MONTPELIER, Vt. (AP) – The Douglas administration is urging state regulators to impose tough conditions on FairPoint Communications before allowing it to buy Verizon’s phone network in the state.

And the Department of Public Service told the Public Service Board it should not let Verizon bid farewell to Vermont until it resolves allegations that the company violated state consumer privacy laws by sharing customer data with the National Security Agency under the Bush administration’s warrantless electronic spying program.

The upshot was the second stiff bump in the road in less than a week for the proposal by North Carolina-based FairPoint to acquire Verizon’s traditional, landline phone business in Maine, New Hampshire and Vermont. Verizon Wireless cell phone service would remain in business in the region.

Last week, the state of Maine’s consumer advocate called for the companies to reduce the $2.7 billion purchase price to make it more likely FairPoint could afford to deliver on promised improvements to phone networks and Internet service in the region.

David O’Brien, commissioner of the Vermont Department of Public Service, said he was not interested in following Maine’s example by “getting into the middle of the transaction.” Rather, he said, his department wants to set tough service-quality standards and broadband Internet deployment standards for FairPoint.

The department’s filing at the Public Service Board brimmed with skepticism that FairPoint could meet the standards.

“If FairPoint succeeds in converting its stated good intentions into the tangible reality of sound service quality and achieved broadband milestones, then this would indeed serve the public good of Vermont,” the department’s filing said. “The inescapable fact remains, though, that there are serious questions about whether FairPoint can deliver.”

FairPoint spokeswoman Rose Cummings said Thursday the company did not want to comment on the details of the department’s filing. She said it would join the other parties in filing reply briefs by the deadline set by the board, Nov. 7.

“We remain steadfast in our belief that this (deal) is good for consumers and businesses in northern New England,” Cummings said. “We just have to work through this process. … Deadlines are being met and this transaction review is moving along appropriately, and we believe that’s a good sign.”

Beth Fastiggi, spokeswoman at Verizon’s Vermont headquarters, also declined comment Thursday, saying the company would save whatever it might want to say for the reply brief due Nov. 2.

Some of the misgivings about FairPoint – voiced both by regulators and the unions representing Verizon workers – is that the company is aiming to swallow a much bigger fish than itself. FairPoint currently operates 300,000 phone lines in mostly rural areas scattered in 18 states. Verizon serves 1.6 million lines in the three northern New England states.

O’Brien said despite those misgivings, he would like to see the deal go through if the conditions are met. One condition the state wants to see is to have FairPoint set up a separate subsidiary just for Vermont, rather than for the three states. The commissioner said that would make it easier to track the revenues from Vermont and to what use they’re being put.

The companies also would not comment on the department’s request that the board reject Verizon’s request that its certificate of public good – effectively a license to operate in the state – be terminated when the sale is completed.

The department said the board should “take appropriate steps to retain jurisdiction over Verizon so the board may continue these other investigations,” into the allegations of improper sharing of customer data with the NSA.

AP-ES-10-18-07 1808EDT