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Clock is ticking for FairPoint Communications(Portland Press Herald (Maine) (KRT) Via Thomson Dialog NewsEdge) Apr. 6--A week after taking over Verizon's 1.6 million telephone access lines in northern New England, a clock is ticking for FairPoint Communications. Every day, roughly 360 lines are being disconnected, according to 2007 figures. They're being turned off as customers switch to digital phone service, wireless phones and other alternative providers. And as each line goes off, FairPoint loses the money associated with that account. FairPoint can't afford to lose customers. The company is heavily dependent on this landline revenue for earnings, and to service the extraordinary debt it assumed in the Verizon purchase. The majority of phone customers in Maine, New Hampshire and Vermont are depending on the revenue, too. FairPoint is now the region's dominant telephone company. Its economic health, and its promise to upgrade phone service and expand Internet access, is tied to its ability to slow the flight of customers to competing providers. "If they lose more lines than they thought they would, then they'd be eroding profit," said Wayne Jortner, a lawyer at the Maine Office of the Public Advocate. In negotiating the terms of the purchase last year, regulators and consumer advocates looked closely at FairPoint's line-loss assumptions. On one hand, Jortner said, they knew that FairPoint's business model was based on an old-style form of telecommunications. On the other, landlines remain critical for most homes and businesses in northern New England, so FairPoint has a compelling interest in upgrading and reinventing the network Verizon wanted to abandon. Whether FairPoint can meet its goals remains a source of concern for state officials. In New Hampshire last week, the Public Utilities Commission tacked on a last-minute provision that amounts to a $15 million penalty if FairPoint's line losses reach a certain level. FairPoint, of course, was well aware of Verizon's line-loss trends in the region, which totaled more than 8 percent of its access lines last year. The company factored the losses into its financial projections when buying Verizon's assets. FairPoint won't release its line-loss projections for 2008, except to say the rate of decline is expected to ease. Later this year, the company will launch an aggressive campaign to slow the customer drain. A critical part of the effort in Maine will be aimed at Time Warner Cable, which has had a big head start in marketing its digital phone service. Time Warner has 3 million phone customers nationwide, making it the country's seventh-largest provider. More than 80,000 customers are in Maine and New Hampshire. In a recent interview, FairPoint outlined several strategies it is preparing to entice customers to stay in the network, rather than bail for Time Warner or other providers. EXPANSION PLANS One measure is to create a sales force dedicated to small business. A business account typically brings in more revenue than a home account, but Verizon didn't make a strong effort to service small businesses in the region, according to Walter Leach, a FairPoint executive vice president. FairPoint also is expanding high-speed Internet access, especially in rural areas. As part of its agreement with regulators, it plans to reach 85 percent of Maine customers within two years. It's becoming more common for customers to abandon their existing phone service if they can't get high-speed access, so making broadband widely available makes sense for FairPoint. FairPoint also will introduce an Internet-based video service with the same features as cable television. The company already offers this in Washington state, Missouri and Florida. The rollout in Maine is at least a year away, Leach said. FairPoint also is negotiating with an unnamed partner to offer wireless phone service. FairPoint won't build towers, but will resell service under its own name. Getting into the wireless game is important for FairPoint. A recent Bureau of Labor Statistics survey showed that in 2006, spending on cell phones nearly equaled spending on home phone service. As wireless and other products come on line, FairPoint will be able to offer them in packages at discount prices. This approach, called bundling, is a fast-growing trend in communications. But FairPoint faces an immediate obstacle. The company is tied to Verizon for back-office functions, such as billing and network monitoring, until September, when the formal switchover takes place. Meanwhile, Time Warner and other competitors continue to do their best to lure new customers. FairPoint has to move quickly. "We have a keen sense of urgency," Leach said. "We don't want to allow the cable companies to have the advantage of first-to-market services." PACKAGE DEALS The timing wasn't fast enough for William Buker. He moved to a house in West Gardiner three years ago. He was making do with dial-up service from America Online, which limited his ability to download music and photo files, or use the phone and computer at the same time. He called Verizon in search of high-speed service. "They said sorry, we don't have DSL in your area," Buker said. Buker did have Time Warner cable. After seeing ads for a service that bundles television, high-speed Internet and digital phone, he made the switch. His service was due to begin Friday. The before-tax cost will be roughly $115 a month to start, he said. "For a few dollars more, I'll get the two things I really want: high-speed Internet and not tying up the phone line," Buker said. Time Warner wants to integrate phone, television and Internet in as many markets as possible in Maine, according to Pete DeWitt, a regional spokesman. People are attracted to what the industry calls triple-play packages because they put all services on one bill and tend to be less expensive than buying services separately. For instance, Portland-area residents pay a total of $144.85 a month before taxes to buy cable, high-speed Internet and nationwide phone calling separately. A bundled package is $132.95. Time Warner promotes triple-play packages with innovative features, such as a caller ID option that displays the name on a customer's television screen. DeWitt declined to discuss Time Warner's penetration goals in Maine, but said the company hasn't altered its marketing campaign to take on FairPoint. That said, Time Warner has begun promoting a new business-class service in southern and central Maine that bundles data, voice, security and video, getting ahead of FairPoint in that market segment. "It's one of our major initiatives in 2008," DeWitt said. FairPoint faces several challenges to keep landline customers, according to Fletcher Kittredge, chief executive officer of Great Works Internet, an alternative provider in Maine and New Hampshire. GWI buys wholesale services from FairPoint, and also competes with the company for phone and Internet customers. Its largest competitor, however, is Time Warner. FairPoint must simultaneously manage a new work force and operations network, keep quality levels high for customers, expand broadband access, build video capacity and market new products, Kittredge said. Any one of those ventures, he said, is difficult to get right. To see more of the Portland Press Herald, or to subscribe to the newspaper, go to http://www.pressherald.com. 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