Keyser, West Virginia

Frontier Communications’ West Virginia roadshow continued this week as company officials continue to sell the company’s plan to take over telephone service from Verizon across much of the state.  But have they stretched the truth to sell state officials on the deal?

Paul Espinosa, general manager of Frontier, told a West Virginia newspaper the company “prides ourselves in taking good care of our customers,” claiming 95 percent of their current residential customers have broadband Internet.

“In some areas it’s DSL. In other markets we do offer fiber,” he told the Mineral Daily News-Tribune in Keyser.

Keyser, a community of just over 5,000, considers broadband high on its list of concerns.  They want it, but they also want to know it is the kind of broadband that will keep Mineral County competitive, particularly for small businesses that depend on it to reach customers.  The county created a Communications Infrastructure Council (CIC) to review broadband communications options considered vital to the community’s economic development.

Rick Welch, who serves on the CIC,  said the economic future of Mineral County depends upon high speed or fiber-optic Internet and not DSL, or Internet service which utilizes existing telephone lines.

Verizon West Virginia has bypassed the state for FiOS development, which provides a fiber-optic connection to the home, claiming the infrastructure costs are too high at today’s prices to satisfy Return On Investment requirements.  Frontier has never had an ambitious broadband agenda centered on fiber optics.

Frontier traditionally offers 1-3Mbps DSL service in most of the smaller communities they serve.  Frontier’s claim that they are currently providing customers in “other markets” with fiber broadband brings these questions:

• Exactly where?
• Under what terms?
• Is this true fiber-to-the-home service, or simply fiber connected central offices?
• Are advanced levels of service are provided to these fiber customers, or are the plans, terms, and speeds identical to traditional DSL plans?

If the deal goes through, Frontier would assume ownership of pre-existing Verizon FiOS deployments, but those were proposed and planned by Verizon, not Frontier.

“DSL will not bring anything to Mineral County as far as economic development is concerned,” he said, noting that high technology businesses require far faster speeds than DSL traditionally provides.

A Verizon representative tasked with trying to sell the deal that gets the company out of the West Virginia’s phone business said that something is better than nothing.

“To hear you say that DSL is not the future is troubling,” Verizon’s John Golden said. “If you are without broadband, DSL would be the future.”

The Mineral County Commission was unimpressed with Golden’s statement.  Commission president Wayne Spiggle told the News-Tribune a lot of businesses and those who work from home would not consider coming to Mineral County when they discovered only low speed DSL service available, commonplace more than a decade ago in other areas. Spiggle said real broadband service was essential to attract the kind of businesses Mineral County needs to succeed.

“Our mission and responsibility to Mineral County is to create an entrepreneurial garden, and high-speed broadband is essential to that,” he said.

The Communications Workers of America are also been fighting to warn state and local officials about the gamble West Virginia will take with Frontier Communications.  Considering the last three deals resulted in bankruptcy for all three, it’s a risk the CWA doesn’t think is worth taking.

“Frontier will wind up taking on at least $3.4 billion in debt from Verizon,” said John Johnston, speaking on behalf of the CWA. “Frontier has said they’ll expand broadband, but will they? With $3.4 billion in debt, that’s a lot of money,” he said.

Chuck Fouts, who serves as local CWA president said bankruptcy brings job losses.  “If you go bankrupt, the first thing that goes is people,” he said.

The union says the state should join their efforts to force Verizon to “do what they said they were going to do” and provide a plan to upgrade the state’s telecommunications system to fiber optics.

As it stands, Verizon sees higher returns from cherry-picking more urban areas for its FiOS service, and isn’t willing to provide the kind of universal service throughout its service areas that phone companies have traditionally provided for decades.

“How can Frontier provide the fiber they claim to offer in “other markets” when Verizon’s deeper pockets have thus far been turned out empty for residents in West Virginia?” asks Stop the Cap! reader Hyatt.

Investment firm D.A. Davidson downgraded Frontier’s stock last week, reporting they felt the deal would be bad for Frontier shareholders.

Moving the stock rating back to “underperform,” the firm was skeptical Frontier would be able to pull off the cost-savings it promised as part of the deal.  They also anticipated Frontier will have to finance as much as $3.3 billion of the debt (at 8-9%) it will take on as part of the transaction.  Perhaps more revealing is their prediction that Verizon shareholders who receive distributed shares of Frontier stock will likely dump them as fast as possible, remembering earlier Verizon deals that quickly led to falling stock prices and eventual bankruptcy.  D.A. Davidson warned potential Frontier investors to “at least move to the sidelines” during the anticipated grand sell-off, moving back into the stock only when it bottoms-out.