FairPoint Communications reported lower revenue and net income in Q4 than in Q3, but lower operating expenses helped the company beat an analyst's expectations on cash flow metrics. FairPoint is "committed to delivering on our unlevered free cash flow [FCF] objectives," said CEO Paul Sunu in a company earnings release Wednesday. It also expects "to be an active participant in our consolidating industry," though that partially depends on reasonable financing, he said. Revenue dropped $11.8 million to $209.8 million in Q4 due to "seasonality" and an anticipated $4.8 million reduction in regulatory funding, primarily lower USF subsidies under a transition to Connect America Fund Phase II support, the telco said. Net income was down $10.8 million to $42.3 million, primarily due to the revenue reduction, which was partially offset by a $1.9 million decrease in operating expenses to $90.9 million due to lower head count and debt expense, it said. The company ended 2015 with 2,718 employees, down 334 from a year before. Adjusted EBITDA dropped $2.8 million to $63.9 million and unlevered FCF fell $9.8 million to $23.3 million due in part to higher pension contributions. But Wells Fargo analyst Jennifer Fritzsche said she had estimated adjusted EBITDA would be $60.2 million and unlevered FCF would be $21.2 million. So while the revenue decline had been expected, the company's cost containment focus allowed it to beat expectations on both adjusted EBITDA and unlevered FCF, she emailed investors. FairPoint said it continued to make progress in 2015 on customer service, reporting "fewer repair tickets in the queue and improved ability to timely address the service orders received." The improvements produced less employee overtime and fewer repeat calls, and should yield more brand loyalty and lower customer churn over time, it said. FairPoint's share price closed down 3 percent to $14.98 Wednesday.
Communications Sales & Leasing's planned buy of PEG Bandwidth got antitrust OK Monday, said the FTC's list of early termination notices, which posts such notices from both the FTC and DOJ. CSL is paying $409 million to purchase PEG Bandwidth's equity interests from affiliates of Associated Partners, the companies said in a January release announcing the deal, which they said is expected to close in April. PEG Bandwidth is a "leading provider of infrastructure solutions including cell site backhaul and dark fiber for telecom carriers and enterprises" and has a fiber network of more than 300,000 miles in the Northeast, mid-Atlantic, Illinois and South Central U.S., the release said. It said CSL is a real estate investment trust and Associated Partners is a telecom investment vehicle of Bill and David Berkman.
The USF contribution factor for carriers will fall in Q2 to 17.9 percent of interstate and international telecom revenue due to lower subsidy demand, industry consultant Billy Jack Gregg said in an email update Tuesday. He said the Universal Service Administrative Co. projected industry long-distance telecom revenue for Q2 at $14.74 billion, about $191 million less than in the current quarter. The downward revenue trend is putting upward pressure on the contribution factor over time, but Gregg noted USF demand for Q2 also edged down to $2.211 billion -- due mainly to "out of period adjustments" (see 1602020047) -- allowing the rate assessed to carriers to decline somewhat from the current quarter's 18.2 percent.
The FCC teed up a petition by Interstate Telecommunications Cooperative and Qwest (CenturyLink) for a waiver of the "study area" definition to transfer a piece of a South Dakota exchange between them. Comments are due March 30, replies April 14, said a Wireline Bureau public notice Monday in docket 96-45. The waiver would permit Qwest/CenturyLink to shift a portion of its Flandreau exchange from its study area to ITC's study area, the companies said in their November petition. The change wouldn't involve a transfer of any facilities or customers, they said; the territory in question has no current active subscriber lines, one requesting subscriber line, and no non-active subscriber locations.
The FCC sought comment on bids to discontinue certain nondominant telecom services and/or interconnected VoIP services in geographic areas specified in applications submitted by Qwest (CenturyLink) in Oregon, Bullroar Telecom in Louisiana and Hill Country Telecommunications in Texas. The Qwest/CenturyLink application seeks to discontinue "interstate, intraLATA toll (local long distance) service" in Oregon areas served by its affiliates CenturyTel of Eastern Oregon and CenturyTel of Oregon, said a Wireline Bureau public notice Monday in docket 16-36, which said comments are due March 15 and contained links to the applications. The requests will be deemed granted March 31 unless the commission notifies an applicant otherwise, though the actual dates they are authorized to discontinue, reduce or impair service will vary in early April, the PN said.
The FCC and others opposed an Oklahoma bid to stay inmate calling service (ICS) rules set by the commission capping intrastate rates (see 1602230034). The FCC said Oklahoma officials missed a federal court deadline for stay motions, and hadn't even sought an administrative stay from the commission itself, as the agency said federal appellate procedures generally require. “There is no cause to excuse Oklahoma’s refusal to comply with the obligations set forth by this Court and the Federal rules,” the FCC said Friday in its opposition filing to the U.S. Court of Appeals for the D.C. Circuit, which is reviewing the consolidated case (Global Tel*Link v. FCC, No. 15-1461). The FCC said ICS providers filed stay requests at the FCC, which were denied (see 1601220040), and with the D.C. Circuit, which set a Feb. 5 deadline for any further such requests (see 1602040023); but the Oklahoma officials didn't file their stay request until Feb. 22. Even if the D.C. Circuit considers the Oklahoma stay request, the FCC said the court should deny it because the state was unlikely to succeed on the merits of its underlying challenge, hadn't shown it would suffer irreparable harm absent a stay, and a stay would harm third parties and the public interest. The FCC said it didn't intrude on state authority by capping intrastate rates, but simply implemented sections 276 and 201 of the federal Communications Act to ensure that compensation for interstate and intrastate ICS is fair. The FCC was backed in opposing the Oklahoma stay motion by a filing from the Martha Wright Petitioners, which includes numerous groups and individuals advocating for the ICS rights of inmates and their families. They said it was “implausible that Oklahoma was not aware of the FCC Order in time to have filed a timely motion for stay with the agency.” Meanwhile, the states of Arkansas, Arizona, Kansas, Indiana, Louisiana, Missouri, Nevada and Wisconsin as well as Indiana sheriffs’ groups filed motions (here and here) seeking to intervene on behalf of Oklahoma.
Inmate Calling Solutions opposed inmate calling service rule changes sought by Michael Hamden, a lawyer in Chapel Hill, North Carolina, who has advocated for the ICS rights of inmates and their families. In a petition for partial reconsideration of a 2015 order, Hamden had asked the FCC to ban ICS provider site commission payments to correctional authorities and allow a modest, capped administrative cost recovery fee as an offset (see 1601200053). ICSolutions said the FCC at a minimum should deny the request to include a prohibition or cap on site commissions. "Any rule attempting to cap or prohibit commissions would not only be ineffective and raise multiple constitutional questions, but it would also be in excess of the FCC’s statutory authority and, therefore, unlawful," ICSolutions said in a filing Friday in docket 12-375. "The FCC does not have the statutory authority to dictate how providers of inmate telephone services ('ITS') use their profits and, therefore, cannot prohibit or otherwise cap ITS providers’ payment of commissions to facilities." ICSolutions said certain clarifications of FCC terms and rules Hamden sought were unnecessary, but it said it didn't oppose them.
The FCC is ready to authorize $37,696 for New Lisbon Broadband and Communications to carry out a rural broadband experiment in seven census blocks of Indiana, the Wireline Bureau announced in a public notice Wednesday in docket 10-90. To be authorized, "New Lisbon must submit at least one acceptable irrevocable stand-by letter of credit and Bankruptcy Code opinion letter" by March 7, the PN said. New Lisbon was given an extension until March 5 to submit proof that it's an eligible telecom carrier in the areas targeted for funding.
AT&T urged a U.S. bankruptcy court to lift an automatic stay covering Great Lakes Comnet that blocks federal and state appellate court consideration of regulatory litigation affecting both companies (see 1602040034). AT&T filed a motion Feb. 19 asking the U.S. Bankruptcy Court for the Western District of Michigan to declare an automatic stay provision inapplicable or to grant other relief so that the appellate litigation can be concluded, AT&T told the U.S. Court of Appeals for the D.C. Circuit Wednesday in a filing in the case (Great Lakes Comnet v. FCC, No. 15-1064), which included its motion. The D.C. Circuit is reviewing a GLC challenge to an FCC order that sided with AT&T in an intercarrier compensation dispute between the companies. In that order, the FCC found that GLC is a CLEC and that its tariffed rates violated a CLEC benchmark rule. AT&T separately is appealing a contrary Michigan Public Service Commission decision that found GLC isn't a CLEC subject to the FCC switched access rate limits. “The requested relief should be granted, and the parties should be permitted to litigate the pending appeals and regulatory proceedings to a final conclusion regarding a determination of what liability and what tariff rates apply under the FCC rules to the access services provided by the Debtor [GLC],” AT&T said in its bankruptcy court motion. “As the Fifth Circuit recognized in virtually identical circumstances, the adjudication of this type of dispute clearly falls within the purview of federal and state regulatory powers and will result only in a determination of liability under the federal regulatory scheme relating to access services,” the telco said, referring to a 2012 Halo Wireless decision. GLC had no comment Thursday.
CenturyLink and Frontier Communications asked the FCC to allocate $176 million in interim USF support to price-cap incumbent telcos providing voice service in costly remote areas where they are no longer being subsidized. “This support would flow for a maximum of two years, and likely less,” the two ILECs said in a filing, posted Wednesday in docket 10-90, summarizing recent meetings with aides to all five commissioners and a senior Wireline Bureau official. The telcos said the support is needed to ensure voice service continuity “in extremely high-cost and other unfunded locations” of territories served by price-cap carriers in states where they accepted new Connect America Fund Phase II support. Those areas constitute about 6 percent of the census blocks carriers serve in those states, the telcos said. In those areas, they said, the incumbents aren't receiving either the CAF II broadband-oriented support or legacy USF phone support but still must continue to offer voice service under FCC rules. Carriers have complained of an unfunded mandate (see 1601220046). CenturyLink and Frontier noted that the FCC plans to deal with the costs to serve areas either through an interim CAF II subsidy reverse auction or a remote areas fund (RAF), neither of which has been set up. “In the interim, however, restoring the inevitable voice service disruptions in unfunded areas presents a significant universal service challenge. Price cap ILECs that accepted offers of model-based CAF Phase II support are obligated to use such support to deploy broadband to covered locations; they cannot shift these monies to support voice service in the unfunded areas,” said the two telcos, which noted the ILECs must invest “significant amounts” to provide broadband in areas where they accepted CAF II money. They said the proposed interim funding should be based on previous legacy "frozen support" for the unfunded areas, as determined by the cost model. It would last only until the end of the CAF II auction process and could be drawn from the $100 million per year budgeted for the RAF and a “tiny fraction of the existing CAF reserve amount” held by the Universal Service Administrative Co., they said.