Memorandum Opinion and Order MEMORANDUM OPINION AND ORDER by FCC 07-226 ITC-ASG-20070206-00062 Order

Attachment Order

Order

MEMORANDUM OPINION AND ORDER submitted by FCC 07-226

Memorandum Opinion and Order

2008-01-09

This document pretains to ITC-ASG-20070206-00062 for Assignment on a International Telecommunications filing.

IBFS_ITCASG2007020600062_615003

Federal Communications Commission FCC 07-226

Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of )
)
Applications Filed for the Transfer of Certain )
Spectrum Licenses and Section 214 )
Authorizations in the States of Maine, New ) WC Docket No. 07-22
Hampshire, and Vermont from Verizon )
Communications Inc. and its Subsidiaries to )
FairPoint Communications, Inc. )

MEMORANDUM OPINION AND ORDER

Adopted: December 20, 2007 Released: January 9, 2008

By the Commission: Commissioners Copps and Adelstein dissenting and issuing separate statements.

TABLE OF CONTENTS
Para.
I. INTRODUCTION ........................................................................................................................... 1
II. BACKGROUND ............................................................................................................................. 3
A. Description of the Applicants ............................................................................................. 3
1. The Transferor ....................................................................................................... 3
2. The Transferee ....................................................................................................... 6
B. Description of the Transaction............................................................................................ 7
C. Applications and Review Process ..................................................................................... 10
III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK.................................... 11
IV. POTENTIAL PUBLIC INTEREST HARMS ............................................................................... 15
A. Market Concentration ....................................................................................................... 16
B. Access to Wholesale Inputs .............................................................................................. 17
C. FairPoint’s Qualifications to Acquire Control of Verizon’s Licenses .............................. 18
V. POTENTIAL PUBLIC INTEREST BENEFITS ........................................................................... 25
A. Introduction....................................................................................................................... 25
B. Analytical Framework....................................................................................................... 26
C. Analysis............................................................................................................................. 29
VI. OTHER ISSUES ............................................................................................................................ 33
VII. CONCLUSION.............................................................................................................................. 41
VIII. ORDERING CLAUSES ................................................................................................................ 42
Appendix A – List of Commenters
Appendix B – List of Licenses and Authorizations Subject to Transfer of Control

I. INTRODUCTION

1. Verizon Communications Inc. (Verizon Communications) and its subsidiaries1 (collectively,
Verizon) and FairPoint Communications, Inc. (FairPoint) (together with Verizon, the Applicants) filed a

1
The Verizon Communications Inc. subsidiaries are Verizon New England Inc. (Verizon New England), NYNEX
Long Distance Company (NYNEX Long Distance), Bell Atlantic Communications, Inc. (BACI), Verizon Select
(continued....)

Federal Communications Commission FCC 07-226

series of applications2 pursuant to sections 214 and 310(d) of the Communications Act of 1934, as
amended (Communications Act or Act).3 Grant of these applications will result in the transfer of
domestic section 214 authority and the assignment of certain spectrum licenses and international section
214 authorizations.

2. In accordance with the terms of sections 214(a) and 310(d), we must determine whether the
Applicants have demonstrated that the proposed transactions would serve the public interest, convenience,
and necessity.4 Based on the record before us, we find that the transaction meets this standard.5 We

(...continued from previous page)
Services Inc. (VSSI), Northern New England Spinco Inc. (Spinco), and Northern New England Telephone
Operations Inc. (Telco).
2
See Applications Filed for the Transfer of Certain Spectrum Licenses and Section 214 Authorizations in the States
of Maine, New Hampshire, and Vermont from Verizon Communications Inc. and its Subsidiaries to FairPoint
Communications, Inc., WC Docket No. 07-22, Public Notice, 22 FCC Rcd 5035 (2007) (Public Notice); see also
Verizon New England, Inc., NYNEX Long Distance Company, Bell Atlantic Communications, Inc., Verizon Select
Services Inc., Verizon Communications Inc., and Northern New England Spinco Inc., Transferors, and FairPoint
Communications, Inc., Transferee, for Consent to Transfer Certain Assets and Long-Distance Customer
Relationships in the States of Maine, New Hampshire, and Vermont, Consolidated Application for Consent to
Transfer Assets, WC Docket No. 07-22 at 7 (filed Jan. 31, 2007) (FairPoint/Verizon Application); ITC-ASG-
20070206-00059; ITC-ASG-20070206-00060; ITC-ASG-20070206-00061; ITC-ASG-20070206-00062; ULS File
Nos. 0002921062, 0002921107, 50005CFTC07. The Public Notice set due dates of April 13, 2007 for the filing of
Comments and Petitions to Deny; April 23, 2007 for Responses and Oppositions; and April 30, 2007 for Replies.
Public Notice, 22 FCC Rcd at 2035. On April 11, 2007, the Wireline Competition Bureau (Bureau) extended the
pleading cycle deadlines by two weeks in response to a petition by the Communications Workers of America and
International Brotherhood of Electrical Workers. See Applications Filed for the Transfer of Certain Spectrum
Licenses and Section 214 Authorizations in the States of Maine, New Hampshire, and Vermont from Verizon
Communications Inc. and its Subsidiaries to FairPoint Communications, Inc., WC Docket No. 07-22, Order, 22
FCC Rcd 6897 (WCB 2007). Appendix A lists the parties that filed formal pleadings in this proceeding. In addition
to those formal pleadings, we have received ex parte submissions. All pleadings and comments are available on the
Commission’s Electronic Comment Filing System (ECFS) website at www.fcc.gov/cgb/ecfs/. Public Notice, 22
FCC Rcd at 5039.
3
See 47 U.S.C. §§ 214, 310(d). Pursuant to section 214 of the Communications Act, the Applicants filed
applications seeking Commission approval to transfer domestic and assign international section 214 authorizations
held by Verizon and its subsidiaries to FairPoint. 47 U.S.C. § 214. Pursuant to section 310(d) of the
Communications Act, the Applicants filed applications seeking Commission approval of (1) the pro forma
assignment of Part 101 Common Carrier Fixed Point-to-Point Microwave and Industrial/Business Pool licenses
from Verizon New England to Telco, as controlled by Spinco and ultimately the Verizon shareholders, as part of a
multi-step pro forma reorganization, see discussion infra Part II.B, and (2) an application seeking Commission
approval of the transfer of control of the licenses held by Telco from Spinco to FairPoint. 47 U.S.C. § 310(d); see
also Appendix B (listing the applications for assignment and transfer of control of wireless licenses filed by the
Applicants). In the pro forma assignment applications, Verizon New England is partially assigning six of its
wireless licenses and fully assigning 24 others. The authority provided by these licenses for all other areas will
remain with Verizon New England. Due to limitations in the ability of the Universal Licensing System (ULS) to
accommodate five of the six partial assignment applications, the Applicants request that five licenses be partitioned
such that the portions of the licenses providing authority to operate in Maine, New Hampshire, and Vermont are
assigned to Telco. Applicants request that Verizon New England retain the currently issued call signs for these five
licenses and requests that new call signs be issued to the portions of the licenses assigned to Telco. See ULS File
No. 0002921065 at Attachment 3 (amended Mar. 2, 2007).
4
See, e.g., AT&T Inc. and BellSouth Corporation Application for Transfer of Control, WC Docket No. 06-74,
Memorandum Opinion and Order, 22 FCC Rcd 5664, 5664, para. 2 (2007) (AT&T/BellSouth Order); SBC
Communications, Inc. and AT&T Corp. Applications for Approval of Transfer of Control, WC Docket No. 05-65,
Memorandum Opinion and Order, 20 FCC Rcd 18290, 18292, para. 2 (2005) (SBC/AT&T Order); Verizon
Communications, Inc. and MCI, Inc. Applications for Approval of Transfer of Control, WC Docket No. 05-75,
(continued....)
2

Federal Communications Commission FCC 07-226

conclude that it is unlikely the merger will result in any anticompetitive effects or other public interest
harms. Specifically, the Applicants do not compete in any of the relevant local exchanges. Moreover,
after consummation of the transaction, the Applicants will compete for large business and long distance
customers. The transaction also is likely to produce public interest benefits, including the accelerated
deployment of broadband throughout the region.

II. BACKGROUND

A. Description of the Applicants

1. The Transferor

3. Verizon Communications, a publicly traded Delaware corporation, owns operating subsidiaries
that provide a range of communications services in the United States and throughout the world.6 The
company’s operating subsidiaries offer local telephone service, as well as broadband, nationwide long
distance, high-capacity connections, video, international, wireless, and other services.7

4. Verizon Communications, through Verizon New England, provides local exchange service and
exchange access service to approximately 1.5 million access lines in 352 exchanges in Maine, New
Hampshire, and Vermont.8 Verizon Communications also provides long distance services in Maine, New
Hampshire, and Vermont, as well as other areas of the United States, through its subsidiaries, NYNEX
Long Distance, BACI, and VSSI.9

(...continued from previous page)
Memorandum Opinion and Order, 20 FCC Rcd 18433, 18435, para. 2 (2005) (Verizon/MCI Order); Applications of
Nextel Communications, Inc. and Sprint Corporation for Consent to Transfer Control of Licenses and
Authorizations, WT Docket No. 05-63, File Nos. 0002031766, et al., Memorandum Opinion and Order, 20 FCC Rcd
13967, 13976, para. 20 (2005) (Sprint/Nextel Order); Applications of NYNEX Corp., Transferor, and Bell Atlantic
Corp., Transferee, For Consent to Transfer Control of NYNEX Corp. and Its Subsidiaries, File No. NSD-L-96-10,
Memorandum Opinion and Order, 12 FCC Rcd 19985, 19987, para. 2 (1997) (Bell Atlantic/NYNEX Order); Merger
of MCI Communications Corp. and British Telecommunications PLC, GN Docket No. 96-245, Memorandum
Opinion and Order, 12 FCC Rcd 15351, 15353, para. 2 (1997) (BT/MCI Order).
5
We decline to address FairPoint’s “all-or-nothing” waiver petition in this Order because it is the subject matter of a
pending Commission proceeding. See Petition of FairPoint Communications, Inc. for a Waiver of the All-or-
Nothing Rule in Connection with its Acquisition of Certain Verizon Properties in Maine, New Hampshire and
Vermont, WC Docket No. 07-66, Public Notice, 22 FCC Rcd 6723 (2007).
6
See FairPoint/Verizon Application at 6-8; see also ITC-ASG-20070206-00059; ITC-ASG-20070206-00060; ITC-
ASG-20070206-00061; ITC-ASG-20070206-00062; ULS File Nos. 0002921062, 0002921107, 50005CFTC07.
7
See FairPoint/Verizon Application at 7. Further, Verizon Communications is a majority owner of Cellco
Partnership d/b/a Verizon Wireless (Verizon Wireless), which services approximately 56 million wireless voice and
data subscribers in the United States. See id. at 8. The transaction does not involve any of the wireless assets,
section 214 authorizations, or Title III licenses that are held by Verizon Wireless. See id. at 2 n.1.
8
See id. at 11. Verizon New England is a direct, wholly owned subsidiary of NYNEX Corporation, a Delaware
corporation, which in turn is a direct, wholly owned subsidiary of Verizon Communications, a Delaware
corporation. See id. at 6.
9
See id. at 7. NYNEX Long Distance, a Delaware corporation, is a direct, wholly owned subsidiary of Bell Atlantic
Worldwide Services Group, Inc. (Bell Atlantic Worldwide), a Delaware corporation, which in turn is a direct,
wholly owned subsidiary of NYNEX Corporation. See id. at 6. BACI, a Delaware corporation, is a direct, wholly
owned subsidiary of Verizon Communications. See id. at 7. VSSI, a Delaware corporation, is a wholly owned
subsidiary of GTE Corporation, a New York corporation, which in turn is a wholly owned subsidiary of Verizon
(continued....)
3

Federal Communications Commission FCC 07-226

5. Three additional Verizon entities – Spinco, Telco, and Enhanced Communications of Northern
New England Inc. (Newco) – have been formed in order to effectuate the proposed transaction.10 Spinco,
a Delaware corporation, is a direct, wholly owned subsidiary of Verizon New England. Newco, a
Delaware corporation, is a direct, wholly owned subsidiary of Spinco.11 Telco, a Delaware limited
liability company, is a direct, wholly owned subsidiary of Verizon New England.12

2. The Transferee

6. FairPoint, a publicly traded Delaware corporation, provides wireline local exchange service
and exchange access service through its local exchange carrier (LEC) operating subsidiaries in 18 states,
including Maine, New Hampshire, and Vermont.13 FairPoint does not provide any local exchange service
in the exchanges in which Verizon currently operates in these three states.14 FairPoint’s interexchange
carrier subsidiaries provide domestic and international long distance toll services in 18 states, including
Maine, New Hampshire, and Vermont.15

B. Description of the Transaction

7. On January 15, 2007, FairPoint entered into an Agreement and Plan of Merger with Spinco
and Verizon Communications (Merger Agreement).16 The Applicants state that the proposed transaction
“consists of two distinct but immediately sequential parts.”17 First, Verizon will undertake an internal
reorganization consisting of the following sequential pro forma transactions: (1) Verizon New England
will transfer certain assets, liabilities, and customer relationships relating to its local exchange and long
distance operations in Maine, New Hampshire, and Vermont to Telco; (2) Verizon New England will
transfer 100 percent of its interest in Telco directly to Spinco; (3) Verizon New England will transfer the
stock of Spinco to Verizon Communications; and (4) Verizon Communications will distribute the stock of
Spinco directly to the shareholders of Verizon Communications, such that Spinco (and therefore Telco
and Newco, each a direct subsidiary of Spinco) no longer will be subsidiaries of Verizon
Communications.18

(...continued from previous page)
Communications. See id. Verizon Communications directly owns more than 92% of the equity of GTE Corporation
and indirectly owns the remainder. Id.
10
See id. at 9-10; Letter from Joseph Jackson, Associate Director, Federal Regulatory, Verizon, to Marlene H.
Dortch, Secretary, FCC, WC Docket No. 07-22 at 1 (filed Oct. 29, 2007) (Verizon Oct. 29 Ex Parte Letter).
11
See id. at 8.
12
See id. at 9.
13
See id. at 8, 11. FairPoint also owns and operates companies that provide telecommunications services in
Alabama, Colorado, Florida, Georgia, Idaho, Illinois, Kansas, Massachusetts, Missouri, New York, Ohio,
Oklahoma, Pennsylvania, Virginia, and Washington. Id. at 11 n.9.
14
See FairPoint/Verizon Application at 11-12.
15
See id.
16
See id. at 9.
17
Id.
18
See Verizon October 29 Ex Parte Letter (identifying the Applicants’ selected transaction structure); see also Letter
from Dee May, Vice President, Federal Regulatory, Verizon, to Marlene H. Dortch, Secretary, FCC, WC Docket
No. 07-22 (filed Dec. 12, 2007) (Verizon Dec. 12 Ex Parte Letter) (stating that per the alternate description of the
transaction provided in the application, Telco had been converted into a limited liability company);
FairPoint/Verizon Application at 10, n.6.

4

Federal Communications Commission FCC 07-226

8. Second, immediately following the pro forma transactions, Applicants state that Spinco will
be merged with and into FairPoint, resulting in the transfer of control of Telco and Newco and the transfer
of assets.19 FairPoint will be the surviving company (under its existing name), and will own all of the
stock of Telco and Newco.20

9. The Applicants contend that the merger will serve the public interest. Specifically, they assert
that the merger will produce numerous public interest benefits, including enhanced service quality,
increased capital expenditures that will result in a variety of high-quality services,21 accelerated
broadband deployment, and the creation of over 700 new jobs and three new local service centers in the
region.22 The Applicants also assert that the merger will not reduce competition because FairPoint and
Verizon do not currently compete for local exchange customers in any of the affected exchanges.23 The
Applicants contend that the merger will promote competition because Verizon will continue to provide
large business and long distance services in the region and compete with FairPoint for the provision of
these services.24 Further, FairPoint proposes to “assume all of the rights and obligations of Verizon” in
19
See FairPoint/Verizon Application at 10. Verizon New England will assign its international section 214
authorization, ITC-214-20030516-00243, to Telco. This international section 214 authorization provides authority
to provide facilities-based services between the Lubec exchange, located in Maine, and the Campobello Island
exchange of New Brunswick Telecommunications, located in New Brunswick, Canada. See International
Authorizations Granted, Report No. TEL-00718, Public Notice, 18 FCC Rcd 19808 (IB 2003). Bell Atlantic
Communications, Inc., NYNEX Long Distance Company, and VSSI will each assign certain accounts receivable,
liabilities and customer relationships related to their provision of international service to Enhanced Communications
of Northern New England Inc. BACI will continue to provide international service to its remaining customers
pursuant to its existing international section 214 authorizations, ITC-214-20020213-00082, ITC-214-20020402-
00170, and ITC-214-20020705-00327. NYNEX Long Distance Company will continue to provide international
service to its remaining customers pursuant to its existing international section 214 authorizations, ITC-214-
20020213-00081, ITC-214-20020402-00168, and ITC-20020705-00326. VSSI will continue to provide
international service to its remaining customers pursuant to its existing international section 214 authorizations, ITC-
214-20020213-00083, ITC-214-20020213-00084, ITC-21420020402-00167, ITC-214-20020402-00169, ITC-214-
20020705-00324, and ITC-214-20020705-00325. Enhanced Communications of Northern New England Inc. will
provide international service to its new customers pursuant to international section 214 authorization, ITC-214-
20070206-00437 (to provide facilities-based service in accordance with section 63.18(e)(1) of the Commission’s
rules, and also to provide resale service in accordance with section 63.18(e)(2) of the Commission’s rules, 47 C.F.R.
§ 63.18(e)(1), (2)). For the purposes of our review in this Order, the primary subject of our concern is the merger of
Spinco with and into FairPoint. We therefore hereinafter refer to the transaction as a “merger.”
20
See FairPoint/Verizon Application at 10. Upon closing of the transactions, the shareholders of Verizon
Communications will own approximately 60% of FairPoint, and the pre-merger shareholders of FairPoint will own
approximately 40% of post-merger FairPoint. See id. at 3, n.2. Applicants state that current FairPoint management
will manage and control the day-to-day operations of FairPoint following consummation of the proposed
transaction. See id. at 3. Further, the Applicants have amended their application to note that Verizon will have the
right to nominate only four of the nine members of the FairPoint board of directors prior to the closing. See Letter
from Karen Brinkmann, Counsel to FairPoint, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22 (filed
Nov. 16, 2007).
21
FairPoint identifies these services as local and long distance phone services, dial-up and digital subscriber line
(DSL) Internet access to residential and business customers, Web hosting, domain name registration, and hosted
e-mail services. See id. at 18.
22
See id. at 16-19; Letter from Karen Brinkmann, Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 07-22, Attach. (filed July 10, 2007) (FairPoint July 10 Ex Parte Letter); Letter from Karen Brinkmann,
Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22 at 1 (filed Nov. 16, 2007).
23
See FairPoint/Verizon Application at 19-20.
24
See Letter from Karen Brinkmann, Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
07-22 at 6 (filed June 18, 2007) (FairPoint June 18 Ex Parte Letter). Verizon states that it has not, nor does it intend
to, sign any non-compete agreements. Id.

5

Federal Communications Commission FCC 07-226

Maine, New Hampshire and Vermont.25 For example, FairPoint anticipates that existing wholesale
agreements will remain largely the same and that Telco will assume those interconnection agreements
between Verizon New England and other carriers that relate to service wholly within Maine, New
Hampshire, and Vermont.26

C. Applications and Review Process

10. On January 31, 2007, Verizon and FairPoint jointly filed a series of applications seeking
Commission approval of the multi-step transaction that will ultimately result in the transfer of control to
FairPoint of domestic 214 authorizations and assignment of licenses and international 214 authorizations
held directly and indirectly by Verizon through its various subsidiaries.27

III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK

11. Pursuant to sections 214(a) and 310(d) of the Act,28 the Commission must determine whether
the proposed transfer of control to FairPoint of certain licenses and authorizations held and controlled by
Verizon will serve the public interest, convenience, and necessity.29 In making this determination, we
first assess whether the proposed transaction complies with the specific provisions of the
Communications Act, other applicable statutes, and the Commission’s rules. If the proposed transaction
would not violate a statute or rule, the Commission considers whether it could result in public interest
harms by substantially frustrating or impairing the objectives or implementation of the Communications
Act or related statutes. The Commission then employs a balancing test weighing any potential public
interest harms of the proposed transaction against the proposed public interest benefits.30 The Applicants

25
See FairPoint/Verizon Application at 20.
26
See id. Applicants state that Verizon New England interconnection agreements that relate, in part, to service
outside Maine, New Hampshire, and Vermont, will be modified to apply to Telco and the other party in Maine, New
Hampshire, and/or Vermont only. Id. In the alternative, Telco will enter into new agreements on substantially the
same terms and conditions following discussion with and required notice to the affected parties and state
commissions, as appropriate. Id.
27
See discussion supra n.3 (discussing the assignment applications filed by the Applicants to reflect this internal
reorganization).
28
47 U.S.C. §§ 214(a), 310(d).
29
Section 310(d) of the Act, 47 U.S.C. § 310(d), requires that we consider applications for transfer of Title III
licenses under the same standard as if the proposed transferee were applying for licenses directly under section 308
of the Act, 47 U.S.C. § 308. See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19; SBC/AT&T Order, 20
FCC Rcd at 18300 n.60; Verizon/MCI Order, 20 FCC Rcd at 18443 n.59; Applications of Western Wireless
Corporation and Alltel Corporation for Consent to Transfer Control of Licenses and Authorizations, WT Docket
No. 05-50, Memorandum Opinion and Order, 20 FCC Rcd 13053, 13063-63, para. 17 (2005) (Alltel/Western
Wireless Order); Applications of AT&T Wireless Services, Inc. and Cingular Wireless Corporation, WT Docket 04-
70, Memorandum Opinion and Order, 19 FCC Rcd 21522, 21542, para. 40 (2004) (Cingular/AT&T Wireless
Order); General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation
Limited, Transferee, MB Docket No. 03-124, Memorandum Opinion and Order, 19 FCC Rcd 473, 485, para. 18
(2004) (News Corp./Hughes Order). Thus, we must examine the Applicants’ qualifications to hold licenses. See
discussion infra at Part IV.C (FairPoint’s Qualifications to Acquire Control of Verizon’s Licenses).
30
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19; SBC/AT&T Order, 20 FCC Rcd at 18300, para.
16; Verizon/MCI Order, 20 FCC Rcd at 18443, para. 16; Sprint/Nextel Order, 20 FCC Rcd at 13976, para. 20;
Cingular/AT&T Wireless Order, 19 FCC Rcd at 21542-43, para. 40; News Corp./Hughes Order, 19 FCC Rcd at
483, para. 15; Application of GTE Corporation, Transferor, and Bell Atlantic Corporation, Transferee, CC Docket
98-184, Memorandum Opinion and Order, 15 FCC Rcd 14032, 14046, paras. 20, 22 (2002) (Bell Atlantic/GTE
Order); Applications of VoiceStream Wireless Corporation and Powertel, Inc., Transferors, and Deutsche Telekom
AG, Transferee, IB Docket No. 00-187, Memorandum Opinion and Order, 16 FCC Rcd 9779, 9789, para. 17 (2001)
(continued....)
6

Federal Communications Commission FCC 07-226

bear the burden of proving, by a preponderance of the evidence, that the proposed transaction, on balance,
serves the public interest.31 If we are unable to find that the proposed transaction serves the public
interest for any reason, or if the record presents a substantial and material question of fact, we may
designate the application for hearing.32

12. Our public interest evaluation necessarily encompasses the “broad aims of the
Communications Act,”33 which include, among other things, a deeply rooted preference for preserving
and enhancing competition in relevant markets, accelerating private sector deployment of advanced
services, ensuring a diversity of license holdings, and generally managing the spectrum in the public
interest.34 Our public interest analysis may also entail assessing whether the merger will affect the quality
of communications services or will result in the provision of new or additional services to consumers.35

(...continued from previous page)
(Deutsche Telekom/VoiceStream Order); Applications of Ameritech Corp. and SBC Communications Inc., WC
Docket No. 98-141, Memorandum Opinion and Order, 14 FCC Rcd 14712, 14737-38, para. 48 (1999)
(SBC/Ameritech Order); Bell Atlantic/NYNEX Order, 12 FCC Rcd at 19987, para. 2.
31
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5672, para. 19; SBC/AT&T Order, 20 FCC Rcd at 18300, para.
16; Verizon/MCI Order, 20 FCC Rcd at 18443, para. 16; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21542-44,
para. 40 (citing, e.g., News Corp./Hughes Order, 19 FCC Rcd at 483, para. 15; Applications for Consent to the
Transfer of Control of Licenses from Comcast Corporation and AT&T Corp., Transferors, to AT&T Comcast
Corporation, Transferee, MB Docket No. 02-70, Memorandum Opinion and Order, 17 FCC Rcd 23246, 23255,
para. 26 (2002) (AT&T/Comcast Order); Application of EchoStar Communications Corporation (a Nevada
Corporation), General Motors Corporation, and Hughes Electronics Corporation (Delaware
Corporations)(Transferors) and EchoStar Communications Corporation (a Delaware Corporation) (Transferee),
CS Docket No. 01-348, Hearing Designation Order, 17 FCC Rcd 20559, 20574, para. 25 (2002) (EchoStar/DirecTV
Order)).
32
We are not required to designate for hearing applications for the transfer or assignment of Title II authorizations
when we are unable to find that granting the applications would serve the public interest. See ITT World
Communications, Inc. v. FCC, 595 F.2d 897, 901 (2d Cir. 1979). We may do so, however, if we find that a hearing
would be in the public interest. With respect to the applications to transfer licenses subject to Title III of the
Communications Act, however, if we are unable to find that the proposed transaction serves the public interest, or if
the record presents a substantial and material question of fact, section 309(e) of the Communications Act requires
that we designate the application for hearing. 47 U.S.C. § 309(e); see EchoStar/DirecTV Order, 17 FCC Rcd at
20574, para. 25; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21542-44, para. 40.
33
AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20; SBC/AT&T Order, 20 FCC Rcd at 18301, para. 17;
Verizon/MCI Order, 20 FCC Rcd at 18443, para. 17; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544, para.
41 (citing, e.g., News Corp./Hughes Order, 19 FCC Rcd at 483-84, para. 16; AT&T/Comcast Order, 17 FCC Rcd at
23255, para. 27; EchoStar/DirecTV Order, 17 FCC Rcd at 20575, para. 26).
34
See 47 U.S.C. § 157 nt. (incorporating section 706 of the Telecommunications Act of 1996, Pub. L. No. 104-104,
110 Stat. 56 (1996) (1996 Act), 254, 332(c)(7)); 1996 Act, Preamble; SBC/AT&T Order, 20 FCC Rcd at 18301,
para. 17; Verizon/MCI Order, 20 FCC Rcd at 18443-44, para. 17; Cingular/AT&T Wireless Order, 19 FCC Rcd at
21544, para. 41; see also Application of WorldCom, Inc. and MCI Communications Corp. for Transfer of Control of
MCI Communications Corp. to WorldCom Inc., WC Docket No. 97-211, Memorandum Opinion and Order, 13 FCC
Rcd 18025, 18030-31, para. 9 (1998) (WorldCom/MCI Order); 2000 Biennial Regulatory Review, Spectrum
Aggregation Limits for Commercial Mobile Radio Services, WC Docket No. 01-14, Report and Order, 16 FCC Rcd
22668, 22696, para. 55 (2001) (citing 47 U.S.C. §§ 301, 303, 309(j), 310(d)); cf. 47 U.S.C. §§ 521(4), 532(a).
35
See AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20; SBC/AT&T Order, 20 FCC Rcd at 18301, para. 17;
Verizon/MCI Order, 20 FCC Rcd at 18443-44, para. 17; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544,
para. 41 (citing, e.g., AT&T/Comcast Order, 17 FCC Rcd at 23255, para. 27; WorldCom/MCI Order, 13 FCC Rcd at
18030-31, para. 9).

7

Federal Communications Commission FCC 07-226

In conducting this analysis, the Commission may consider technological and market changes, and the
nature, complexity, and speed of change of, as wells as trends within, the communications industry.36

13. In determining the competitive effects of the merger, our analysis is informed by, but not
limited to, traditional antitrust principles.37 The Commission is charged with determining whether the
transfer of control serves the broader public interest.38 In the communications industry, competition is
shaped not only by antitrust principles, but also by the regulatory policies that govern the interaction of
industry players.39 In addition to considering whether the merger will reduce existing competition,
therefore, we also must focus on whether the merger will accelerate the decline of market power by
dominant firms in the relevant communications markets and the merger’s effect on future competition.40
We also recognize that the same consequences of a proposed merger that are beneficial in one sense may
be harmful in another.41 For instance, combining assets may allow the merged entity to reduce
transaction costs and offer new products, but it may also create or enhance market power, increase
barriers to entry by potential competitors, and/or create opportunities to disadvantage rivals in
anticompetitive ways.42

14. The Commission has the authority to impose and enforce narrowly tailored, transaction-
specific conditions that ensure that the transaction serves the public interest.43 Indeed, our public interest
authority enables us to impose and enforce conditions based upon our extensive regulatory and
enforcement experience to ensure that the merger, overall, will serve the public interest.44 Despite broad

36
See AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 20; SBC/AT&T Order, 20 FCC Rcd at 18301-02, para. 17;
Verizon/MCI Order, 20 FCC Rcd at 18444, para. 17; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544, para.
41.
37
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5673, para. 21; Verizon/MCI Order, 20 FCC Rcd at 18444, para.
18; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544-45, para. 42; News Corp./Hughes Order, 19 FCC Rcd at
484, para. 17; Bell Atlantic/GTE Order, 15 FCC Rcd at 14046, para. 23; WorldCom/MCI Order, 13 FCC Rcd at
18033, para. 13.
38
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21.
39
See AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21; SBC/AT&T Order, 20 FCC Rcd at 18302, para. 18;
Verizon/MCI Order, 20 FCC Rcd at 118444, para. 18; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544-45,
para. 42; AT&T/Comcast Order, 17 FCC Rcd at 23256, para. 28.
40
See generally AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21; SBC/AT&T Order, 20 FCC Rcd at 18302,
para. 18; Verizon/MCI Order, 20 FCC Rcd at 118444, para. 18; Cingular/AT&T Wireless Order, 19 FCC Rcd at
21544-45, para. 42.
41
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21.
42
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 21; SBC/AT&T Order, 20 FCC Rcd at 18302, para.
18; Verizon/MCI Order, 20 FCC Rcd at 118445, para. 18; Applications for Consent to the Transfer of Control of
Licenses and Section 214 Authorizations by Time Warner Inc. and America Online, Inc., Transferors to AOL Time
Warner Inc., Transferee, CS Docket No. 00-30, Memorandum Opinion and Order, 16 FCC Rcd 6547, 6550, 6553,
paras. 5, 15 (2001) (AOL/Time Warner Order); Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544-45, para. 42.
43
See 47 U.S.C. § 303(r); 47 U.S.C. § 214(c). See generally AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22;
SBC/AT&T Order, 20 FCC Rcd at 18302, para. 19; Verizon/MCI Order, 20 FCC Rcd at 118445, para. 19;
Alltel/Western Wireless Order, 20 FCC Rcd at 13065-66, para. 21 (conditioning approval on the divestiture of
operating units in specified markets); Cingular/AT&T Wireless Order, 19 FCC Rcd at 21545-46, para. 43 (same);
WorldCom/MCI Order, 13 FCC Rcd at 18032, para. 10 (conditioning approval on the divestiture of MCI’s Internet
assets).
44
47 U.S.C. § 303(r); see, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5674, para. 22; SBC/AT&T Order, 20 FCC
Rcd at 18303, para. 19; Verizon/MCI Order, 20 FCC Rcd at 18445, para. 19; Alltel/Western Wireless Order, 20 FCC
Rcd at 13065-66, para. 21; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21545-46, para. 43; Bell Atlantic/GTE
(continued....)

8

Federal Communications Commission FCC 07-226

authority, the Commission has held that it will impose conditions only to remedy harms that arise from
the transaction (i.e., transaction-specific harms)45 and that are related to the Commission’s responsibilities
under the Communications Act and related statutes.46

IV. POTENTIAL PUBLIC INTEREST HARMS

15. In this section, we consider the potential public interest harms, including potential harms to
competition, arising from this proposed transaction. Consistent with Commission precedent, in addition
to considering whether the transfer of control will reduce existing competition, we also must focus on its
likely effect on future competition.47 In doing so, we recognize that FairPoint will assume local exchange
facilities needed by other providers,48 but find, on the record before us, that the proposed transaction is
not likely to have an anticompetitive effect in Maine, New Hampshire, or Vermont.

A. Market Concentration

16. Based on evidence in the record, we find that the proposed transaction is not likely to increase
market concentration. The record evidence indicates that the proposed transaction is not likely to
adversely affect competition because Verizon and FairPoint do not compete for local exchange customers
in the affected exchanges.49 This finding is consistent with our view that the sale of rural exchanges from
large incumbent LECs to smaller incumbent LECs that specialize in providing service in rural areas is
unlikely to raise the potential of competitive harm.50 In addition, the Applicants contend that after the
transaction, Verizon affiliates will continue to provide “large business and long distance services” in

(...continued from previous page)
Order, 15 FCC Rcd at 14047, para. 24; WorldCom/MCI Order, 13 FCC Rcd at 18032, para. 10; FCC v. Nat’l
Comm. for Broad., 436 U.S. 775 (1978); United States v. Southwestern Cable Co., 392 U.S. 157,178 (1968); United
Video, Inc. v. FCC, 890 F.2d 1173, 1182-83 (D.C. Cir. 1989).
45
See AT&T/BellSouth Order, 22 FCC Rcd at 5675, para. 22; SBC/AT&T Order, 20 FCC Rcd at 18303, para. 19;
Verizon/MCI Order, 20 FCC Rcd at 18445, para 19; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544-45,
para. 43.
46
See AT&T/BellSouth Order, 22 FCC Rcd at 5675, para. 22; SBC/AT&T Order, 20 FCC Rcd at 18303, para. 19;
Verizon/MCI Order, 20 FCC Rcd at 18445, para 19; Cingular/AT&T Wireless Order, 19 FCC Rcd at 21544-45,
para. 43; News Corp./Hughes Order, 19 FCC Rcd at 534, para. 131.
47
See, e.g., Verizon Communications, Inc. and América Móvil, S.A. de C.V. Application for Authority to Transfer
Control of Telecomunicaciones de Puerto Rico, Inc., WC Docket No. 06-113, Memorandum Opinion and Order and
Declaratory Ruling, 22 FCC Rcd 6195, 6205, para. 22 (Verizon/América Móvil Order); Guam Cellular and Paging,
Inc. and DoCoMo Guam Holdings, Inc. WT Docket No. 06-96, 21 FCC Rcd 13580, 13591, para. 16 (2006)
(DoCoMo-Guam Cellular Order); Midwest Wireless Holdings, L.L.C. and AllTel Communications, Inc., WC Docket
No. 05-339, 21 FCC Rcd at 11526, 11538, para. 19 (2006) (ALLTEL/Midwest Wireless Order); SBC/AT&T Order,
20 FCC Rcd at 18302, para. 18; Verizon/MCI Order, 20 FCC Rcd at 18444. para. 18; Sprint/Nextel Order, 20 FCC
Rcd at 13978, para. 22; ALLTEL/Western Wireless Order, 20 FCC Rcd at 13065, para. 20; Cingular/AT&T Wireless
Order, 19 FCC Rcd at 21545, para. 44.
48
FairPoint will assume certain accounts receivable, liabilities, and customer relationships related to the provision of
international services and not any international facilities, except for the cross-border local exchange services in
Lubec, Maine, which has authority for facilities-based international services with the Campobello Island exchange
of New Brunswick Telecommunications, located in New Brunswick, Canada (see ITC-ASG-20070206-00062, ITC-
214-20030516-00243).
49
See FairPoint/Verizon Opposition at 32 (acknowledging that FairPoint already has a presence in the region, but
that none of its current exchanges overlap with the Verizon exchanges).
50
See Implementation of Further Streamlining Measures for Domestic Section 214 Authorizations, WC Docket No.
02-78, Report and Order, 17 FCC Rcd 5517, para. 33 (2002).

9

Federal Communications Commission FCC 07-226

Maine, New Hampshire, and Vermont in competition with FairPoint.51 Accordingly, we find no potential
public interest harms related to market concentration.

B. Access to Wholesale Inputs

17. We disagree with comments alleging that the transaction will harm competition by disrupting
the ability of competing carriers to obtain wholesale services.52 We find nothing in the record to suggest
that FairPoint will have either greater incentive or ability to discriminate in the provision of wholesale
inputs than Verizon. To the contrary, we find that, because FairPoint has a much smaller footprint than
Verizon, it will have a smaller incentive to discriminate.53 Further, FairPoint states that it will retain all
obligations under Verizon’s current interconnection agreements, tariffs, SGATs, and other existing
arrangements, in addition to the statutory obligations applicable to all incumbent LECs under sections 251
and 252.54 Moreover, FairPoint asserts that it is devoting significant resources to providing wholesale
services, and that competitive LECs will not be charged for the training, job aids, or reference materials
necessary to interact with FairPoint’s updates to its existing wholesale systems.55 Accordingly, we find
that the transaction is not likely to result in potential public interest harms related to access to wholesale
inputs.56

51
FairPoint June 18 Ex Parte Letter at 6. Verizon states that it has not, nor does it intend to, sign any non-compete
agreements. Id.
52
See, e.g., One Communications Petition at 13-28.
53
Cf. AT&T/BellSouth Order, 22 FCC Rcd at 5697, paras. 183-184 (discussing the “big footprint” theory).
54
See FairPoint/Verizon Opposition at 33; FairPoint June 18 Ex Parte Letter at 3-4; see also Letter from Karen
Brinkmann, Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22 (filed Sept. 10,
2007) (stating that PAETEC Communications, Inc. and USLEC Communications Inc. had filed a joint motion to
withdraw as intervenors in the New Hampshire proceeding following successful negotiations with FairPoint for
access to wholesale services in New Hampshire after the transaction); Letter from Shirley J. Linn and Robin E.
Tuttle, FairPoint and Michael E. Glover, Karen Zacharia, and Leslie V. Owsley, Verizon, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 07-22 at 5 (filed Oct. 11, 2007) (FairPoint/Verizon Oct. 11 Ex Parte Letter)
(stating that DSCI Corporation recently moved to withdraw its motion to intervene in the New Hampshire
proceeding, and a group of eight independent LECs in Vermont, which includes all such carriers in the state, filed a
letter with the Vermont Public Service Board, and 22 independent LECs in Maine filed a letter with the Maine
Public Utilities Commission, after the parties resolved their concerns regarding wholesale services).
55
See FairPoint/Verizon Opposition at 33. Further, FairPoint states that it has already contacted all of the
competitive LECs in the region to discuss any concerns. See id.
56
We decline to impose a number of proposed conditions relating to wholesale special access service. See, e.g., One
Communications/Great Works Reply at 23-25 (arguing that the Commission should impose conditions similar to
those imposed in the Verizon/MCI Order). As we have found previously, “[t]o the extent that certain incumbent
LECs have the incentive and ability under our existing rules to discriminate against competitors” using special
access inputs, “such a concern is more appropriately addressed in our existing rulemaking proceedings on special
access performance metrics and special access pricing.” AT&T/BellSouth Order, 22 FCC Rcd at 5695, para. 60.
Commenters submitted to the Commission a voluminous record on industry-wide special access pricing issues in
one of these proceedings. See Special Access Rates for Price Cap Local Exchange Carriers; AT&T Corp. Petition
for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access
Services, WC Docket No. 05-25; RM-10593, Order and Notice of Proposed Rulemaking, 20 FCC Rcd 1994 (2005).
By addressing these issues in the context of a rulemaking, we would be able to develop a comprehensive approach
based on a full record that applies to all similarly situated incumbent LECs. See AT&T/BellSouth Order, 22 FCC
Rcd at 5695, para. 60. We note that we address specific allegations of competitive harms relating to wholesale
inputs in the discussion below.

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Federal Communications Commission FCC 07-226

C. FairPoint’s Qualifications to Acquire Control of Verizon’s Licenses

18. Section 310(d) of the Communications Act provides that no station license may be
transferred, assigned, or disposed of in any manner except upon a finding by the Commission that the
“public interest, convenience and necessity will be served thereby.”57 Among the factors that the
Commission considers in its public interest inquiry is whether the applicant for a license or license
transfer has the requisite “citizenship, character, financial, technical, and other qualifications.”58
Therefore, as a threshold matter, the Commission must determine whether the parties meet the requisite
qualifications to hold and transfer licenses under section 310(d) of the Act and the Commission’s rules.59

19. We recognize that the standard for evaluating the qualifications of the transferor is less
stringent than that applied to the transferee.60 Section 310(d) requires the Commission to consider
whether FairPoint, the proposed transferee, is qualified to hold a Commission license.61 The Commission
has previously determined that, in deciding character issues, it will consider certain forms of adjudicated,
non-FCC related misconduct that includes: (1) felony convictions; (2) fraudulent misrepresentations to
governmental units; and (3) violations of antitrust or other laws protecting competition.62 With respect to
Commission-related conduct, the Commission has stated that it would treat any violation of any provision
of the Act, or of the Commission’s rules, as predictive of an applicant’s future truthfulness and reliability
and, thus, as having a bearing on an applicant’s character qualifications.63 In prior merger orders, the
Commission has used the Commission’s character policy in the broadcast area as guidance in resolving
similar questions in transfer of licenses proceedings.64 For expositional simplicity when commenters

57
47 U.S.C. § 310(d).
58
See AT&T/BellSouth, 22 FCC Rcd at 5756, para. 190; Applications for Consent to the Transfer of Control of
Licenses and Section 214 Authorizations From Southern New England Telecommunications Corporation,
Transferor to SBC Communications Inc., Transferee, CC Docket No. 98-25, 13 FCC Rcd 21292, 21305, para. 26
(1998) (SBC/SNET Order).
59
See 47 U.S.C. § 310(d); 47 C.F.R. §§ 1.948, 25.119.
60
The Commission does not, as a general rule, reevaluate the qualifications of the transferors unless issues related to
basic qualifications have been designated for hearing by the Commission or have been sufficiently raised in petitions
to warrant the designation of a hearing. See, e.g., SBC/AT&T Order, 20 FCC Rcd at 18379, para. 171.
61
See AT&T/BellSouth Order, 22 FCC Rcd at 5756, para. 191; SBC Communications Inc. and BellSouth
Corporation for Consent to Transfer Control or Assignment of Licenses and Authorizations, File Nos. 0000117778,
et al., WT Docket No. 00-81, Memorandum Opinion and Order, 15 FCC Rcd 25459, 25465, para. 14 (2000)
(SBC/BellSouth Order).
62
See AT&T/BellSouth Order, 22 FCC Rcd at 5756, para. 191; Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20092-
93, para. 236.
63
Policy Regarding Character Qualifications in Broadcast Licensing; Amendment of Rules of Broadcast Practice
and Procedure Relating to Written Responses to Commission Inquiries and the Making of Misrepresentations to the
Commission by Permittees and Licensees, Gen. Docket No. 81-500, Docket No. 78-108, Report, Order and Policy
Statement, 102 FCC 2d 1179, 1209-10, para. 57 (1986) (Character Qualifications), modified, 5 FCC Rcd 3252
(1990) (Character Qualifications Modification), recon. granted in part, 6 FCC Rcd 3448 (1991), modified in part, 7
FCC Rcd 6564 (1992) (Further Character Qualifications Modification); MCI Telecommunications Corp. Petition
for Revocation of Operating Authority, Order and Notice of Apparent Liability, 3 FCC Rcd 509 (1988) (stating that
character qualifications standards adopted in the broadcast context can provide guidance in the common carrier
context). The Commission has also determined that allegations that an applicant has engaged in unreasonable or
anticompetitive conduct are relevant to the Commission’s public interest analysis. SBC/SNET Order, 13 FCC Rcd
at 21306-07, paras. 28-30.
64
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5756, para. 191; SBC/AT&T Order, 20 FCC Rcd at 18739, para.
172; SBC/SNET Order, 13 FCC Rcd at 21305, para. 26; Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20092-93, para.
(continued....)
11

Federal Communications Commission FCC 07-226

FairPoint clarifies that its issuance of dividends is discretionary.67 We find nothing in the record
indicating that FairPoint will be unable to reduce dividend payments if necessary.68 Moreover, FairPoint
states that it intends to spend more per line than Verizon has in recent years.69 Specifically, FairPoint
represents that it anticipates making a capital expenditure of at least $100 per access line per year in the
three states for the five years following the merger closing date.70 Therefore, we are persuaded that
FairPoint is likely to be financially capable of investing at appropriate levels in the acquired service
territory.71 While it is difficult to calculate the exact amount per access line that will be required to
maintain and improve service quality and broadband availability, we take comfort in FairPoint’s
representation that this level of investment will serve as a significant step in reaching those goals.72
Based on the record before us, we find that the commenters’ contention that the transaction will result in
financial instability for FairPoint and reduce its ability to invest in network infrastructure is speculative,
and conclude that FairPoint is likely to have the financial resources necessary to maintain and improve its
network in the relevant service territories.73

22. We also reject commenter arguments that the Applicants’ decision to utilize a Reverse Morris
Trust (RMT) will result in harm to the public interest.74 There is no evidence in the record that the use of
67
See, e.g., FairPoint/Verizon Opposition at 15 (arguing that FairPoint’s issuance of dividends is discretionary and
dividend payments would not divert resources); Leach Decl. at 4 (stating that FairPoint can opt not to pay dividends
under its current dividend policy); FairPoint/Verizon Aug. 20 Ex Parte Letter at 4 (noting that it is not FairPoint’s
intention to under-invest in order to pay dividends); id. at 7 (arguing that FairPoint’s dividend payments are within a
range required by the equities markets). But see Letter from Kenneth R. Peres, Ph.D., Research Economist, CWA to
Marlene Dortch, Secretary, FCC, WC Docket No. 07-22, Attach. at 1 (filed June 28, 2007) (comparing FairPoint
dividends to those of other telecommunications companies).
68
See Letter from Karen Zacharia, Vice President & Associate General Counsel, Verizon, Shirley J. Linn, Executive
Vice President & General Counsel, and Robin E. Tuttle, Director of Federal Affairs & Assistant General Counsel,
Regulatory Affairs, FairPoint, and Karen Brinkmann, Brian Murray, and Kelley M. Marsden, Counsel to FairPoint,
to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22, Attach. (filed Dec. 14, 2007) (FairPoint/Verizon Dec.
14 Ex Parte Letter) (attaching a stipulation in Maine by which FairPoint proposes to cut its dividend level by 35%).
69
See FairPoint/Verizon Opposition at 13, Leach Decl. at 14.
70
See Letter from Karen Brinkmann, Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
07-22, Attach. (filed May 3, 2007) (FairPoint May 3 Ex Parte Letter) (anticipating that FairPoint would make
capital expenditures of approximately $100 per access line per year in the three states in addition to its investments
in network upgrades to generate revenues, strengthen the company’s competitive position and increase high-speed
data addressability).
71
See, e.g., FairPoint/Verizon Dec. 14 Ex Parte Letter, Attach. (agreeing to certain investment levels in Maine).
72
See id.
73
We note that at the time of releasing this Order, there are separate, ongoing proceedings in Maine, New
Hampshire and Vermont reviewing the merits of the proposed transaction. See CWA May 31 Ex Parte Letter at 1-2
(summarizing CWA’s contention that FairPoint does not have the financial qualifications to run the Verizon
territories before the State of Vermont Public Service Board); CWA Sept. 5 Ex Parte Letter at 1 (summarizing
CWA’s contention that FairPoint does not have the financial qualifications to run the Verizon territories before the
New Hampshire Public Utility Commission); Letter from Kenneth R. Peres, Ph.D., Research Economist, CWA, to
Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22 at 1 (filed Sept. 5, 2007) (CWA Sept. 5 Maine Ex Parte
Letter) (summarizing CWA’s contention that FairPoint does not have the financial qualifications to run the Verizon
territories before the Maine Public Utility Commission).
74
See, e.g., Letter from Representative Dennis J. Kucinich to Kevin J. Martin, Chairman, FCC, WC Docket No. 07-
22 (filed May 25, 2007); CWA/IBEW Reply at 15-16 (arguing that the RMT mechanism has harmed the public
interest, and resulted in Verizon not considering other companies for the transaction); CWA June 27 Ex Parte Letter,
Attach. at 4 (arguing that Verizon may have chosen FairPoint for tax avoidance purposes rather than its financial and
operational capacity to succeed); Letter from Kenneth R. Peres, Ph.D., Research Economist, CWA, to Marlene H.
Dortch, Secretary, FCC, WC Docket No. 07-22 at 1 (filed Sept. 26, 2007) (arguing that Verizon chose to avoid taxes
(continued....)
13

Federal Communications Commission FCC 07-226

an RMT will result in public interest harm in light of our finding that FairPoint has the requisite financial
qualifications.75 In fact, the Applicants assert that, because the transaction is tax free, it will result in a
lower transaction price, which will facilitate FairPoint’s intended investments in the affected exchanges.76

23. Technical Qualifications. We find that FairPoint has extensive experience in providing
telecommunications services and maintaining and investing in facilities in rural and small urban areas.77
We disagree that FairPoint’s lack of experience with operating a company as large as that which will
result from the proposed transaction, or its alleged lack of experience with wholesale customers,
demonstrates that FairPoint lacks the requisite technical qualifications.78 The Transition Services
Agreement (TSA) entered into by FairPoint and Verizon is likely to ensure that the transaction is

(...continued from previous page)
rather than consider larger companies that would have the capital and operational resources to run the operations in
Maine, New Hampshire, and Vermont); Letter from Kenneth R. Peres, Ph.D., Research Economist, CWA, to
Marlene Dortch, Secretary, FCC, WC Docket No. 07-22 at 1-2 (filed Dec. 6, 2007) (arguing that the transaction was
structured to avoid paying federal taxes). But see FairPoint/Verizon Aug. 20 Ex Parte Letter at 10 (stating that the
tax advantages of the proposed transaction was not the primary factor in choosing FairPoint).
75
See, e.g., CWA/IBEW Reply at 15-16 (arguing that the transaction “appears” to be guided by tax avoidance).
76
See FairPoint/Verizon Opposition at 12; Leach Decl. at 4. Accordingly, we reject assertions that Applicants
should be required to forfeit the tax benefits from the use of an RMT. See, e.g., CWA Nov. 9 Ex Parte Letter at 3
(arguing that FairPoint should create a special “Broadband Infrastructure Fund” funded by the $600 million resulting
from the RMT tax savings associated with the transaction to mitigate potential public interest harms); CWA Dec. 6
Ex Parte Letter at 1-2 (suggesting that the $600 million fund could be used to build out fiber and DSL services in
northern New England). But see Letter from Karen Zacharia, Vice President & Associate General Counsel,
Verizon, Shirley J. Linn, Executive Vice President & General Counsel, FairPoint Communications, Inc., and Karen
Brinkmann, Brian Murray, and Kelley M. Marsden, Counsel for FairPoint, to Marlene H. Dortch, Secretary, FCC,
WC Docket No. 07-22 at 7-8 (filed Dec. 12, 2007) (FairPoint/Verizon Dec. 12 Ex Parte Letter) (arguing that CWA
presents no evidence that supports the creation of the fund or why this amount is needed to create the fund);
FairPoint/Verizon Dec. 14 Ex Parte Letter (attaching a stipulation by which Verizon agrees to increase FairPoint’s
working capital by $235.5 million).
77
See, e.g., FairPoint/Verizon Application at 17; FairPoint/Verizon Opposition at 7. We disagree with commenters
that suggest that the Hawaiian Telcom/Verizon transaction should provide caution when reviewing this transaction
because the Hawaiian Telcom/Verizon transaction did not involve the same parties or the same facts. See, e.g.,
CWA/IBEW Petition at 27-28 (arguing that the Commission should review this transaction in light of the Hawaiian
Telcom transaction); One Communications/Great Works Reply at 18-19 (arguing that in the Hawaiian Telcom
transaction there were also assertions made that consultants had extensive telecommunications experience). But see
FairPoint/Verizon Opposition at 30 (arguing that the Hawaiian Telcom transaction is not indicative of this
transaction because it involved a different local exchange property and a different purchaser). Further, the Hawaiian
Telcom/Verizon deal involved a purchaser, the Carlyle Group, whose focus is on a variety of investment industries,
while FairPoint is an established and experienced carrier with extensive experience in serving rural markets. See,
e.g., id. at 30. Additionally, FairPoint began working with Capgemini, which has 30 years of telecommunications
experience, prior to the deal’s announcement to speed the transition. See id. at 27, 30.
78
See, e.g., One Communications Petition at 18 (arguing that there is no basis for concluding that the existing
FairPoint management has the expertise or ability to manage such a large company); id. at 18-19 (stating that
FairPoint has no wholesale systems in place and no experience with meeting the wholesale requirements of sections
251, 271, or providing wholesale special access); One Communications/Great Works Reply at 17 (arguing that
FairPoint has no track record or experience in providing wholesale services); CWA/IBEW Reply at 4-5 (arguing that
FairPoint lacks the managerial experience to step into the shoes of Verizon, and that FairPoint management has
never been responsible for a network of hundreds of thousands of poles, wire centers, or dozens of central offices);
CWA June 27 Ex Parte Letter, Attach. at 2 (arguing that FairPoint management will be unprepared to handle taking
over Verizon’s large operations in these states). But see FairPoint/Verizon Oct. 11 Ex Parte Letter at 6 (arguing that
FairPoint has implemented internal processes and procedures that will ensure that the wholesale systems will be
ready).

14

Federal Communications Commission FCC 07-226

Second, we agree with the Applicants that FairPoint will have an incentive to maintain a commitment to
customer service given continued state oversight of customer service issues.88 Third, FairPoint’s
commitment to invest in its network infrastructure and the availability of support services under the TSA
should help to mitigate potential service quality issues.

V. POTENTIAL PUBLIC INTEREST BENEFITS

A. Introduction

25. We next consider whether the transaction is likely to generate verifiable, merger-specific
public interest benefits.89 In doing so, we ask whether the combined entity will be able, and is likely, to
pursue business strategies resulting in demonstrable and verifiable benefits that could not be pursued but
for the combination.90 As discussed below, we find that the proposed transaction is likely to generate
significant merger-specific public interest benefits, although it is difficult to quantify the magnitude of
some of these benefits.

B. Analytical Framework

26. The Commission has recognized that “[e]fficiencies generated through a merger can mitigate
competitive harms if such efficiencies enhance the merged firm’s ability and incentive to compete and
therefore result in lower prices, improved quality, enhanced service, or new products.”91 Under
Commission precedent, the Applicants bear the burden of demonstrating that the potential public interest
benefits of the proposed transfer outweigh the potential public interest harms.92

(...continued from previous page)
(stating in a January 16, 2007 FairPoint/Verizon news release that FairPoint has demonstrated its ability to provide
high-quality operations in rural and small urban markets and that FairPoint’s commitment to quality customer
service was key to Verizon’s decision to enter into the transaction with FairPoint); FairPoint/Verizon Aug. 20 Ex
Parte Letter at 11 (attaching a letter from the Maine Public Service Commission commending FairPoint for its
service quality improvements).
88
See, e.g., FairPoint/Verizon Aug. 20 Ex Parte Letter, Attach. (stating that the Maine Public Service Commission
will continue to monitor FairPoint’s service quality through filed consumer complaints).
89
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5760, para. 200; SBC/AT&T Order, 20 FCC Rcd at 18384, para.
182; Verizon/MCI Order, 20 FCC Rcd 18530, para. 193; Bell Atlantic/GTE Order, 15 FCC Rcd at 14130, para 209;
SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 255; WorldCom/MCI Order, 13 FCC Rcd at 18134-35, para.
194.
90
See, e.g., Verizon/América Móvil Order, 22 FCC Rcd at 6210, para. 34; Bell Atlantic/GTE Order, 15 FCC Rcd at
14130, para. 209; SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 255; WorldCom/MCI Order, 13 FCC Rcd at
18134-34, para. 194.
91
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5760, para. 201; SBC/AT&T Order, 20 FCC Rcd at 18384, para.
183; Verizon/MCI Order, 20 FCC Rcd 18530, para. 194; Echostar/DirecTV Order, 17 FCC Rcd at 20630, para. 188;
Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063, para. 158; see also Horizontal Merger Guidelines, issued by the
U.S. Department of Justice and the Federal Trade Commission (Apr. 2, 1992, revised Apr. 8, 1997) § 4 (DOJ/FTC
Guidelines).
92
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 201; SBC/AT&T Order, 20 FCC Rcd at 18384, para.
183; Verizon/MCI Order, 20 FCC Rcd 18530, para. 194; Echostar/DirecTV Order, 17 FCC Rcd at 20630, para. 188;
SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 256; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at
20063, para. 157.

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Federal Communications Commission FCC 07-226

27. The Commission applies several criteria in deciding whether a claimed benefit is cognizable.
First, the claimed benefit must be transaction or merger specific.93 This means that the claimed benefit
“must be likely to be accomplished as a result of the merger but unlikely to be realized by other means
that entail fewer anticompetitive effects.”94 Second, the claimed benefit must be verifiable. Because
much of the information relating to the potential benefits of a merger is in the sole possession of the
Applicants, they are required to provide sufficient evidence supporting each benefit claim so that the
Commission can verify the likelihood and magnitude of the claimed benefit.95 In addition, as the
Commission has noted, “the magnitude of benefits must be calculated net of the cost of achieving
them.”96 Furthermore, the Commission will discount or dismiss speculative benefits that it cannot verify.
Thus, as the Commission explained in the EchoStar/DirecTV Order, “benefits that are to occur only in the
distant future may be discounted or dismissed because, among other things, predictions about the more
distant future are inherently more speculative than predictions about events that are expected to occur
closer to the present.”97 Third, the Commission has stated that it “will more likely find marginal cost
reductions to be cognizable than reductions in fixed cost.”98 “The Commission has justified this criterion
on the ground that, in general, reductions in marginal cost are more likely to result in lower prices for
consumers.”99

28. Finally, the Commission applies a “sliding scale approach” to evaluating benefit claims.100
Under this sliding scale approach, where potential harms appear “both substantial and likely, the
Applicants’ demonstration of claimed benefits also must reveal a higher degree of magnitude and

93
See AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202.
94
AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20630, para.
189; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063-64 para. 158 (“Pro-competitive efficiencies include
only those efficiencies that are merger-specific, i.e., that would not be achievable but for the proposed merger.
Efficiencies that can be achieved through means less harmful to competition than the proposed merger . . . cannot be
considered to be true pro-competitive benefits of the merger.”) (footnote omitted); SBC/Ameritech Order, 14 FCC
Rcd at 14825, para. 255 (“Public interest benefits also include any cost saving efficiencies arising from the merger if
such efficiencies are achievable only as a result of the merger. . . .”); AT&T/Comcast Order, 17 FCC Rcd at 23313,
para. 173 (explaining that the Commission considers whether benefits are “merger-specific”); cf. DOJ/FTC
Guidelines § 4.
95
See AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20630,
para. 190; see also Bell Atlantic/NYNEX Order, 12 FCC Rcd at 20063, para. 157 (“These pro-competitive benefits
include any efficiencies arising from the transaction if such efficiencies . . . are sufficiently likely and verifiable . . .
.”); BellSouth/Comcast Order, 17 FCC Rcd at 23313, para. 173 (explaining that the Commission considers whether
benefits are verifiable . . . .”); SBC/Ameritech Order, 14 FCC Rcd at 14825, para. 255; DOJ/FTC Guidelines § 4
(“[T]he merging firms must substantiate efficiency claims so that the Agency can verify by reasonable means the
likelihood and magnitude of each asserted efficiency, how and when each would be achieved (and any costs of
doing so), [and] how each would enhance the merged firm’s ability to compete . . . .”).
96
AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para.
190.
97
EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para. 190.
98
AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para.
190.
99
AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 202; EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para.
191; see also DOJ/FTC Guidelines § 4.
100
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5761, para. 203.

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Federal Communications Commission FCC 07-226

likelihood than we would otherwise demand.”101 On the other hand, where potential harms appear less
likely and less substantial, as in this case, we will accept a lesser showing to approve the merger.102

C. Analysis

29. We find that the Applicants have met their burden of demonstrating that the proposed
transaction will result in public interest benefits.103 As the Applicants argue, Verizon’s strategic
opportunities have required it to prioritize demands on its capital, and it has chosen to divest the
exchanges in order to address competing needs.104 In contrast, FairPoint presents a plan that is likely to
result in accelerated broadband deployment in the three-state region.

30. We are persuaded that FairPoint’s proposed plan for broadband deployment is likely to
provide greater benefits to consumers than they would receive absent the transaction.105 Verizon stopped
its capital-intensive New Hampshire FiOS project in June of 2006.106 FairPoint initially proposed to
spend $52.55 million on broadband expansion in the three-state region by 2010, including $18.55 million
in Vermont, $16.45 million in New Hampshire, and $17.55 million in Maine.107 FairPoint anticipated that
101
EchoStar/DirectTV Order, 17 FCC Rcd at 20631, para. 192 (quoting SBC/Ameritech Order, 14 FCC Rcd at
14825); cf. DOJ/FTC Guidelines § 4 (“The greater the potential adverse competitive effect of a merger . . . the
greater must be cognizable efficiencies in order for the Agency to conclude that the merger will not have an
anticompetitive effect in the relevant market. When the potential adverse competitive effect of a merger is likely to
be particularly large, extraordinary great cognizable efficiencies would be necessary to prevent the merger from
being anticompetitive.”).
102
See, e.g., AT&T/BellSouth Order, 22 FCC Rcd at 5762, para. 203.
103
We do not rely on FairPoint’s assertion that the transaction will result in FairPoint achieving a net cost savings
because the record does not definitively support this claim. Compare FairPoint/Verizon Opposition at 14 (stating
that there will be a resulting cost savings from reduced overhead when FairPoint internalizes functions currently
provided by Verizon); Leach Decl. at 5 (alleging that the reduction in allocated expenses post-closing is expected to
result in operating efficiencies of $ 60 million to $ 75 million); id. at 5 (asserting that FairPoint expects to be able to
reduce expenses from the levels of Verizon’s internal corporate allocations related but not limited to network
monitoring, customer care, and back office support); id. at 5 (discussing that FairPoint expects that in-region costs to
run operations will be less than Verizon’s internal allocations for services provided from outside the region);
FairPoint May 3 Ex Parte Letter, Attach. (arguing in a January 16, 2007 press release that operating efficiencies will
occur based on reduced expenses for network monitoring, customer care, and back office support), with
CWA/IBEW Petition at 17 (arguing that FairPoint did not account for the potential risks associated with delays in
closing the transaction and other transition and operational costs); CWA/IBEW Reply at 12-14 (alleging that it will
be difficult for FairPoint to execute its plan should an unforeseen event occur); CWA May 31 Ex Parte Letter at 2
(arguing that the projected expense savings are in doubt because, CWA asserts, FairPoint’s unit operating expenses
are higher than Northern New England’s); id., Peres Testimony Attach. at 3 (alleging that there is a significant risk
posed by FairPoint’s creation and implementation of 600 new operational, support, and administrative systems).
104
See, e.g., FairPoint/Verizon Opposition at 3 (arguing that the transaction suits the companies’ business strategies
because FairPoint’s strategy is to serve rural and small urban markets and Verizon has sought to divest such
exchanges).
105
See Section 706 of the 1996 Act directs the Commission to encourage the deployment of advanced
telecommunications capability to all Americans on a reasonable and timely basis through, among other things,
removing barriers to infrastructure investment. See 47 U.S.C. § 157 nt.
106
See, e.g., CWA Petition at 18 n.25. Further, Verizon only provides access to broadband to 62% of its current
customers in the three-state region, while FairPoint provides 92% of its customers access to a broadband product.
See FairPoint May 3 Ex Parte Letter, Attach.
107
See FairPoint/Verizon Dec. 12 Ex Parte Letter at 2-4. In Vermont, FairPoint expects to offer broadband DSL to
10 communities for the first time, and to 200 additional neighborhoods where Verizon does not offer broadband.
See id. at 3-4. FairPoint has also committed to meet Verizon’s obligation to achieve 80 percent addressability in
(continued....)
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Federal Communications Commission FCC 07-226

capital of the divested company by $235.5 million, enabling FairPoint to incur less debt and facilitate
investment.114

32. Accordingly, we believe that FairPoint’s plan for broadband deployment is likely to
accelerate availability of broadband Internet access service to customers in the three states, and we reject
commenters’ arguments that the transaction will produce no public benefits.115

VI. OTHER ISSUES

33. Regulatory Status of FairPoint. We find that FairPoint will be a Bell Operating Company
(BOC) following this transaction. Section 3(4) of the Act defines a BOC as either one of a group of
specifically listed companies – one of which is New England Telephone and Telegraph Company – or as
“any successor or assign of any such company that provides wireline telephone exchange service.”116 The
Act, however, does not define “successor or assign.” The Commission has stated that “a successor or
assign analysis is ultimately fact-based” and that those terms “take their meaning from the particular legal
context in which they were used.”117 Sections 252 and 271-76 of the Act define BOC obligations.118 The
purpose of the sections specifically applicable to the BOCs is to address Congressional concerns
regarding the BOCs opening their markets to competition.119 Based on this, we interpret the terms
114
FairPoint Maine Stipulation Letter at 1; Maine Stipulation at 10; see also supra note 76 (discussing this
commitment in the context of the analysis of FairPoint’s financial qualifications). We also note that it is likely that
these and/or similar commitments will be required by the Vermont Public Service Board, which recently denied
FairPoint’s initial petition to acquire Verizon’s operations in that state, noting that “it was open to FairPoint
submitting revisions” that addressed its concerns, and that its decision “did not consider a recent settlement in
Maine,” which was not officially in the record before the Board, and thus could not be considered. Vermont Public
Service Board Denies Fairpoint Petition To Acquire Verizon; Invites Revised Request, Press Release (Dec. 21,
2007) available at http://www.state.vt.us/psb/document/7270pressrelease.pdf; see also Joint Petition of Verizon New
England Inc., d/b/a Verizon Vermont, certain affiliates thereof, and FairPoint Communications, Inc. for approval of
an asset transfer, acquisition of control by merger and associated transactions, Docket No. 7270, Order (VT. Pub.
Serv. Bd. Dec. 21, 2007).
115
See, e.g., CWA Oct. 26 Ex Parte Letter at 8-9 (quoting Vermont Department of Public Services Staff conclusions
that the transaction will not result in improved services). We also reject arguments that we need to go further, and
impose additional requirements on FairPoint in this respect. See, e.g., CWA Nov. 9 Ex Parte Letter at 2-3 (arguing
that the Commission should impose broadband, fiber and video service rollout, investment requirements, and
performance measurement merger conditions on FairPoint); Letter from Larry Cohen, President, CWA, to Kevin
Martin, Chairman, FCC, WC Docket No. 07-22 at 3 (filed Nov. 28, 2007) (CWA Nov. 28 Ex Parte Letter)
(suggesting that FairPoint be required to increase its broadband investment commitment in Maine to $28 million).
But see FairPoint Dec. 12 Ex Parte Letter (arguing that imposing further broadband, fiber or video service rollout
conditions would be cost prohibitive and unnecessary since FairPoint has already committed to expanding
broadband availability, and that performance measurement conditions are similarly inappropriate).
116
47 U.S.C. § 153(4). New England Telephone and Telegraph Company is now part of Verizon, and the exchanges
at issue in this proceeding were part of the New England Telephone and Telegraph Company. See Bell
Atlantic/NYNEX Order, 12 FCC Rcd 19985 (merging Bell Atlantic and NYNEX, formerly the AT&T subsidiaries
New York Telephone and New England Telephone and Telegraph Company); Bell Atlantic/GTE Order, 15 FCC
Rcd 14032 (merging Bell Atlantic and GTE, which thereafter conducted business in these states as Verizon New
England, Inc.).
117
See SBC/Ameritech Order, 14 FCC Rcd at 14897, para. 454 (citing Howard Johnson Co. v. Detroit Local Joint
Executive Bd., 417 U.S. 249, 264 n. 9 (1974)), rev’d on other grounds, Ass’n. of Communications Enterprises v.
FCC, 235 F.3d 662 (D.C. Cir. 2001).
118
See 47 U.S.C. §§ 252, 271-76.
119
See, e.g., 47 U.S.C. § 271 (requiring a BOC to meet a 14-point checklist prior to providing interLATA services
originating in any of its in-region states). Further, a fundamental goal of the Act is to promote competition for all
services. See 1996 Act, Preamble.

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Federal Communications Commission FCC 07-226

“successor or assign” as used in section 3(4) in a manner that promotes competition in the markets that
were the focus of the Act’s BOC-specific requirements. This counsels in favor of treating FairPoint as a
BOC. The potential loss of the market-opening benefits of section 271 is an independent public interest
reason for rejecting FairPoint’s argument that it will not be a successor or assign of a BOC for the three-
state operations it is acquiring from Verizon.120

34. Support for this interpretation also comes from case law on how federal courts have
interpreted these terms. As in similar inquiries, we find that the courts have generally applied a
“substantial continuity” test to determine whether one entity replaces another.121 In particular, in Fall
River Dyeing & Finishing Corp. v. NLRB, the Supreme Court, in determining whether substantial
continuity existed between two companies, focused on whether the company had “acquired substantial
assets of its predecessor and continued, without interruption or substantial change, the predecessor’s
business operations.”122 Applying the “substantial continuity” test here, we find that FairPoint would be a
successor or assign of Verizon, and thus FairPoint is a BOC in the three-state region.123 Specifically, we
find that the transaction will result in FairPoint acquiring substantial assets that are necessary to continue
the incumbent’s traditional business operation from Verizon for the entire three-state region, resulting in
no interruption or substantial change to Verizon’s business operation.124 Therefore, we find that because
this transaction involves a large portion – three of five states – of the former New England Telephone and
Telegraph Company, and there is substantial continuity between Verizon and FairPoint in the provision of
wireline telephone exchange service in these states, FairPoint will be a successor or assign of Verizon.125

35. We are not persuaded by FairPoint’s argument that we need not address whether FairPoint is
a BOC in this Order, nor by its arguments that it would not be appropriate to classify FairPoint as a BOC
upon conclusion of the proposed transaction.126 While FairPoint correctly states that the Commission has
120
See, e.g., Letter from Thomas Jones, Counsel for One Communications, to Marlene H. Dortch, Secretary, FCC,
WC Docket No. 07-22 at 10 (filed July 27, 2007) (One Communications July 27 Ex Parte Letter) (arguing that the
section 271 safeguards are still necessary from a policy perspective); One Communications Dec. 7 Ex Parte Letter at
8-12 (arguing that the merged firm is a successor or assign of Verizon).
121
See SBC/Ameritech Order, 14 FCC Rcd at 14897, para. 454 (analyzing the terms “successor or assign” in the
context of section 251(h)(1)); Alltel Communications, Inc., File No. EB-05-SE-084, Order, 20 FCC Rcd 8112 (2005)
(analyzing the terms “successor or assign” in the context of Enhanced 911 Consent Decrees).
122
Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 43 (1987).
123
See, e.g., One Communications July 27 Ex Parte Letter at 1-3.
124
The Applicants have structured the merger to eliminate any disruptions in business operations that may occur as a
result of the change in ownership. See, e.g., FairPoint/Verizon Opposition at 26 (arguing that the transition plan will
ensure that the transaction is completed without disruptions in service or operations); Leach Decl. at 7 (declaring
that wholesale customers will receive the same services under the same rates, terms, and conditions as provided by
Verizon).
125
See, e.g., One Communications Petition at 5-6 (arguing that the New England Telephone and Telegraph
Company is now Verizon New England, meaning Verizon New England qualifies as a BOC, and thus FairPoint
should also be considered a BOC under section 3(4)); One Communications/Great Works Reply at 10 (asserting that
FairPoint is a “successor or assign” of a BOC after the transaction); id. at 10-11 (arguing that the “substantial
continuity” test is appropriate for determining whether a firm is a “successor or assign” of a BOC).
126
See, e.g., FairPoint/Verizon Opposition at 38 (explaining that in prior merger proceedings involving the transfer
of BOC-owned lines to non-BOC incumbent LECs, the Commission has declined to deem the non-BOC acquirer a
BOC as a result of the transaction); see also id. at 37 (arguing that post-merger FairPoint will resemble GTE, not a
BOC, because FairPoint’s post-merger operations will not be large and geographically concentrated); id. at 34
(arguing that BOC status is a classification Congress singled out for uniquely large and concentrated operations).
But see One Communications July 27 Ex Parte Letter at 9-10 (noting that the Commission has never addressed the
issue relating to BOC status because it has never been raised before).

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Federal Communications Commission FCC 07-226

not previously held a non-BOC purchasing BOC exchanges to be a successor or assign of a BOC,
FairPoint’s argument fails to account for the difference in scale between those previous transactions and
this proposed transaction.127 This transaction involves the transfer of the local exchange lines for an
entire three-state region, rather than a small number of exchanges within a state.128 Previously, the
Commission examined Verizon’s statewide compliance for each one of these three states by applying the
quintessential BOC provision of the 1996 Act, section 271. This transaction will involve those same
lines. FairPoint’s argument that it will not be large and geographically concentrated is unavailing here,
where it proposes to own BOC operations in three contiguous states, where the average percentage of
incumbent local exchange lines held in the three states approximates 80 percent.129 Accordingly, we find
that the proposed transaction is factually distinguishable from the transactions cited by FairPoint.

36. Since FairPoint will be a BOC in the three-state region following the transaction, it will be
responsible for complying, for example, with the provisions of sections 271, 272, 273, 274, 275, and 276
of the Act that have not sunset,130 and the applicable Computer Inquiry requirements.131 Having already

127
Past transactions where the Commission (or Bureau on delegated authority) has permitted a transfer of BOC local
exchanges, without finding that the transferee would thereby become a BOC, have involved a significantly smaller
number of exchanges and customers than the instant transaction, and in no event has resulted in the sale of all of a
BOC’s assets in a given state. Compare Comments Invited on Qwest Section 214 Application to Discontinue
Operation of Facilities within 38 Arizona Exchanges, Public Notice, 16 FCC Rcd 6972 (NSD 2001) (application by
Qwest for authorization to discontinue service to 38 exchanges in Arizona in connection with an acquisition of
assets by Citizens Utilities Rural Company, Inc.); Citizens Telecommunications Company of Iowa and Qwest
Corporation Joint Petition for Waiver of the Definition of “Study Area” Contained in the Part 36 Appendix-
Glossary of the Commission’s Rules, CC Docket No. 96-45, Order, 15 FCC Rcd 19362 (APD 2000) (granting a
study area waiver in connection with the acquisition of 32 Qwest Corporation exchanges in Iowa by Citizens
Utilities Rural Company, Inc.); U S West Communications, Inc. and Eagle Telecommunications, Inc., Joint Petition
for Waiver of the Definition of “Study Area” Contained in Part 36, Appendix-Glossary of the Commission’s Rules,
and Eagle Telecommunications, Inc. Petition for Waiver of Section 61.41(c) of the Commission’s Rules,
Memorandum Opinion and Order, 10 FCC Rcd 1771 (1995) (granting study area and price cap waivers in
connection with sale of 43 exchanges in Colorado from U S West to Eagle Telecommunications, Inc.) with
FairPoint/Verizon Application Attach. B (identifying the 352 exchanges affected by the FairPoint/Verizon
transaction, including 135 Maine exchanges, 118 New Hampshire exchanges, and 99 Vermont exchanges). See
FairPoint June 18 Ex Parte Letter at App. A.
128
See FairPoint June 18 Ex Parte Letter at App. A; see also FairPoint/Verizon Application at 11.
129
See FCC, Local Telephone Competition: Status as of June 30, 2006 at Table 7 (WCB rel. Jan. 2007); FCC,
Selected June 30, 2006 Data Filed for the Incumbent Local Exchange Carrier Operations of the Region Bell
Operating Companies (visited Aug. 21, 2007), available at
http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/RBOC_Local_Telephone_June_2006.
xls; see also One Communications July 27 Ex Parte Letter at 9 (arguing that several BOCs listed in section 3(4) of
the Act are smaller than the exchanges FairPoint plans to purchase, and that unlike GTE, FairPoint’s lines are
concentrated in an area of three contiguous states).
130
See 47 U.S.C. §§ 271-75.
131
Under the Computer Inquiry requirements, a BOC that provides enhanced services must unbundle its enhanced
services and offer transmission capacity to other enhanced service providers under the same tariffed rates, terms, and
conditions under which it provides services to its own enhanced service operations, and further must provide its
enhanced services only through a Computer II affiliate. See Amendment of Section 64.702 of the Commission’s
Rules and Regulations (Computer II), 77 FCC 2d 384 (1980) (Computer II Final Decision), recon., 84 FCC 2d 50
(1980) (Computer II Reconsideration Order), further recon., 88 FCC 2d 512 (1981) (Computer II Further
Reconsideration Order), aff’d sub nom. Computer and Communications Industry Ass’n v. FCC, 693 F.2d 198 (D.C.
Cir. 1982) (CCIA v. FCC), cert. denied, 461 U.S. 938 (1983) (collectively referred to as Computer II). We note that
the Computer II “unbundling” of basic services requirement is separate and distinct from the obligation in section
251(c)(3) of the Act to provide access to unbundled network elements (UNEs). See 47 U.S.C. § 251(c)(3).
Alternatively, FairPoint may provide enhanced services on an integrated basis (i.e., through the traditional telephone
(continued....)
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Federal Communications Commission FCC 07-226

approved Verizon’s section 271 applications in Maine, New Hampshire, and Vermont, we find that
FairPoint does not need to file for section 271 authority, but rather will step into the shoes of Verizon’s
authority in those states.132 Further, FairPoint will step into Verizon’s shoes for any regulatory relief that

(...continued from previous page)
operating company or through separate affiliates not considered Computer II affiliates) pursuant to the Computer III
nonstructural safeguards (i.e., open network architecture and comparably efficient interconnection processes). See
Amendment of Section 64.702 of the Commission’s Rules and Regulations, CC Docket No. 85-229, Phase I, 104
FCC 2d 958 (1986) (Computer III Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Computer III Phase I
Reconsideration Order), further recon., 3 FCC Rcd 1135 (1988) (Computer III Phase I Further Reconsideration
Order), second further recon., 4 FCC Rcd 5927 (1989) (Computer III Phase I Second Further Reconsideration
Order); Phase I Order and Phase I Recon. Order vacated sub nom. California v. FCC, 905 F.2d 1217 (9th Cir.
1990) (California I); CC Docket No. 85-229, Phase II, 2 FCC Rcd 3072 (1987) (Computer III Phase II Order),
recon., 3 FCC Rcd 1150 (1988) (Computer III Phase II Reconsideration Order), further recon., 4 FCC Rcd 5927
(1989) (Phase II Further Reconsideration Order); Phase II Order vacated, California I, 905 F.2d 1217 (9th Cir.
1990); Computer III Remand Proceeding, CC Docket No. 90-368, 5 FCC Rcd 7719 (1990) (ONA Remand Order),
recon., 7 FCC Rcd 909 (1992), pets. for review denied sub nom. California v. FCC, 4 F.3d 1505 (9th Cir. 1993)
(California II); Computer III Remand Proceedings: Bell Operating Company Safeguards and Tier 1 Local
Exchange Company Safeguards, CC Docket No. 90-623, 6 FCC Rcd 7571 (1991) (BOC Safeguards Order), BOC
Safeguards Order vacated in part and remanded sub nom. California v. FCC, 39 F.3d 919 (9th Cir. 1994)
(California III), cert. denied, 514 U.S. 1050 (1995); Computer III Further Remand Proceedings: Bell Operating
Company Provision of Enhanced Services, CC Docket No. 95-20, Notice of Proposed Rulemaking, 10 FCC Rcd
8360 (1995) (Computer III Further Remand Notice), Further Notice of Proposed Rulemaking, 13 FCC Rcd 6040
(1998) (Computer III Further Remand Further Notice); Report and Order, 14 FCC Rcd 4289 (1999) (Computer III
Further Remand Order), recon., 14 FCC Rcd 21628 (1999) (Computer III Further Remand Reconsideration Order);
see also Further Comment Requested to Update and Refresh Record on Computer III Requirements, CC Dockets
Nos. 95-20 & 98-10, Public Notice, 16 FCC Rcd 5363 (2001) (asking whether, under the open network architecture
(ONA) framework, information service providers can obtain the telecommunications inputs, including digital
subscriber line (DSL) service, they require) (collectively referred to as Computer III).
132
See Application by Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long
Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc.,
and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Vermont, CC
Docket No. 02-7, Memorandum Opinion and Order, 17 FCC Rcd 7625 (2002); Application by Verizon New England
Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a
Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to
Provide In-Region, InterLATA Services in Maine, CC Docket No. 02-61, Memorandum Opinion and Order, 17 FCC
Rcd 11659 (2002); Application by Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon
Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks
Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New
Hampshire and Delaware, WC Docket No. 02-157, Memorandum Opinion and Order, 17 FCC Rcd 18660 (2002).
FairPoint represents that it will honor all of Verizon’s existing interconnection arrangements and commercial
agreements post-transaction to the extent that the section 271(c)(2) checklist requirements duplicate provisions in
those agreements. See FairPoint/Verizon Opposition at 39. Therefore, we disagree with commenters that suggest
that FairPoint should be required to file for its own section 271 authorizations or that it will be otherwise unable to
comply with ongoing section 271 obligations. See One Communications Petition at 5 (arguing that the Commission
should eliminate the possibility that the merged firm will refuse to comply with the requirements of section 271); id.
at 14 (arguing that because FairPoint will be highly leveraged, it will not have an incentive to expend the resources
necessary to comply with section 271); id. at 18-19 (arguing that FairPoint has no experience with meeting the
wholesale requirements of section 271); id. at 25 (arguing that a BOC’s desire to enter the in-region long distance
market should be conditioned on compliance with the section 271 checklist); One Communications Reply at 17
(arguing that the Commission should impose conditions governing the price and non-price terms and conditions for
the offer of all inputs, including special access and interconnection from the section 271 checklist); id. at 24 (arguing
that as a condition of regulatory approval, FairPoint must show it will comply with the obligations of section 271);
id. at 24 (arguing that without section 271 requirements, the transaction will give FairPoint an incentive to backslide
in terms of performance).

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Federal Communications Commission FCC 07-226

the Commission has granted Verizon in the service area that pertains to the facilities and service
operations that FairPoint is acquiring.133

37. We find it unnecessary to condition our approval of this transaction subject to FairPoint not
seeking an exemption under section 251(f)(1) and (f)(2).134 FairPoint already has agreed to honor all
existing Verizon obligations under section 251, including inter-carrier agreements entered into pursuant to
section 251 for interconnection, transport and termination of local telecommunications, traffic exchange,
resale, access to unbundled network elements, and collocation.135

38. Employment. We reject arguments that the transaction is likely to result in the loss of
experienced employees.136 We note that FairPoint states that it plans to retain all current employees and
add another 700 positions when it moves out-of-state back office functions into the region and opens three
new service centers.137 Additionally, FairPoint states that it will assume pension and other post-
employment benefits obligations for current Verizon employees.138 Commenters do not contradict
FairPoint’s assertions, offering only speculative concerns,139 which we find are not supported by the
record.

133
See, e.g., Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements; 2000 Biennial
Regulatory Review Separate Affiliate Requirements of Section 64.1903 of the Commission’s Rules; Petition of AT&T
Inc. for Forbearance Under 47 U.S.C. § 160(c) with Regard to Certain Dominant Carrier Regulations for In-
Region, Interexchange Services, WC Docket Nos. 02-112, 06-120; CC Docket No. 00-175, Report and Order and
Memorandum Opinion and Order, FCC 07-159 (rel. Aug. 31, 2007) (establishing a new framework to govern the
provision of in-region, long distance services by AT&T, Qwest, and Verizon, and their independent incumbent LEC
affiliates). FairPoint does not seek, and thus we need not reach, a determination in this Order as to whether or not
FairPoint may qualify for relief from any of the obligations applicable to BOCs. We note that other procedural
avenues are available to FairPoint if it seeks regulatory relief in the future.
134
See, e.g., One Communications Petition at 8 (arguing that the merged firm could attempt to argue it should be
free of the requirements of section 251(c) under section 251(f)(1) in areas where it has not yet received a request for
interconnection, services or network elements); id. at 9 (asserting that the merged firm will own less than 2% of the
Nation’s subscriber lines and therefore it will have a basis to argue for suspension or modification of the
requirements of section 251(b) or section 251(c) under section 251(f)(2)); One Communications Sept. 13 Ex Parte
Letter at 3 (arguing that the Commission should clarify that the merged firm is ineligible for the section 251(f)
exemptions); One Communications Dec. 7 Ex Parte Letter at 15 (asserting that the Commission should condition
any approval on FairPoint refraining from seeking section 251(f) protections).
135
See, e.g., Nixon Decl. at 4; see also FairPoint/Verizon Opposition at 34 (stating that following the transaction,
FairPoint’s operating companies will be incumbent LECs).
136
See, e.g., CWA/IBEW Petition at 28 (alleging the possibility that if the transaction is approved that FairPoint will
lose experienced workers and access to experienced workers in nearby states); id. (claiming that employees “are
seriously thinking of retiring before the merger becomes official”); Letter from Kenneth R. Peres, Ph.D., Research
Economist, CWA, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-22 (filed Sept. 7, 2007) (asserting
based on a survey of current Verizon employees that more than half are seriously considering leaving the company
if the sale is approved). But see FairPoint/Verizon Oct. 11 Ex Parte Letter at 2-4 (arguing that some Verizon
workers are electing to join the Northern New England team despite knowing of the pending merger).
137
See, e.g., FairPoint/Verizon Application at 19 (stating that FairPoint will maintain jobs, work with the unions,
and honor existing collective bargaining agreements); FairPoint July 10 Ex Parte Letter, Attach. (stating that
FairPoint plans to create 145 new positions in Vermont, 280 in Maine, and 250 in New Hampshire);
FairPoint/Verizon Nov. 16, 2007 Ex Parte Letter.
138
See, e.g., Leach Decl. at 8 (asserting that FairPoint will assume pension and other post-employment benefits
obligations for all active, continuing employees of Verizon that become part of FairPoint).
139
See CWA October 26 Ex Parte Letter at 11-14 (arguing that experienced employees will leave if the transaction
is consummated, resulting in service degradation).

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Federal Communications Commission FCC 07-226

39. Miscellaneous Proposed Conditions. Several commenters in this proceeding allege that grant
of the proposed transaction is inconsistent with the public interest and request that the Commission deny
the applications. In the alternative, commenters urge us to impose conditions on any approval of the
proposed transaction in order to address other alleged public interest harms.140 We deny those requests
because they do not address merger-specific harms. For example, we reject One Communications’
request to condition merger approval on FairPoint’s compliance with the provisions of the Verizon/MCI
Order freezing special access rates and prohibiting FairPoint from requesting a rate increase for any
UNE.141 We agree with FairPoint that the dissimilar posture of the current transaction eliminates the need
for such conditions.142 As noted above, we do not believe that this transaction will disrupt the ability of
competing carriers to obtain wholesale services, nor are we concerned that FairPoint’s financial
commitments to various stakeholders will create incentives for FairPoint management to recover costs
through increases in UNE or special access prices.143 Accordingly, we find it inappropriate to apply the
voluntary conditions present in the Verizon/MCI Order to the present transaction.

40. One Communications argues that Verizon and FairPoint must be required to make
appropriate adjustments in their volume/term commitment requirements for special access agreements so
that wholesale customers can continue to qualify for discounts.144 Specifically, One Communications
argues that if a competitive LEC has received a certain percent discount under a special access volume
commitment plan from Verizon, post-consummation that entity should continue to receive the same

140
See, e.g., CWA/IBEW Petition at 32 (urging the Commission to require service quality improvements based on
performance as measured by the Commission in its ARMIS reports); CWA/IBEW Petition at 32 (asserting that the
Commission should require that operating, administrative, and support systems functions operate efficiently for two
years before cutover from Verizon to FairPoint); One Communications Petition at 27-28 (arguing that the
Commission must require FairPoint to continue to comply with the provisions of the Verizon/MCI Merger Order
freezing special access rates and prohibiting FairPoint from requesting a rate increase for any UNE); One
Communications/Great Works Reply at 17 (asserting that the special access reporting requirements established in
the Verizon/MCI Merger Order are necessary to address a possible breakdown of the wholesale system); One
Communications Petition at 28 (asserting that FairPoint’s systems must interface with wholesale customers in
exactly the same manner as Verizon’s); One Communications/Great Works Reply at 25 (arguing that there should
be a binding merger condition that the merged firm will stand in place of Verizon for all existing interconnection
agreements); Rivard Comment at 1 (arguing for Verizon to continue its FiOS rollout in Maine, New Hampshire and
Vermont); Letter from Kenneth R. Peres, Ph.D., Research Economist, CWA, to Marlene H. Dortch, Secretary, FCC,
WC Docket No. 07-22 (filed Dec. 5, 2007) (attaching the Maine Hearing Examiner’s recommended 47 conditions to
the merger); One Communications Dec. 7 Ex Parte Letter at 15 (arguing for conditions on interconnection
agreements and rates); id., Attach. (attaching a list of proposed merger conditions to the New Hampshire Public
Utility Commission).
141
See, e.g., One Communications Petition at 27-28 (asserting that the Commission must require One
Communications to continue to comply with the provisions of the Verizon/MCI Order conditions freezing special
access rates and prohibiting the merged firm from requesting a rate increase for any UNE); One Communications
Reply at 23 (arguing that the proposed transaction poses an even more serious threat, albeit from a different cause,
than was the case with Verizon/MCI).
142
See, e.g., FairPoint/Verizon Opposition at 39 (arguing that the transactions are distinguishable because the
Verizon/MCI merger involved the vertical integration of an incumbent LEC with one of its largest wholesale
competitors and this transaction would sever that relationship).
143
See, e.g., One Communications Petition at 14 (arguing that without sufficient regulatory requirements, it is
probable the quality of wholesale services offered by the incumbent LECs will deteriorate after they are transferred
to FairPoint); One Communications Reply at 24 (arguing that the UNE and special access rate freeze requirements
established in the Verizon/MCI transaction should apply to prevent FairPoint from recovering costs by raising
prices).
144
See Letter from Thomas Jones, Counsel for One Communications, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 07-22 at 5 (filed Sept. 13, 2007) (One Communications Sept. 13 Ex Parte Letter).

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Federal Communications Commission FCC 07-226

discount from FairPoint, on the condition that the competitive LEC satisfies its volume commitment that
is proportionately adjusted to reflect the reduction in the size of the relevant geographic territory to
include only Maine, New Hampshire and Vermont.145 One Communications argues, respectively, that a
competitive LEC should also continue to receive the same percentage discount from Verizon that is
appropriately adjusted to reflect the size of the relevant geographic area excluding those states.146 We
agree that the transaction should not adversely affect the Applicants’ commercial partners and customers
by requiring them to meet higher standards for discount rates during the term of existing contracts, and
note that Applicants have agreed to adjust their contracts and tariffs on a pro rata basis to account for the
changes in the Applicants’ service territories resulting from the transaction, for the duration of existing
contracts.147 We note that the Applicants’ plan to adjust their contracts and tariffs in this manner will
ensure that the Applicants’ wholesale customers are not adversely affected due to the loss of previously
negotiated discount rates. Accordingly, we do not anticipate that the transaction is likely to result in
public interest harms that would necessitate imposing a condition regarding special access discount rates.

VII. CONCLUSION

41. We find that no significant public interest harms are likely to result from the merger, and that
public interest benefits are likely to occur. We therefore conclude that Applicants have met their burden
under sections 214 and 310(d) of the Act.148

VIII. ORDERING CLAUSES

42. Accordingly, IT IS ORDERED that, pursuant to sections 4(i) and (j) and 214 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), (j), 214, the applications for the transfer
of control of certain spectrum licenses and domestic section 214 authorizations from Verizon to FairPoint
as discussed herein and set forth in Appendix B ARE GRANTED.

43. IT IS FURTHER ORDERED that, pursuant to section 4(i) and (j), 214, 309, and 310(d) of
the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), (j), 214, 309, 310(d), the applications
for the assignment of international section 214 authorizations from Verizon to FairPoint as discussed
herein and set forth in Appendix B ARE GRANTED.

44. IT IS FURTHER ORDERED that, pursuant to section 4(i) and (j), 309, and 310(d) of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), (j), 309, 310(d), the applications for the
pro forma assignment of certain spectrum licenses from Verizon New England to Telco and the transfer
of control of spectrum licenses held by Telco from Verizon to FairPoint as discussed herein and set forth
in Appendix B ARE GRANTED.

45. IT IS FURTHER ORDERED that, pursuant to sections 4(i) and (j), 309, and 310(d) of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), (j), 309, 310(d), the Petitions to Deny the
transfer of control and licenses and authorizations from Verizon to FairPoint filed by the Communications
Workers of America and the International Brotherhood of Electrical Workers, and One Communications
Corp. ARE DENIED for the reasons stated herein.

145
See id.
146
See id.
147
See FairPoint Oct. 29 Ex Parte Letter at 1-2.
148
47 U.S.C. §§ 214(a), 310(d). The actions taken in this Order are without prejudice to ongoing state proceedings.

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Federal Communications Commission FCC 07-226

46. IT IS FURTHER ORDERED that, pursuant to section 1.103 of the Commission’s rules, 47
C.F.R. § 1.103, this Memorandum Opinion and Order IS EFFECTIVE upon release. Petitions for
reconsideration under section 1.106 of the Commission’s rules, 47 C.F.R. § 1.106, may be filed within 30
days of the date of public notice of this Order.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch
Secretary

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Federal Communications Commission FCC 07-226

APPENDIX A
Commenters

Comments Abbreviation
David Rivard Rivard

Petitions to Deny

Petitions to Deny Abbreviation
Communications Workers of America CWA
International Brotherhood of Electrical Workers IBEW
One Communications Corp. One Communications

Oppositions to Petitions to Deny

Oppositions Abbreviation
Verizon New England Inc., NYNEX Long Distance FairPoint/Verizon
Company, Bell Atlantic Communications, Inc., Verizon
Select Services Inc., Verizon Communications Inc., and
Verizon New England Spinco Inc., and FairPoint
Communications, Inc.

Reply Commenters

Reply Comments Abbreviation
Communications Workers of America CWA
International Brotherhood of Electrical Workers IBEW
Free Press and Consumer Federation of America Free Press/CFA
Independent Telephone & Telecommunications Alliance ITTA
One Communications Corp. and Great Works Internet One Communications/Great Works
Organization for the Promotion and Advancement of OPASTCO
Small Telecommunications Companies

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Federal Communications Commission FCC 07-226

APPENDIX B

List of Licenses and Authorizations
Subject to Transfer of Control

Domestic Section 214 Authorizations

File No. Authorization Holder
See WC Docket No. 07-22 Verizon New England Inc.
NYNEX Long Distance Company
Bell Atlantic Communications, Inc.
Verizon Select Services, Inc.
Verizon, Inc.
Northern New England Spinco Inc.

International Section 214 Authorizations

File No. Authorization Holder Authorization Number
ITC-ASG-20070206-00059 Verizon Select Services Inc. ITC-214-20020705-00324
ITC-214-20020402-00167
ITC-214-20020213-00084
ITC-214-20020705-00325
ITC-214-20020402-00169
ITC-214-20020213-00083
ITC-ASG-20070206-00060 Bell Atlantic Communications, Inc. ITC-214-20020213-00082
ITC-214-20020402-00170
ITC-214-20020705-00327
ITC-ASG-20070206-00061 NYNEX Long Distance Company ITC-214-20020705-00326
d/b/a Verizon Enterprise Solutions ITC-214-20020402-00168
ITC-214-20020213-00081
ITC-ASG-20070206-00062 Verizon New England Inc. ITC-214-20030516-00243

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Federal Communications Commission FCC 07-226

Section 310(d) Authorizations

A. Part 101 Common Carrier Fixed Point-to-Point Microwave and Industrial/Business
Pool Licenses

File No. Licensee Lead Call Sign
00029210651 Verizon New England Inc. KCK72
0002921107 Verizon New England Inc. KA8049
50005CFTC072 Northern New England Telephone KCK72
Operations Inc.

1
This application was designated the lead application for the section 310(d) applications. For information about the
partial assignment of licenses, see ULS File No. 0002921065, at Attachment 3 (amended Mar. 2, 2007).
2
This application is attached to File No. 0002921065.

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Federal Communications Commission FCC 07-226

STATEMENT OF
COMMISSIONER MICHAEL J. COPPS, DISSENTING

Re: Applications Filed for the Transfer of Certain Spectrum Licenses and Section 214 Authorizations
in the States of Maine, New Hampshire, and Vermont from Verizon Communications Inc. and its
Subsidiaries to FairPoint Communications, Inc., Memorandum Opinion and Order, WC Docket
No. 07-22

The residents of Maine, New Hampshire and Vermont deserve high quality, affordable broadband
and telecommunications service. Bringing these services to the four corners of the country is the
infrastructure challenge of our time. If the people and businesses of northern New England are going to
be connected, competitive, and have access to cutting edge technologies, the largest telecommunications
provider in these states has to be committed and able to provide first-rate broadband services throughout
the region, particularly to areas as rural as these. So the Commission is asked to consider whether it
serves the public interest for FairPoint to acquire Verizon’s assets and responsibilities to serve these
states.

The record has a number of competing and conflicting assertions. Petitioners promise that they
will invest in bringing broadband to these areas, increase jobs and increase quality of service. In contrast,
there is sizable information in the record to show that FairPoint may be limited by the terms of their
agreement in its ability to deliver on its promises. If the seller is not committed to ubiquitous broadband
deployment, then letting someone else with more commitment do the job makes sense. But if the buyer is
shackled by the costs of the agreement, it becomes more difficult to see how the public interest is served.
As a result of this particular transaction, FairPoint may be unable to meet its broadband promises, have
less reliable service, employ fewer people over time and meet its other commitments due to its heavy debt
load and historically high dividends. Were I confident that FairPoint could deliver on these promises,
then the public interest argument they put forward would be more persuasive. However, today’s Order
relies almost entirely on the assertions of the applicants and makes no endeavor to get under the hood to
confirm that these promises are realistic.

The Order repeatedly deems the concerns raised by the transaction’s opponents as “speculative.”
There are at least two definitions of the word “speculation.” One is “[a] conclusion, an opinion, or a
theory reached by conjecture.”1 I believe that the concerns raised in the record have merit, are certainly
more than conjecture and at a minimum deserving of an in-depth analysis. Those in northern New
England who have made such an endeavor have concluded that the transaction is problematic. In recent
days, the Vermont Public Service Board rejected the proposed transaction and the Maine Public Utilities
Commission approved it only after substantial changes to its terms. Both concluded that the transaction
as originally proposed and as proffered to the FCC would not well serve the citizens of their respective
states. The New Hampshire Public Utilities Commission staff and the New Hampshire Consumer
Advocate also have serious concerns with the proposed transaction.

In weighing the public interest benefits of this transaction, I believe it is incumbent on the
Commission to determine whether the applicants’ proposals are in fact speculative or real. As Larry
Cohen, President of the Communications Workers of America, advised, those reviewing the transaction in
the states did not “accept[] FairPoint’s and Verizon’s stated promises. Instead, they subjected the
Applicants’ projections, assumptions and statements to rigorous analysis. Consequently, the regulatory
agencies in these states have a comprehensive record from which to reach a decision. We expect nothing

1
The American Heritage College Dictionary, 3rd ed., Houghlin Mifflin Co. (2000).

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Federal Communications Commission FCC 07-226

less from the Federal Communications Commission.”2 Disappointingly, the Commission did not heed
this advice and gave little credence to the concerns raised in the record.

The Commission was asked by a number of parties, including Members of Congress from these
states, to wait for the state commissions to complete their work before acting. We should be doing that in
order to benefit from their more granular analysis and their on-the-scene knowledge and experience.
Nevertheless, I hope and expect that the states will continue independently in their consideration of this
matter despite the FCC’s action today.

I conclude with a second definition for “speculation”: “[e]ngagement in risky business
transactions on the chance of quick or considerable profit.”3 I worry that this transaction falls within this
definition and that the Commission has not undertaken the analysis to know for sure. For these reasons, I
dissent.

2
Letter from Larry Cohen, President of the Communications Workers of America, to Chairman Kevin Martin, FCC,
WC Docket No. 07-22 at 1 (Nov. 27, 2007).
3
The American Heritage College Dictionary, 3rd ed., Houghlin Mifflin Co. (2000).

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Federal Communications Commission FCC 07-226

STATEMENT OF
COMMISSIONER JONATHAN S. ADELSTEIN, DISSENTING

Re: Applications Filed for the Transfer of Certain Spectrum Licenses and Section 214 Authorizations
in the States of Maine, New Hampshire, and Vermont from Verizon Communications Inc. and its
Subsidiaries to FairPoint Communications, Inc., Memorandum Opinion and Order, WC Docket
No. 07-22

The fundamental standard of review of a transfer of control by the Commission is whether the
proposed transfer will serve the public interest, convenience, and necessity, pursuant to sections 214(a)
and 310(d) of the Act. The Commission has not grappled meaningfully with the question of whether this
transaction truly satisfies that public interest standard. Accordingly, I must dissent from this Order.

This transaction presents a different set of issues than those raised in many of the recent large-
provider transactions, in which the Commission has looked at increasing consolidation and loss of
competition. Yet, the issues are just as pressing for the citizens affected, if not more so. In this case, we
are asked to address whether the divestiture of the entire operations of three contiguous states will serve
the public interest. In the balance are the lifeline connections and broadband opportunities of the
approximately 3 million people who live in Maine, Vermont, and New Hampshire. Given the significant
and growing role of telecommunications services in the health of our communities, this decision will have
a momentous impact for the citizens, businesses, and governments of these three states. As this
Commission has recognized, telecommunications, particularly as we migrate to a broadband world, is a
critical engine for economic development, essential for public safety and disaster response, and vital to
the opportunities available for these communities.

According to precedent, the Commission considers in its public interest inquiry whether the
applicant for a license has the requisite “citizenship, character, financial, technical, and other
qualifications.” The applicants have asserted that this transaction would produce numerous public interest
benefits, including enhanced service quality, increased capital expenditures, accelerated broadband
deployment, and the creation of new jobs in the region. At the same time, we have heard serious concerns
about whether this transaction, as proposed, would serve the public interest. The Communications
Workers of America (CWA) has argued that “[t]he proposed transaction is so fraught with financial,
operational, service quality and broadband risks that the Commission must protect the public interest by
either denying the transaction or attaching significant conditions.”1 Similar questions have been raised in
our record by the International Brotherhood of Electrical Workers (IBEW), as well as citizens’
organizations, including the American Association of Retired Persons (AARP), the Consumer Federation
of America (CFA), and Free Press. At the state level, red flags have been raised by the Maine Public
Utilities Commission Hearing Examiner, the Maine Public Advocate, the Vermont Department of Public
Service, the staff of the New Hampshire Public Utilities Commission, and the New Hampshire Consumer
Advocate. The Vermont Public Service Board did more than raise red flags -- it put up a red light in
denying the transaction as proposed. These commenters raise serious issues that would have benefited
from more attention than the casual dismissal we offer today.

1
Letter from Larry Cohen, CWA, President, to the Honorable Kevin Martin, Chairman, Federal Communications
Commission (Nov. 28, 2007).

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Federal Communications Commission FCC 07-226

I am particularly concerned about these issues because Vermont, Maine, and New Hampshire
have an exceptionally high percentage of rural residents.2 Consumers in these rural areas, despite the
efforts of state and local governments, face some of the lowest levels of broadband penetration in the
country.3 A rural-focused company may provide real benefits for the consumers in this region, but more
careful attention to the benefits proffered seems warranted here, particularly given the size and scale of
the transaction. Like a python swallowing an elephant, the acquiring company here will be taking the
reins of an entity that is approximately six times larger than its current size.

Yet, inexplicably, there are no special measures in this Order to address the concerns about
broadband deployment, wholesale service, or service quality for customers in these three states. The
Order itself does not wrestle in any serious way with the ultimate question for consumers, as posed by the
consumer commenters, of what level of service these new customers will be receiving and at what price.4
Instead, this Order takes at face value assertion after assertion without engaging in meaningful analysis. I
might have been persuaded that, with the proper analysis and conditions, this merger could serve the
public interest. Sadly, neither is offered in this Order.

We hear so much about promoting broadband deployment, but here the Commission has a
specific opportunity to promote the public interest and fails to take any concrete steps to ensure that the
consumers of Maine, Vermont, and New Hampshire will not be deprived. There are no binding
commitments, no reports to monitor progress, and no commitment to oversight. Instead, we leave these
issues to the state commissions. Fortunately, our colleagues in the state commissions are well positioned
to grapple with these questions, but it is clear that this Commission did not intend to meaningfully address
these issues.

For these reasons, I respectfully dissent.

2
U.S. Census Bureau, Census Summary File 3, Table P5 (viewed at http://factfinder.census.gov).
3
Comments of Consumer Federation of America and Free Press at 2.
4
Id.

34

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