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City calls for FCC review of PAETEC sale

The city of Rochester is opposing the sale of PAETEC Holding Corp. to Arkansas-based Windstream Corp.

Mayor Thomas S. Richards announced today that he has instructed Corporation Counsel Robert J. Bergin to submit a formal comment to the Federal Communications Commission indicating the city’s opposition to the transfer until there has been a thorough review of the impact it could have on the city and region.

The companies announced Aug. 1 that an agreement had been reached for Windstream to acquire the Perinton-based business communications firm. PAETEC had plans to build a new world headquarters at the former Midtown site.

Richards wants the FCC to consider the potential loss of jobs and job growth, the loss of development incentives available at the Midtown parcels and a drop in the level of telecommunication services PAETEC currently provides to municipal and state agencies, educational institutions and nonprofit organizations throughout the state.

“This transaction will create a formidable national telecommunications provider which will retain a significant presence in Rochester,” said Scott Morris, staff manager of Windstream’s corporate communiciations. “It better positions both companies to face new competitive challenges and to serve customers. We are confident the transaction satisfies the FCC’s public interest standard and will be approved.”

Bergin, in his letter, dated Sept. 29, said the city and PAETEC entered an agreement Dec. 28 in which PAETEC agreed to build a three-and-a-half-story, 222,440-square-foot building in the heart of the city.

In anticipation of the PAETEC project, the state and city invested $60 million to demolish the former improvements on the Midtown site. The city also offered a development package that expedited and customized the demolition of the existing buildings to accommodate PAETEC’s construction schedule and provide a foundation for the new headquarters.

“The development package required the city to take significant actions,” Bergin wrote. “Some incentives in the development package are specific to the PAETEC project and will no longer be available if the PAETEC project is abandoned.”

He said the city will be adversely impacted by the loss and that it will affect the development of the remainder of the Midtown site.

“The unique incentives may not be available to other companies or developers and the waste of those benefits are a negative consequence,” Bergin said. “Despite all the efforts of the city to facilitate and provide the positive economic environment for the PAETEC project, Windstream has indicated that it intends to reduce PAETEC’s current 850-employee Monroe County workforce.”

He said retention of the current workforce and anticipated additional hiring were critical parts of the PAETEC commitment that prompted the development package offering and that the loss of employees would negatively impact the city, state and region significantly — and therefore, the public interest.

“It is our responsibility to make the FCC aware that Rochester and the region may be negatively affected if the transfer of PAETEC to Windstream takes place,” Richards said in a release. “We have tailored a development package and invested millions of dollars to make this site shovel-ready for development. We are asking the FCC to review and consider the steps that have been taken by the city and the state in anticipation of PAETEC’s commitment to this project and the wide-ranging effect that it will have on the community and the public interest if that commitment is not respected.”

Richards said he has been in touch with Windstream and is hopeful the city’s concerns can be resolved in the best interests of the community.

Shareholders are scheduled to vote Oct. 27 on the sale, which will also need approval from the FCC and various state pubic service commissions.