FairPoint Communications Inc. has been suffering lost revenue, lost customers and a tarnished image because of ongoing customer service problems the last couple of months. It also faces the prospect of hefty fines down the road.

State regulators in northern New England can hit FairPoint in the wallet with penalties totaling millions of dollars if it fails to improve customer service.

Regulators say their primary focus now is to fix the problems that have plagued FairPoint since it switched to its own computer systems about two months ago, 10 months after buying Verizon's landline telephone and Internet network in Maine, New Hampshire and Vermont.

But the problems will also be part of the record when the three states perform their annual reviews of FairPoint's performance and decide what penalties the company should pay.

"Yes, we have the means to impose penalties and what have you," said David O'Brien, commissioner of the Vermont Department of Public Service. "But what's more important is whether this company can right this ship. That's what matters most to us."

A year ago, FairPoint paid $2.3 billion for Verizon Communications Inc.'s wired telephone and high-speed Internet operations in northern New England over critics' objections that that the smaller telephone company was biting off more than it could chew.

Things were going relatively smoothly until early last month when FairPoint began transferring millions of pieces of data from Verizon's system.

Since then, customers have complained of e-mail problems, late bills and delays in getting orders filled. They've also complained of long waits for customer service or not being able to get through at all.

In each state, regulators look at a variety of customer-service standards such as how long it takes customer service representatives to answer calls, how long it takes to install new service and how long it takes to respond to reports of service problems.

To meet the Maine benchmark on customer service calls, for instance, FairPoint has to answer 69 percent of its calls within 20 seconds, said PUC spokesman Fred Bever.

On repair calls, it has to clear the problem within 24 hours 68 percent of the time for residential customers, and 91 percent of the time for businesses.

Verizon wasn't perfect on customer service, either.

The Maine PUC routinely fined the company hundreds of thousands of dollars for failing to reach benchmarks. Verizon was fined nearly $1.3 million in the 2006-2007 assessment period, $711,657 in 2005-06 and $639,127 in 2004-05. The company paid no fines in 1999-2000 after meeting the benchmarks.

In Vermont, there were years when Verizon paid $8 million or more in penalties for failing to make the grade, regulators say. New Hampshire didn't have automatic penalties attached to its benchmarks when Verizon owned the network. But the rules were changed for FairPoint.

As it stands now, it won't be a pretty sight when it comes time for regulators in the three states to review FairPoint's performance.

"Speaking from telecom, this is beyond the level of service problems I've seen before. And we are very concerned about it," said Kate Bailey, head of the New Hampshire Public Utilities Commission's telecommunications division.

It's in FairPoint's best interest, of course, to provide good service. By doing so, the company can avoid fines, which are paid to customers in the form of rebates. More important, good service help companies retain customers and win new ones.

The ongoing problems are not only costing FairPoint money, driving away customers and hurting the company's image, they have also delayed FairPoint's plans to roll out new product and pricing plans aimed at luring new customers, the company said.

While costs are always a concern, the bigger motivator is customer satisfaction, said Jeff Allen, FairPoint's executive vice president of external relations.

"At the end of the day, the most important thing is if we can take care of our customers as we know we're capable of, then we can keep those customers and keep them happy," he said.

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