FairPoint suit seeks $6.2m from CLEC

FairPoint Communications is taking on the nation’s biggest competitive local exchange carrier — or CLEC — in federal court, saying it is owed $6.2 million.On Monday, FairPoint’s two subsidiaries (Vermont LLC and Northern New England Telephone Operations LLC ) filed suit against Level 3 Communications LLC, a Colorado-based CLEC that last quarter reported some $932 million in revenue.The suit – filed in U.S. District Court in Concord — is the culmination of a long-simmering dispute that heated up last November, when Level 3 refused to pay invoices and boiled over in May, when FairPoint threatened to cut off new services to Level 3.FairPoint said it received a $600,000 payment from Level 3, but that is a fraction of what it is owed. Level 3 allegedly owes FairPoint $4.3 million for accessing FairPoint’s lines in New Hampshire alone, with the rest of the alleged debt incurred in Maine and Vermont.However, “Level 3 has refused to accept FairPoint’s analysis and, during the November 2010 time frame, decided to engage in ‘self-help’ by refusing to pay for most if not all of the invoices it received from FairPoint, rather than adhering to the dispute resolution terms set forth in the tariffs,” says the suit.In May, FairPoint sent a written notice that threatened to initiate an embargo in which “FairPoint no longer would process orders submitted by Level 3 for new services or modified services.”Thereafter, the companies engaged in negotiations over a five week period, but said the suit “Level 3 did not negotiate in good faith” and made a final written demand on October 18, before filing suit on October 24.Level 3 would not comment on the case.As a result of telecommunications reform of the 1990s, like FairPoint must agree to grant access to their lines at a wholesale price to CLECs, which in turn can compete with the company at the retail level. Verizon, FairPoint’s predecessors struck such a deal with Level 3 back in 2002.But CLECs often have complained providers don’t provide equal access to the lines, and disputes with CLECs have been common, though usually resolved at the state Public Utilities Commission or the Federal Communications Commission.Level 3, however, is a voice and Internet giant that sells primarily to larger customers throughout the United States. Just last week, Level 3 completed acquisition of Global Crossing in an all-stock transaction valued at $3 billion, and switched from trading on the Nasdaq exchange to the New York Stock Exchange.Before that, in its last quarterly report ending June 30, it claimed assets of $8.9 billon, with about $584 million in cash.The company has posted a net loss so far this year of $386 million, which is only slightly better than 2010, when it ended up losing a total of $622 million. From 2008 to 2010, Level 3 lost approximately $1.5 billion.FairPoint, which controls the landlines in a number of rural areas (Northern New England being its largest holding) is a smaller company with about $3 billion in assets.It also has its own financial troubles, having emerged from Chapter 11 bankruptcy in January with about $1 billion in debt, and facing a world where companies are leaving landlines behind for cell phones and internet. But it did earn $560 million last quarter. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW