While FairPoint Faces Significant Challenges, its Prospects are Excellent

Implications: 1.      The FairPoint leadership can spin itself as more of “a modern Internet company.” 2.      But it is precisely success as “an old-fashioned telephone business” that will be the key strength involving its new operations in northern New England -- with all of its experience in dealing with rural assets.  3.      The overall outlook for FairPoint is very favorable.

Analysis:  FairPoint has obtained a very powerful asset.  It has a nice piece of a traditional Bell company that is totally contiguous and offers ubiquitous service throughout the region.  Besides Embarq, it will now be the only independent telco to really be serving metropolitan areas.  While cities in the north part of New England like Manchester, Burlington, and Portland would be small potatoes to a large carrier, is it a big and exciting step-up for an ILEC that was previously only offering rural services.  

The competitive threats are not too troubling.  For example, there is not likely to be any CLECs attracted to these relatively small urban areas.  Verizon will be working with FairPoint for a while to be sure it is on a steady path forward to actually deliver on the promises of offering broadband solutions.   

Although there has been some notable neglect over the years of the network, the installed  base of equipment, such as the central offices, is in pretty good shape.  There might be some hurdles with older copper in order to provide DSL.  Still, the management of the network has been placed into capable hands.  

The most important consideration is that with future consolidation in the independent telco space, FairPoint is going to be part of a much bigger entity down the road.