States Scrutinize Frontier as Company Reviews Capital Structure

“The repeated failures of Frontier management have resulted in a deteriorating business, massive amounts of debt they can’t pay back and negotiations to a bankruptcy,” Communications Workers of America President Chris Shelton said on a Thursday teleconference. The union wants to help, but Frontier management refuses to meet, he said.

“Frontier is evaluating its capital structure with an eye to reducing debt and interest expense so as to be able to better serve our customers,” a spokesperson emailed. “Frontier remains subject to federal and state regulatory oversight and our customers should expect no changes as we remain focused on providing quality communications services.”

The West Virginia PSC heard the bankruptcy rumors and is “taking steps to make sure that if that happens, we will deal with it and make sure that service continues,” said Lane. “We do not want to lose landline service to West Virginians who have no other option.”

Connecticut’s Public Utilities Regulatory Authority knows Frontier “has been considering various options to manage its $17B debt load, including Chapter 11 reorganization,” emailed PURA Chairman Marissa Gillett. If Frontier reorganizes, PURA would seek to ensure the company “continues to reliably provide competitive and non-competitive services in Connecticut,” she said. The authority “could exercise its jurisdiction to review and approve any sale of SNET or its assets,” she said, using initials for Frontier's previous name, Southern New England Telephone. Connecticut’s attorney general “would represent the Authority in any reorganization proceeding, and the Authority has had discussions with the AG’s office in preparation for a potential Chapter 11 filing.”

Three Minnesota agencies “are in contact with Frontier officials,” emailed a Minnesota Public Utilities Commission spokesperson. The PUC plans to watch the news and coordinate with the state's attorney general and Commerce Department “to ensure necessary communications are exchanged and in order to minimize the impact on Minnesota customers should the company file for restructuring.” Possible bankruptcy shouldn’t affect settlement terms reached last year after a major state investigation (see 1910170052) because the consumer remedies weren’t financial penalties, said a Minnesota Commerce spokesperson.

Utah's Commerce Department is “actively monitoring the situation to determine how Frontier’s impending bankruptcy filing will impact Utah customers and regulatory processes,” emailed a department spokesperson: Public Utilities and Consumer Services units “have been investigating Frontier for several months to determine the extent of customer concerns and to assess the actual performance and service quality of Frontier in its Utah territories.”

South Carolina regulatory staff will “monitor developments” and “continue to review and apply the provisions of state statute 58-9-280,” which established the Public Service Commission (PSC), emailed an Office of Regulatory Staff spokesperson. “It is possible for a company to enter into bankruptcy for financial restructuring purposes and maintain service throughout that process without interruption.”

State Probes

The West Virginia PSC is auditing Frontier (see 1911220039). Staff is reviewing a draft report received Tuesday, will make recommendations and deliver a final audit to commissioners March 19, and Frontier will have 30 days to respond, a PSC spokesperson said. The draft report “will give us some idea as to extent of problems that Frontier is having,” said Chairman Lane, noting it covers the state of Frontier’s copper network and the adequacy of its staffing, capital investment and service-quality policies. Lane said she’s especially concerned about outages disrupting 911. The PSC gets complaints about internet but lacks jurisdiction, she said.

West Virginia regulators opened the audit after getting about 2,000 customer complaints in each of the past two years, Lane said. That’s “a lot” for the state agency, she said. Frontier responds when the PSC contacts the company about complaints, she said, but “customers shouldn’t have to be resorting to making informal or formal complaints to the commission.”

Connecticut’s PURA opened a docket in 2018 to monitor Frontier finances and their impact on operations, she said. PURA hasn’t “identified any direct negative impacts on SNET’s services in Connecticut, including 911, interconnections, and wholesale services,” but “the Authority remains concerned that capital limitations adversely affect SNET’s ability [to] invest improving and adding competitive services for Connecticut consumers, specifically video and broadband services.”

“Frontier’s operational practices related to reporting and restoration of local service outages within a reasonable period of time need improvement,” South Carolina staff said in a Jan. 30 audit report at the PSC. “Outages lasting 23 days are unacceptable.” Accounting practices for USF capital and operating expenses “need improvement,” staff said. However, corrective action to improve service restoration procedures for outages of less than 100 customers is appropriate, and Frontier showed it spends more in the state than it receives in USF voice support, staff said.

Minnesota Commerce opened a second Frontier investigation in December on the carrier allegedly “billing customers for services that they did not want or need” and on “whether Frontier required consumers to subscribe to both phone and internet service, even when phone service was not desired,” the department spokesperson said. He wouldn’t say when the department will report.

Union

“State regulators are key to getting Frontier to agree to meet their legal requirements,” said Center for Economic Organizing analyst Randy Barber, advising CWA, on Thursday’s call with the CWA president. Under one equalization scenario presented by the analyst, reorganization could provide billions of dollars for capital investments from 2020-2023 that “would help Frontier gain significant additional flexibility and ... move itself towards a sustainable future.” Frontier must invest in remediating neglected operations, deploying more fiber, meeting Connect America Fund benchmarks and expanding into new markets and technologies, he said. The carrier missed 2019 CAF milestones in several states (see 2001160041).

CWA wants to help Frontier negotiate a new debt agreement to better position Frontier to invest and improve service, advocate for federal broadband programs and respond to state regulators probing the carrier, Shelton said. The CWA president said he contacted CEO Bernard Han, who took the job in December, “but he is fastidiously staying away from a meeting with the union.”

“We’re eager to work with new management to build this company up, but we will not stand by for more years of neglect and mismanagement, and I don’t think the company’s customers will, either,” said Shelton. CWA has two big union contracts with Frontier expiring this year: New York in June and California in September, he said. “Our members are willing to fight for their jobs.”

Frontier problems intensified after acquiring Verizon network assets in Florida, Texas and California in 2016, claimed two other union officials on the call. “The new course of reduced investment to service debt has been clear and has taken a toll on our competitiveness,” while “management initiatives to improve efficiency have backfired,” said Dave Weidlich, president of CWA Local 1298 in Connecticut. Bonnie Boord, a former customer service repair technician in Los Angeles, said she “almost immediately began to see changes in our operations that frustrated our technicians and customers alike.” Frontier declined to comment on the CWA call.