public advocate, and from state legislators, who say it could become a burden for customers and may also require a change in state law.

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For decades, phone customers in urban areas have subsidized the higher cost of service in rural areas. But in recent years, competition in the telecommunications realm has grown, with cell phones and internet-based phones taking away a lot of the traditional landline phone business, which FairPoint must still provide.

FairPoint's Jeff Nevins says while the company's revenues have declined, the costs of providing access to phone service everywhere have gone up. "We have 280,000 poles throughout the state of Maine. It is very costly to provide that service to rural areas," he says.

In documents filed with the Public Utilities Commission, FairPoint is asking for additional revenues of over $68 million a year. The company is proposing an immediate rate increase of $2 a month per line for the nearly 30,000 Mainers now getting "provider of last resort service." That means they have no other option, other than FairPoint.

Those customers have been mailed a notice of the proposed increase. But that proposed increase only brings in about $700,000 a year for FairPoint. To make up the rest, the company wants to tap into the Maine Universal Service Fund, which is supplied revenue from a monthly fee on every phone in use in the state.

Maine Public Advocate Tim Schneider says that would require a significant increase in the fee. "That's a really big number," Schneider says. "So asking for $67 million a year - roughly $67 million a year - is a very dramatic increase in the current Maine Universal Service Fund. So that number, obviously, gives us pause."

For example, if you are paying $75 a month now for your cell phone, you would pay about $5 more for the Universal Service Fund fee. The current fee generates a little less than $8 million a year, and only a few independent phone companies are getting payments from the fund.

Schneider believes FairPoint's request will require a change in law. "FairPoint has advanced a theory about how they will have access to the Maine Universal Service Fund, but right now, under the commission's existing rules, they are not eligible for that," Schneider says. "So that's one of the issues that we will be looking at in the case."

FairPoint's Nevins says while the company wants the rate increase to take effect next month, he acknowledges that a decision on FairPoint's request to tap into the Universal Service Fund will likely take months to resolve.

"There will be a lot of discussion as to the cost model, what is included in it," he says. "And that will certainly take some time, and there will be a lot of discussion back and forth. We fully expect that that will be a very intensive process."

The Public Utilities Commission has yet to schedule a hearing on either the rate case or the bigger question of FairPoint's access to the Universal Service Fund.


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