Frontier/Verizon Deal Keeps Moving ForwardOhio latest state to ignore warnings, unanimously approve deal...
04:34PM Thursday Feb 11 2010 by Karl Bodetags: business · Op/Ed · telco · Frontier CommunicationsTipped by XPAMD 
Despite
heavy opposition from consumer advocates and unions, Verizon's plan to offload another significant chunk of their DSL and landline networks continues to move forward. The $8.5 billion deal immediately infuses Frontier, which has 2.3 million customers, with 4.8 million new residential and small-business phone lines and 1 million broadband connections. 11,000 Verizon employees will be transferred. Unions, consumer advocates and many consumers fear the deal, which also infuses Frontier with $3 billion in debt, will end the same way a similar deal did for Fairpoint Communications (namely, bankruptcy and a lot of crying).
Frontier execs and lobbyists have been very busy going state to state trying to convince regulators they shouldn't worry, and that they're nothing like Fairpoint. In a number of states the carrier has been running
PR campaigns to also sell locals on the deal. The marketing campaign and lobbying appears to be working. Ohio regulators are the latest to unanimously approve the deal. Frontier quickly issued a
press release claiming the approval means Ohio residents will see better broadband services:
"Upon completion of the transaction, Ohio will be Frontier's fifth largest state and we will be ready to deliver great products and services to our new customers. Extending broadband reach and penetration is critical to revitalizing communities, improving business productivity and giving consumers faster access to the resources of the Internet. Frontier has committed to do that for its new customers in Ohio."
The Office of the Ohio Consumers' Counsel also issued a
press release claiming the deal is good for consumers, despite the fact that staffers at the office just a few months earlier claimed the deal wasn't a particularly good idea (we saw the same kind of discord
in Oregon). Ohio regulators did impose conditions, but they aren't tough: Frontier must cap prices until they reach 85% broadband deployment in the state, which must happen by the end of 2013. That won't be a tough metric for a state that the industry's own
Connect Ohio broadband mapping organization claims is already largely served (that may or may not be true, but the data can be used by Frontier to claim to regulators that their goals are met).
Back in reality, while Frontier may be better positioned than Fairpoint to absorb the massive debt hit, there's still no reason customers should expect significant upgrades. Other than the limited number of already built Verizon FTTH markets in the Pacific Northwest included in the deal, these users certainly won't be seeing fiber. Users in Frontier's existing markets don't really see next generation services of any kind as it is; 12 Mbps is the fastest speed Frontier offers, and most users
tell us they see far less. There's little evidence to suggest these new acquisition markets will be any different. In fact, Frontier is growing so quickly with this deal, it will probably take them some time simply to absorb the billing and support load.
While it's absolutely not clear that the deal benefits consumers in any way, at least Frontier
wants to serve these communities.
Verizon is offloading many of these more rural markets as part of a significant new plan to offload aging copper-based networks and
complaining union workers while jettisoning debt and gaining some nice tax credits. These deals also provides Verizon with a way to dodge regulators who've increasingly been complaining that Verizon's intentionally letting these networks (and their support of them)
go to hell. As an added bonus (but don't tell Frontier or Fairpoint executives this), Verizon will likely come back into these markets at a later date and pitch consumers
wireless LTE services that may be faster than aging DSL.
Frontier only needs approval from five additional states and the FCC.