Competitors Worry Frontier Can’t Handle Verizon Operations
Verizon and Frontier wholesale customers strongly resisted Frontier’s proposed acquisition of Verizon wireline operations in 14 states (CD Sept 22 p10). In comments this week at the FCC, they said Frontier may be unfit to manage the new assets, like FairPoint before it. Others said the deal would work only with conditions.
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Previous Verizon spinoffs in Hawaii and New England “have had disastrous consequences for consumer welfare,” and the Frontier deal could do the same, said TW Telecom and two other competitive local exchange carriers. “In both cases, it quickly became clear that the acquiring firm had insufficient resources and experience to manage the transferred LEC assets,” they said. Frontier doesn’t have much experience serving wholesale customers, and the acquisition will triple Frontier’s size and add $3 billion in debt, “leaving in serious doubt” the company’s ability to live up to promises to provide wholesale services and deploy broadband, they said.
One current wholesale customer of Frontier, nTelos, said its experience “has been a largely negative one.” Frontier’s wholesale support systems “are unsophisticated and not designed for mass quantity,” the CLEC said. “They are manual, error prone, and slow.” And Frontier wholesale rates are much higher than Verizon’s, it said.
EarthLink said the transaction is only acceptable with conditions about the company’s wholesale practices. The FCC should require Frontier to implement Verizon’s wholesale Operation Support System and associated Application Interface, and continue to offer wholesale broadband “on the same -- or better -- prices, terms and conditions that Verizon currently makes available.”
“The financial and operational risks involved in the transaction overwhelm any supposed benefits,” said the Communications Workers of America and the International Brotherhood of Electrical Workers in joint comments. “Frontier will find it difficult to meet its debt obligations while simultaneously investing enough capital to maintain current plant, improve service quality, set up entirely new operational, administrative and billing systems in West Virginia, lease existing computer systems from Verizon in the other 13 states until it integrates those systems, provide video service for the first time, ensure adequate staffing, and expand broadband availability.”
“This transaction advances Verizon’s plan to shed the remaining rural areas within its footprint,” said Free Press. The practice leaves rural areas with “ill-equipped companies offering inadequate service at high prices,” undermining Congress and the Obama administration’s universal broadband goals, it said.
Frontier and Verizon won strong support from the Independent Telephone & Telecommunications Alliance. Transactions where smaller carriers acquire rural exchanges from big companies don’t raise red flags from a public interest perspective, and are unlikely to harm competition, said the alliance, of which Frontier is a member. Frontier has experience serving the rural U.S. and already offers broadband to 92 percent of its customers, the association said. The FCC shouldn’t impose conditions “that are not transaction-specific or when there is no demonstrable harm,” it said.