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Carrier Services
FairPoint: New England network transition is on target
Marketing broadband and business services become major focus
by Sean Buckley
FairPoint Communications certainly has their work cut out for themselves.
Looking to provide a similar level of service it provides in its legacy regions, FairPoint is set on expanding its broadband and business services footprint throughout the three Northern New England regions (Maine, New Hampshire and Vermont) it acquired from Verizon.
Perhaps the biggest challenge FairPoint will face going forward be its ongoing integration of the network assets it acquired from Verizon.
Speaking at last week’s Goldman Sachs Communacopia XVII conference in New York City, FairPoint’s Chairman and CEO Gene Johnson outlined the operator’s key challenges the ILEC has ahead of itself through 2008 and into 2009.
With a desire to get the cutover done right the first time, FairPoint announced recently it will extend the timing of its cutover from Verizon to the end of January.
The cutover from Verizon obviously is not for the faint of heart. FairPoint will consolidate 617 systems, a hundred of which have distinct databases, down to 60 new integrated systems at one time.
The reasoning for the latest delay was due to timing with not only Verizon, but also the Public Utility Commissions in New Hampshire, Maine and Vermont.
FairPoint will take this extra time to ensure the processes are done right and that it can hire the staff it needs to minimize disruption when they go live in January. Under the terms of the Transition Services Agreement, FairPoint will pay Verizon $16.0 million in December, while Capgemini, FairPoint’s lead integration partner, will assume the responsibility of the $15.5 million payment in January.
Despite the challenges of making this transition, Johnson, while acknowledging the task is taking up at least 20 percent of his time, he is confident that it can be done by the January 2009 deadline they have set.
“Everything we do, from the minute an employee comes to work in the morning at an office location, a call center or a technician drives a truck and goes to call on customers is a very complex process,” he said. “The timing and how you get the people is critical to us. We don’t want to have them too early and we don’t to be too late.”
Serving the underserved
With the integration of the Verizon assets in full swing, FairPoint will continue to turn its attention bringing broadband and business services to the underserved regions that Verizon often ignored in Maine, New Hampshire and Vermont.
Unlike Verizon, which is obviously focused on more of the larger metro urban and suburban communities, FairPoint believes its experience in serving rural areas will enable it to build a viable brand name in its new Northern New England territories.
Prior to the takeover, Verizon had only 16 percent availability of broadband access in the Northern New England properties that FairPoint purchased. Alternatively, FairPoint claims to have up to 92 percent of broadband penetration in its other legacy territories outside of New England.
Verizon, for example, did increase its broadband penetration mainly due to Public Utility Commission (PUC) regulatory mandates in Maine, but one would be hard pressed to know the service existed.
“If we look at other markets we can go into there was effectively no competition from our predecessor company,” Johnson said. “They did not spend the money to provide services to the customers and did not spend the money marketing their broadband service.”
FairPoint is enhancing the broadband capabilities in Northern New England on two fronts.
First, FairPoint is in the midst of a three-phase next-gen core and last mile network build out.
This network build out consists of three parts: an IP/MPLS core network, a transport/aggregation network with 10 GigE rings and an edge/last mile network with a mix of ADSL2+, VDSL2, FTTH and even wireless technologies.
“That process is ongoing and will be ongoing through next year and will give us tremendous advantages in the competitive marketplace once it is completed,” said Johnson.
As the network build continues, FairPoint will actively market its broadband capabilities in old Verizon territories it acquired. By leveraging the same model it used to spur broadband growth in its legacy markets, FairPoint is confident it can reach high penetration rates in these regions.
One element of its broadband branding strategy is to launch a rebranding campaign of Verizon’s FiOS service in the southern New Hampshire territories it acquired as its newly rechristened Fiber Access Speed Technology (FAST) service.
Further, FairPoint is targeting customers with what it believes to be a good service experience and multiple options with various price and bandwidth packages. These packages could include, for example, a 20 Mbps symmetrical, a 20 Mbps asymmetrical service or a 5 Mbps symmetrical service.
At the same time that it expands its residential broadband push, FairPoint is also flexing its business services muscle.
Similar to the residential base that resided in the former Verizon territory, smaller business customers, not being the cash cow large corporations that Verizon Business is more interested in serving, will have another new source for other services besides voice.
“We’re spending a tremendous amount of time focusing on the business customers, something that Verizon did not focus the way we would,” Johnson said. “For instance, [Verizon’s] idea of a business customer was substantially bigger with quarter of a million dollars in revenue, while our idea of a business customer is one with US$4,000 in revenues.”
Cable is the enemy
FairPoint may not be the same size as Verizon or the larger RBOCs, but landline loss to cable and increasingly wireless substitution is a reality every telco has to face.
While Johnson acknowledges wireless substitution is a threat to FairPoint's landline livelihood, his real worry is cable.
“We’re seeing most of our competition coming from cable not wireless,” he said.
As for its own wireless play, Johnson, while not necessarily ruling out the possibility of building its own service set or network, says wireless is not an initial priority.
"One of the problems with our market footprint there’s not any single or two wireless carriers that cover our entire market footprint,” he said. “We think wireless obviously is an important part of the bundle, but it’s probably not as important in our markets, and I think we have some time.”
Even without a wireless play, FairPoint will have its hands full fighting the cable competition.
But don't expect FairPoint to fight cable with a me-too IPTV service. While Johnson would not divulge any specific details about his IPTV plans outside of saying that he’s trialing next-gen IPTV, he thinks it will have to offer something better than cable.
"We actually think we don’t want to do what [the cable company] does,” he said. “We think you have to differentiate yourself, and it’s a huge mistake to chase the cable guys and build a 400-channel system; we have to find a smarter way to offer video.”
Whether or not FairPoint uses IPTV or higher data speeds as its weapons, it’s clear that cable has become a strident threat to FairPoint and its telco brethren. In Q2 08 alone, cable operator’s data service growth outpaced DSL. (see Cable beats DSL to a pulp).
When pressed about the recent telco industry’s DSL broadband slowdown, Johnson, while recognizing cable as a viable telecom competitor, believes what you see in the papers and TV is not always what you get.
“It’s not like the old days when cable was the only guy selling video and we were the only guy selling voice,” he said. “I think it’s natural given when they increase the dollars they’re spending on advertising as much as they have they are going to have a pick up from that. When you start talking about speed differentials, I don’t think the speed differentials are as great as they are advertised.”
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