Consumer advocates, unions and state regulators are worried that Verizon's plan to sell a massive chunk of their DSL and landline networks to Frontier Communications won't go very well. The $8.5 billion deal, if approved, would infuse Frontier with 4.8 million new residential and small-business phone lines across 14 states, 1 million broadband connections, and 11,000 former Verizon employees. Frontier, who currently has just 2.3 million customers, would become a giant player literally overnight, and fears that they'll struggle with the load seem legitimate.
The fear is the deal will end just as Verizon's Fairpoint and Hawaii Telcom deals did: bankrupt carriers, outdated networks, and shoddy service. Unions are worried about layoffs and pay reductions, and have been
running a series of ads illuminating how Verizon's particular method of offloading unwanted customers doesn't usually work out well for the customers.
At the same time, Frontier has been traveling state to assure regulators that they're far more financially stable than Hawaii Telcom and Fairpoint. West Virginia state PSC consumer Advocate Division for one isn't buying it, this week
advising against the deal. Why? The PSC argues that Frontier's financial projections are based on "overly optimistic assumptions," they won't have the funds to handle network problems, and that they haven't laid out concrete plans to deal with increased complaint volume.
Frontier meanwhile has launched a new public relations offensive. The company has started running a
series of TV ads supporting the deal in key states, and has also launched
a new website in West Virginia, informing them the deal will "get them into the digital fast lane, faster." The site urges customers to
write their lawmakers, and offers a
note to customers from Frontier CEO Magie Wilderotter in which she promises to do a better job than Verizon did:
Weve already made broadband available to more than 92 percent of our current customers. By way of comparison, broadband is available to only about 60 percent of Verizon customers. We offer download speeds of one to 10 megabits per second (Mbps), depending on technical limitations and customer requirements. Verizons fastest download speed today is seven Mbps, and thats only in limited areas. Frontier wants to hit the accelerator and give you the broadband availability, speed and reach you need and deserve.
Given Verizon spent the better part of the last decade
neglecting West Virginia infrastructure almost entirely in order to focus on more affluent markets, doing a better job shouldn't be that hard. The problem is (just as it was with Fairpoint and Hawaii Telcom), that once Frontier takes on the debt required under the deal, integrates all new systems, and tackles the certain influx of confused customers -- they may be in no financial position to upgrade much of anything.
But Frontier's new website doesn't just promise to extend DSL, it promises to offer "next-generation broadband Internet services." One problem with that claim is that even before the Verizon deal, Frontier has had a hard time
delivering anything more than current generation 3 Mbps DSL to many users.
With the problems faced by Fairpoint and Hawaii Telcom after integrating Verizon's unwanted DSL networks, Verizon's even more ambitious plan to offload an even bigger chunk of rural customers to Fairpoint is getting added scrutiny. The $8.5 billion deal, if approved, would infuse Frontier (which currently has 2.3 million customers) with 4.8 million new residential and small-business phone lines across 14 states, 1 million broadband connections, and 11,000 former Verizon employees.
Unions, who obviously don't want the new company to fail or cut back on infrastructure investment or jobs, have
started pushing harder to get the deal scrapped. The Communications Workers of America is running
this ad in West Virginia that complains about Verizon's favored tactic of using Reverse Morris Trusts.
The unions employees who warned regulators that Fairpoint wasn't equipped to handle the acquisition of Verizon's New England DSL and landline networks last year are rightfully saying "we told you so." As Fairpoint teeters toward possible bankruptcy, union officials
tell Vermont locals that they can thank Verizon for all the fun everyone's having. Instead of simply selling to the highest bidder, Verizon used a Reverse Morris Trust to incur huge tax savings while dumping a huge debt load on Fairpoint. That debt load may ultimately be what crushes Fairpoint:
"Verizons use of the RMT loophole prevented other communication companies with the essential financial resources from making bids on the northern New England properties, Montefusco wrote recently in The Rutland Herald. "Verizons desire to avoid paying taxes apparently was so great that it did not auction the properties or entertain other offers from more financially qualified firms.
story continues..Oregon Live has the interesting tale of 83-year-old Dennis Streed, who only wanted to pay $77.99 a month for broadband, TV and phone service. So Streed
drew up his own contract that ensured this was as much as he'd ever have to pay. More interesting perhaps is that Verizon agreed -- though as Verizon sometimes
has a tendency to do -- a billing mixup wound up with Verizon charging him consistently twice the amount that was agreed to. While they've issued a refund, Verizon now seems like they're waffling on the agreement moving forward, and the article explores whether Streed will have any luck getting the massive operator to adhere to a non-routine customer created contract.