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FairPoint CEO Hints the Company is For Sale; Analysts Suspect Frontier Would Be the Logical Buyer

Phillip Dampier May 13, 2015 Audio, Competition, Consumer News, FairPoint, Frontier 2 Comments

fairpoint4Frontier Communications, just hours after passing its first hurdle  — from the Federal Trade Commission — to go ahead with its proposed $10.54 billion acquisition of Verizon’s wireline assets in California, Florida and Texas, is already being discussed as the most likely buyer of FairPoint Communications, which serves former Verizon customers in the northern New England states of Vermont, New Hampshire and Maine.

Wall Street is turning up the pressure on FairPoint to sell its money-losing operation to a larger company that could use economy of scale to rescue a business that has already declared bankruptcy once and lost over $136 million last year. FairPoint also recently settled an ongoing dispute with its unionized workforce which makes the company a more likely takeover target.

FairPoint CEO Paul Sunu put out the for-sale sign during last week’s first quarter earnings conference call, admitting to investors FairPoint is considering mergers and acquisitions as a seller or buyer as part of the company’s overall strategy.

Barry Sine, a telecom analyst with Drexel Hamilton, said the company’s 18,000 mile fiber optic network across the three states it serves is the crown jewel of FairPoint and would be a valuable addition to a larger phone company’s portfolio. FairPoint continues to rapidly lose residential customers as they switch to cellular phones, cable company phone service, or broadband-powered Voice over IP services like Ooma. But FairPoint is picking up customers in the commercial sector, including wireless carriers seeking cell tower backhaul connections, hospitals, and other institutions using FairPoint’s fiber network.

Frontier, headquartered in Stamford, Conn., already has substantial assets in the northeast, including AT&T’s former service area in Connecticut. Picking up northern New England would not be much of a challenge for a company already serving 28 states with more than 17,000 employees and could soon pick up millions of new customers in the south.

Vermont Public Radio reports troubled FairPoint Communications, which serves customers in northern New England originally serviced by Verizon, is likely up for sale and could be acquired by a company like Frontier Communications by 2017. (2:54)

You must remain on this page to hear the clip, or you can download the clip and listen later.

frontier frankWith Frontier’s attention currently occupied by its latest Verizon transaction, analysts do not expect to see a deal with FairPoint struck before 2017. That could allow Frontier’s rivals — CenturyLink and Windstream to approach FairPoint first. But neither of those two companies have recently been active acquiring new landline service areas.

Many of FairPoint’s largest shareholders purchased defaulted bonds when FairPoint went bankrupt, and hope to rack up a substantial return when FairPoint is sold to a larger company.

Frontier has a better record of working well with unionized workers than FairPoint, so it was no surprise the unions representing FairPoint workers are not upset with the news the company could be sold.

A spokesman for the International Brotherhood of Electrical Workers in Vermont told Vermont Public Radio the union is aware of speculation about a future sale of the company and would welcome the opportunity to be a partner with “a more successful business” than FairPoint.

Fla. Utility Says Negotiations With Verizon Make It Clear Verizon Will Exit the Wireline Business Within 10 Years

FPL_logo_PMS2925A Florida utility company has told federal regulators it is certain Verizon has a plan to exit its landline and wired broadband businesses within the next ten years to become an all-wireless service provider.

Florida Power & Light argued in a regulatory filing with the Federal Communications Commission it was clear Verizon had plans to exit its wireline business after the phone company suddenly informed regulated utilities like FP&L it no longer seemed interested in fighting over pole attachment fees and pole ownership and use issues. FP&L suggests that is a radical change of heart for a company that has fought tooth and nail over issues like pole attachment fees for years.

“Verizon has made it clear it intends to be out of the wireline business within the next ten years, conveying this clear intent to regulated utilities in negotiations over joint use issues and explaining that Verizon no longer wants to be a pole owner,” FP&L wrote to federal regulators. “Indeed, the current proposed [$10.54 billion sale of Verizon facilities in Florida, Texas and California] proves this point.”

Verizon has fought repeatedly with the Florida power company over the fees it pays FP&L to attach copper and fiber cables to the power company’s poles. Verizon Florida has repeatedly accused FP&L of charging unjust fees and at one point withheld payments to the utility worth millions.

In February, the FCC dismissed Verizon’s complaint for lack of evidence in the first-ever decision in a pole attachment complaint case involving an incumbent telephone company under a joint use agreement with an electric utility. The power company accused Verizon of lying when it promised concrete benefits to consumers if the FCC reduced joint use pole attachment rates. Suddenly, Verizon no longer seems to be interested in the issue.

verizon“Verizon has not increased its efforts to deploy wireline broadband in the last three years; and there is no evidence that Verizon has used the capital saved on joint use rates for the expansion of wireline broadband,” FP&L officials write. “Indeed, all of the evidence shows that Verizon is abandoning its efforts to build out wireline broadband.”

The power company is not about to just wave goodbye to Verizon. It filed remarks opposing the sale, claiming the benefits will end up in the pockets of executives and shareholders while customers get little or nothing. FP&L wants the FCC to enforce concrete conditions that guarantee Frontier will invest in upgrades to Verizon’s network, especially in non-FiOS service areas.

FP&L added it supports forward technological progress for the benefit of consumers, but the price of that progress should not be the abandonment of wireline customers, contractual obligations, and past promises to the FCC. The utility wrote it is not opposed to Verizon becoming a fully wireless company, but it should only be allowed to do so after it ensures that “its wireline house is in order.”

As things stand today, the utility argues Verizon is looking to abdicate on its obligation to deliver universal service and is no longer interested in maintaining its wired networks. FP&L points to Verizon’s efforts in 2013 to discard damaged wired facilities in favor of Voice Link, Verizon’s wireless landline replacement, in states including New York, New Jersey, and Florida.

“There should be no doubt that Verizon’s strategy to abandon wireline service in favor of wireless service extends beyond New York and Florida and beyond storm damaged and rural areas,” argues FP&L.

The utility points to Verizon’s successful effort to relieve itself of obligations to build a statewide fiber network in New Jersey that was supposed to be complete by 2010.

“Verizon, quite simply, has failed to build out wireline broadband in New Jersey because Verizon has no interest in doing so,” said FP&L. “As the sale of wireline facilities in Florida, Texas, and California […] clearly demonstrates, Verizon obviously is no longer interested in the wireline broadband business and sees its financial future in the wireless industry.”

Frontier’s Website Woes – Company Drops Online Ordering… Because It Can’t Make It Work Right

frontierIf you want to order a product or service online from Frontier Communications, forget it. A source tells Stop the Cap! the company was dropping online e-commerce functions from its Frontier.com website because it could never get online ordering working properly.

Sure enough, the latest iteration of Frontier’s website today blazes with banners requesting customers call the company or use “live chat” to handle any orders for service.

“They still offer the function of self-service — allowing customers to view their bills, set up auto payments, make one time payments, etc., but they are removing the ability for customers to order any service at all,” said our source.

Yesterday's phone company can't manage a website with online ordering.

Yesterday’s phone company can’t manage a website with online ordering.

“This company can’t manage to figure out how to build a website that supports ordering of products, so they are just going to kill that function,” the source added. “Customers will be able to see what products they can get within a specific zip code, but that’s it. If they want to order, they are going to be forced into the already overloaded call center.”

Frontier’s ability to handle its acquisitions of landline customers from Verizon and AT&T have caused problems in the recent past, including customers losing service, getting improperly billed, or experiencing missed service calls. With Verizon customers in Florida, Texas, and California likely to join the Frontier family, our source tells us they will be shocked to see how backwards Frontier’s online presence is compared with Verizon.

“I’m sure our former Verizon and AT&T customers as well as our future Verizon customers will enjoy going back to the Stone Age when they couldn’t do what they needed to do online and would have to pick up the phone to call into a Contact Center,” the source said. “We might as well just have a Frontier Wikipedia page for crying out loud.”

noonlineorder

Just don’t try ordering online.

Frontier has also adopted this novel disclaimer explaining why its advertised DSL speeds often don’t come close to actual speeds in the fine print:

“Actual speeds may vary and are not guaranteed. Performance metrics based on Frontier lab validation under ideal network environment simulating “best case scenario” without network congestion, other factors cause by consumer behavior, or factors caused by third-party providers’ behaviors. Consumers may not be able to replicate the performance shown in the performance metrics.”

In plain English: “Our advertised DSL speeds are theoretically possible… in a lab… on Moonbase Alpha… as long as you don’t try to use the service… and nobody else does either.”

“Please let your readers know that there are some Frontier employees who want to do right by our customers and want to give them the best service possible, but our expertise and opinions are rarely valued,” the source said.

N.Y. Broadband Improvement Fund to Public Broadband Networks: Don’t Call Us, We’ll Never Call You

A $500 million New York State broadband improvement fund is effectively off-limits for would-be community-owned broadband networks trying to deliver broadband service in areas for-profit providers have deemed unprofitable.

New York Gov. Andrew Cuomo’s ambitious plan to revolutionize Internet access for New Yorkers depends almost exclusively on for-profit providers and the state’s largest cable operator, Time Warner Cable – the company that has so far received the largest share of state funds earmarked for better broadband.

Cuomo wants all of New York wired for 100Mbps service no later than 2018. His goal is ambitious because the overwhelming majority of upstate New York barely now receives a maximum of 50Mbps from Time Warner Cable, the only significant cable operator in the region.

The broadband map from N.Y. State shows 100Mbps service is available to most New Yorkers from Verizon FiOS, Cablevision, and a handful of municipal/co-op operators. Time Warner Cable only provides a maximum of 50Mbps service across upstate New York.

The broadband map from N.Y. State shows 100Mbps service is available only from Verizon FiOS, Cablevision, and a handful of municipal/co-op operators. Time Warner Cable only provides a maximum of 50Mbps service across upstate New York. Cablevision and FiOS compete on Long Island, Time Warner Cable Maxx competes with Verizon in New York City, and most of upstate New York is served by Verizon or Frontier DSL competing with Time Warner Cable.

Six months after the program was announced, Capital magazine reports the “New NY Broadband” plan is languishing with no defined guidelines, rules, or any clear sense about how the program will be implemented and the money spent.

Salway

Salway

In fact, one of the only clear statements coming from David Salway, a former telecommunications consultant who now administers the program, is that local governments should not bother applying because he doesn’t want them competing with Time Warner Cable, Verizon, and Frontier. It’s private enterprise only:

“The primary focus of our program is that we’re not going to be in the building business,” Salway said. He emphasized that municipal governments won’t be specifically precluded from receiving funds under the program, but said that the state is “wary” of “the government building and competing with the private sector. We see this as a provider partnership process where an incumbent provider or maybe a new entrant comes in.”

Local government leaders can read between the lines and most will not bother applying for funding if Salway’s vision guides the grant-making process. Instead, Salway wants to funnel money that effectively belongs to New York taxpayers into the pockets of for-profit providers like Verizon, Frontier, Windstream, Time Warner Cable and other providers that have consistently refused to expand their networks into rural areas on their own dime. The money earmarked for broadband is part of a $6 billion legal settlement the New York Attorney General’s office negotiated with Wall Street and commercial banks that helped plunge the country into The Great Recession.

statewide availability 1

statewide availability 2

statewide availability 3

Broadband advocates across the political spectrum are slamming the broadband program for different reasons. Christopher Mitchell from the Institute for Local Self Reliance predicts providers will deliver bait and switch broadband on the taxpayer’s dime and send the proceeds out of the area.

“When you subsidize the private sector, you don’t really know what kind of services they’re going to provide in the future,” Mitchell said. “There’s a fair number that basically rip off consumers,” and they “basically extract resources from the community they serve.”

Mitchell

Mitchell

“The only clear beneficiaries of this program will be cable and Internet providers, who will have a new state subsidy to expand their footprints into areas in which their competitors have demonstrated an inability to operate profitably,” said Ken Girardin of the conservative Empire Center for Public Policy, in a scathing review of the New NY plan.

So far, Verizon has shown no interest in the program. It’s eventual intent is to decommission rural landline service and push existing customers to wireless service, so applying for wired broadband expansion funding isn’t a priority. The most likely applicants include Windstream, which serves a small percentage of rural New York telephone exchanges, Frontier Communications, which dominates Rochester and parts of the Finger Lakes region, and Time Warner Cable, which used earlier funding to connect two rural communities to its cable service. But all three companies are waiting for the program and its grant terms to be better defined.

With incumbent cable and phone companies reluctant to take part, there are several wired and wireless broadband initiatives in rural areas around New York starved of resources to expand their networks. The “white space” wireless broadband project in Thurman, for example, will be seeking funding to expand its wireless high-speed network into other parts of the community. Other initiatives could allow existing middle mile fiber networks in the Southern Tier and Finger Lakes region to explore building out “last mile” service to homes and businesses that now receive only DSL or no Internet access at all.

Salway promises he’ll consider funding networks that deliver the best broadband speeds for the lowest relative price in similarly sized communities. But all the money in the world won’t help if an existing phone or cable company shows no interest in serving unprofitable rural areas even after the state defrays the initial cost of placing the infrastructure to provide the service.

Mitchell believes local communities are best positioned to know what their residents want and many support publicly funded fiber technology rollouts. He points to Longmont, Col., a community that fought off propaganda mailers and a $300,000 marketing effort by CenturyLink and Comcast to defeat public fiber broadband in the city. The residents voted in favor of building their own network to move beyond the “good enough for you” broadband coming from the phone and cable company.

“The Longmonts of the country can decide to wait until these private sector companies decide its in their interest to finally build these fiber networks out, or they can say, ‘You know, we’re always going to be behind the greater technological curve of the nation,’ and do it themselves,” Tom Roiniotis, Longmont’s general manager, told Capital.

Frontier Boosts Internet Speeds for its FiOS Customers in Oregon, Washington; But You Have to Ask for Them

Phillip Dampier April 6, 2015 Broadband Speed, Competition, Consumer News, Frontier No Comments

frontier fiosFrontier Communications customers lucky enough to have access to fiber to the home service will find broadband speeds have been increased to offer identical upload and download rates.

In FiOS areas of Washington and Oregon, symmetrical broadband speeds of 30/30, 50/50, 75/75, 100/100, and 150/150Mbps are now available.

Both the 75 and 150Mbps tiers are new to customers.

Existing customers will not be upgraded to the new speed tiers until they call Frontier and request them.

“Customers have been demanding faster upload speeds for access to the cloud, gaming and streaming applications, and Frontier is committed to fulfilling those needs,” said Vicky Oxley, Frontier vice president and Washington general manager. “This is something our competitors don’t offer.”

The majority of Frontier’s customers receive DSL service at speeds averaging 6Mbps.

Thurman, N.Y.’s Rural ‘White Space’ Wireless Network Debuts; Speed, Capacity Blows DSL and Satellite Away

The national map of available white space channels show plenty are available in rural areas, but designing an urban network might prove challenging because open channels just don't exist.

The national map of available white space channels show plenty are available in rural areas, but designing an urban network might prove challenging because open channels often just don’t exist. In a medium-sized city like Rochester, only 11 UHF channels are available, a number likely to dwindle to close to zero if the FCC successfully reallocates much of the UHF band to wireless providers like AT&T and Verizon.

A dozen homes in the middle of the Adirondacks now have access to Internet speeds far faster than what Verizon and Frontier DSL can deliver and without the usage caps or speed throttling common with satellite Internet access.

Thurman, N.Y.’s public-private “white space” wireless network survived months of political wrangling, debate, and even intentional signal interference created by someone intent on disrupting the project. For a community that some maps depict with zero residents, the 1,200 people of Thurman are now more known than ever, winning national attention for one of the first next generation rural wireless networks to use unused space on the UHF dial to provide Internet access.

A dozen homes are the first to receive the service, with nearly 80 more on the way during phase one of the project. A $200,000 New York state broadband grant helped get the project off the ground and defray the cost of equipment installed in each subscriber’s home. But the initial cost isn’t cheap, even with the grant. New customers pay an upfront equipment fee of $292 for a receiver that costs the project up to $600. The monthly service charge is $50. Despite the price, it’s worth it to a lot of subscribers.

“The white space service is truly amazing,” said John Schroeter of Kenyontown, noting he uses the Internet for genealogical research and relied on dial-up access for the last 15 years. “I can go from one web page to another without waiting forever.”

Schroeter told Denton Publications that web pages often failed to load with dial-up, even after hours of waiting. Now he can manage to complete days of research in about an hour, without having to drive 15 miles to the nearest Wi-Fi hotspot.

Despite the fact Verizon and Frontier Communications both run their own fiber cables on the same utility poles in the region, at least 75% of the 400 homes in Thurman have no access to broadband Internet, living out of reach of even basic DSL. Many end up in the parking lot of the town hall to use Wi-Fi. Others depend on prohibitively expensive satellite access. None of the existing options were ideal. Sheila Flanagan, proprietor of Nettle Meadow Farm complained it took her hours to prepare even a small number of shipping labels to send her cheese products across the country with UPS. Speeds were so slow, she was forced to drop Williams-Sonoma as a client.

thurmanThe concept of white space wireless Internet access has already taken hold in Europe but has dragged in the United States as existing UHF television stations, wireless carriers, wireless microphone manufacturers and others who use the same frequencies white space data services also depend on defend their turf. Since white space services are unlicensed and intended for two-way communications, fears that Internet users would degrade wireless microphones or TV reception meant special care had to be taken to lower the potential for interference.

Since rural areas lack a crowded television dial, are often outside of the coverage areas of wireless carriers, and are unlikely to host many wireless mics, white space broadband would seem like the natural solution.

The project in Thurman faced a number of obstacles to overcome anyway. There were philosophical objections from tea party conservatives who objected to tax dollars paying for the “luxury” of Internet access when satellite service is available. Some residents wanted a fiber to the home solution, one that was likely financially out of reach for the small community. Still others wanted the money spent on a fiber link between the town and Time Warner Cable, that might then be enticed to wire homes in the rural community. In the end, the community decided to go ahead with an advanced wireless network, citing a number of factors familiar to many living in rural areas:

  1. thurman-nySince the town is located entirely within the Adirondack Park, there are prohibitions on placing communications towers on nearby peaks or other high spots that could spoil the view;
  2. The heavily forested and mountainous area made a traditional Wireless ISP project difficult because those networks need line of sight communications. White space wireless signals easily penetrate through trees and can stay intact across hilly terrain;
  3. Although not as bandwidth capable as fiber optics, white space networks are capable of delivering 10Mbps broadband per UHF channel. Most networks bond multiple UHF channels together to support even faster speeds and expand capacity;
  4. The chances of creating interference for other spectrum users was low in Thurman, which is a four-hour drive from New York and far enough north of Albany to avoid interfering with signals from the state capital. Even wireless carriers hug their cell towers along I-87, a respectable distance away;
  5. The network has redundant backhaul access to fiber from both Verizon and Frontier, neither of which show the slightest interest in expanding services into the community on their own;
  6. The grant was limited in scope and white space broadband qualified so it proved the most economical choice for a community that was no stranger to fights over money, engaging in political battles over issues like the cost of building a salt shed and auditing the on-hand count of trash bags.
The Thurman white space broadband project hides base station antennas in the tree canopy.

The Thurman white space broadband project hides base station antennas in the tree canopy.

Tests provided the project managers with an idea where to place needed wireless antennas, often hidden within tree canopies. But at least one disgruntled resident made a point of creating intentional interference on the channels the project managers were testing, committing a federal offense along the way. That was quickly overcome and the equipment has been placed and will soon be joined by installations in nearby neighborhoods, broadening the reach of the service.

Recent advancements in white space technology have also allowed speed and capacity to improve dramatically. Equipment now transmits its exact GPS-identified location to a national database which sends back an authorized list of “white space” channels each transmitter can use to provide the service. If a new licensed broadcaster takes to the airwaves, a database update will lock out that channel in the area, preventing interference.

Although exact speed data was not available at press time, Sally Feihel demonstrated she could successfully stream an episode of a classic Andy Griffith Show on her iPod at the same time a videoconference was underway and someone else was downloading a movie, all without skipping a beat. In fact, there is so much speed and capacity built into the system, its managers say speed throttles and usage caps are completely unnecessary.

Most users agreed the wireless network far outpaced satellite and DSL and some believed it was even faster than Time Warner Cable Internet access they experienced elsewhere. (Time Warner Cable doesn’t come near the community today.)

Constructing the network only took several months, but the politics that often surrounds public-private initiatives and the need for grant funding in income-challenged rural America can tie up projects much longer than that. The need for decent and affordable Internet access often will cross party lines, especially in rural communities.

New York’s state broadband expansion fund could help expand similar projects to other bypassed areas of the state. That investment may actually save taxpayers from paying high broadband bills indefinitely.

Residents are eagerly waiting for the next expansion to begin down Valley, Garnet Lake and Glen-Athol Roads. Moving beyond that may take more grant funding.

“White space is saving us $90 per month, and it’s far faster than satellite ever was,” another resident said.

http://www.phillipdampier.com/video/MetroFocus A New way to Bring Broadband to Rural Towns in Upstate New York 2014.mp4

MetroFocus showed the initial planning and testing phases of Thurman’s new white space wireless network, including interviews with town officials and a tour of the community. (4:23)

http://www.phillipdampier.com/video/Dynamic Spectrum in Action How TV White Space Devices Work.mp4

TV white space wireless broadband networks are designed to avoid interference with other licensed spectrum users. See how the technology works in this short video. (2:27)

Suddenlink: Subscribers Walloped With Big Rate Increases and “Free” Speed Upgrades (With Usage Caps)

suddenlink meter

Suddenlink customers are unhappy with the cable company’s usage caps that go with “free speed upgrades.”

Suddenlink subscribers promised “free” speed upgrades are calling them Suddenlink’s Trojan Horse because they are accompanied by dramatically higher cable programming surcharges and usage caps.

St. Augustine, Tex. subscribers got a smaller bite in the mail than some other communities:

Effective with the March 2015 billing cycle, Suddenlink customers will experience no change to the price of telephone service and no change to the price of Basic TV service. There will also be no change to the price of Expanded Basic TV service; however, a $3.00 sports programming surcharge will be added to the bills of customers subscribing to this service to cover a portion of the skyrocketing cost of dedicated sports channels and general entertainment networks with sports programming. The broadcast station surcharge will increase $2.88 per month to cover the escalating fees charged by broadcast TV station owners. Optional tiers of digital TV channels will increase $1.25 per month per tier. High-speed Internet services will increase $3.00 per month.

Over in Chandler, Tex., fees went even higher, with one customer reporting his broadcast station surcharge now exceeded $8 a month. Another customer counting up all the extra fees added to his bill found them coming close to an extra $25 a month.

But the state that gets the worst from broadband providers remains West Virginia, where Suddenlink faces only token DSL competition from Frontier Communications. Suddenlink retention representatives dealing with customers threatening to cancel service in West Virginia are well aware customers have nowhere else to go and don’t break a sweat trying to rescue business.

“We are a business and our goal is to make a profit,” one retention representative told a Suddenlink customer dropping service in favor of DirecTV.

Customers tell Stop the Cap! they were first excited Suddenlink was dramatically boosting Internet speeds — good news for the small and medium-sized cities Suddenlink favors over larger cable operators. The bad news is Suddenlink is bringing back strict enforcement of usage caps, temporarily suspended when its usage measurement tool was proven inaccurate.

Suddenlink has been upgrading its cable systems since 2014 and has gradually rolled out new speeds. Most customers can now choose speed tiers of 50, 75, 100, or 150Mbps, but some larger systems are getting more robust upgrades:

  • Current speed 15Mbps increases to 50Mbps (250GB usage cap)
  • Current speed 30Mbps increases to 50Mbps (250GB usage cap)
  • Current speed 50Mbps increases to 75Mbps (350GB usage cap)
  • Current speed 100Mbps increases to 300Mbps (500GB usage cap)
Suddenlink's sales website makes no reference to the company's broadband usage caps.

Suddenlink’s sales website makes no reference to the company’s broadband usage caps.

Suddenlink is also enforcing usage caps again, which most customers only learn about after signing up for service. Suddenlink makes no references to usage allowances on their sales or general support pages and information is difficult to find unless a customer uses a search engine to find specific information.

Suddenlink’s explanation for its usage caps is among the most cryptic we have ever seen from an ISP:

Consistent with our Acceptable Use Policy and Residential Services Agreement, Suddenlink has applied monthly usage allowances to residential Internet accounts in most of its service areas. To determine if there is a monthly allowance associated with your account – and what that allowance is – please set up or log in to an existing online account. See the related instructions under question #8.

While existing residential customers will quickly learn their usage allowance and find a usage measurement tool on Suddenlink’s website, that is not much help to a new or prospective customer. The overlimit fee, also difficult to find, is $10 for each allotment of 50GB.

Some customers have found a way around the usage cap by signing up for Suddenlink’s business broadband service, typically 50/8Mbps for around $75 a month. Business accounts are exempt from Suddenlink’s caps.

West Virginia Legislature Won’t Consider Any Bill That Could Offend Frontier, GOP Delegate Claims

frontier loveThe Republican leadership of West Virginia’s House of Delegates is alleged to have quietly placed a ban on considering any bill that could potentially offend Frontier Communications, frustrating state lawmakers attempting to introduce broadband improvement and consumer protection measures.

In a press release posted to his Facebook page, Delegate Randy Smith (R-Preston) complained that the House GOP leadership told him his two broadband-related bills waiting for consideration would “go nowhere because it would hurt Frontier.”

“Frontier has its hands in the state Capitol,” Smith said in the release obtained by the Charleston Gazette. “The company knows how to play hardball with the legislative process.”

When asked to name names of those obstructing his broadband-related measures, Smith declined, at least for now.

“It was one individual,” Smith said. “He said leadership wouldn’t support this because they feel like it’s targeting Frontier. If it comes to the point I have to, I’ll give names. I know you’re wanting names.”

Last December, Smith’s frustration with Frontier boiled over.

Smith

Smith

“For too long, West Virginia has lagged behind other states when it comes to accessible computer technology and infrastructure,” Smith said. “We’ve been offered excuses about our state being too mountainous for improving conditions here. But it’s not the state’s rugged terrain holding us back. Although a few areas of the state have a choice of service providers, most are stuck with whatever Frontier decides is enough. And not only do I receive complaints about their service, there are multiple grievances about how they bill their customers. We can, and must, do more to create competition to drive the quality of services up and drive costs down.”

“This is not a Republican or Democrat issue. This is a West Virginia issue,” Smith said. “And we need to catch up to other states in the 21st century.”

For the first time in 80 years, Republicans won a majority in the House of Delegates, pledging to transform West Virginia into a “business friendly state.” But even Smith, an assistant majority whip for the new Republican leadership, seemed stunned by the willingness to grant Frontier de facto veto power over telecom-related legislation.

Last week he learned his two broadband bills were essentially dead on arrival, because they would not be supported by Frontier.

  • HB2551, co-sponsored by 10 GOP delegates, would prohibit Internet providers from advertising broadband service as “high-speed Internet” unless the company offered a download speed of 10Mbps or higher. The majority of West Virginia experiences real world speeds far slower than that from Frontier;
  • HB2552, intended to address chronic billing problems by Frontier, would allow Internet customers to take billing disputes to Attorney General Patrick Morrisey’s office, if the state Public Service Commission refuses to review their complaints.
Speed tests on Frontier's "High-Speed Max" Internet service aren't high speed at all.

Speed tests on Frontier’s “High-Speed Max” Internet service aren’t high speed at all.

When Smith’s accusations went public in the pages of the Gazette, Republican leaders scrambled to deny his allegations.

House Majority Leader Daryl Cowles (R-Berkeley) told the Gazette House Republicans have no “blanket position” against bills that Frontier opposes.

“There’s no policy by leadership that these bills should move or shouldn’t move based on who’s supporting them or who doesn’t,” Cowles said. “It sounds like Randy is frustrated. He, like many out there, are frustrated by their Internet speeds and service.”

“I was told Friday that there’s no way those bills were going to run,” Smith countered.

Frontier won’t deny its disapproval of Smith’s bills.

“We’re the only provider that chooses to serve much of rural West Virginia, and we see the legislation as having a negative effect on further development of rural broadband services,” said Frontier spokesman Dan Page.

Frontier customers in West Virginia are among the company’s most vocal critics nationwide, complaining about unavailability of DSL, billing errors, poor service, and most common of all: selling service and speed the company cannot consistently deliver. A statewide class action lawsuit against Frontier for failing to provide advertised speeds has attracted hundreds of Frontier customers. The suit maintains Frontier has engaged in “false advertising,” a violation of the state’s Consumer Credit and Protection Act.

Smith introduced the two broadband measures partly out of his own frustration with the company.

Cowles

Cowles

“I regularly conduct speed tests on my Internet connection and the results are laughable,” Smith told his mostly rural constituents. “I’ve had download speeds of around 0.20Mbps. No wonder they’re called Frontier. Those are the kinds of speeds you’d expect on the American frontier in the 17th century.”

Smith recognized some members of his own party will take Frontier’s side over his.

“Of course, my bills don’t go over well with some members of my own party,” Smith said. “But right is right and wrong is wrong.”

On cue, Cowles rushed to Frontier’s defense.

“Frontier has been trying to spend money to upgrade service, but it hasn’t been easy for those guys,” Cowles said. “We’re trying to expand broadband and improve the speeds everywhere we can. We try to nudge Frontier when we can, push them when we can, while we respect their investment.”

A considerable part of that “investment” came at the cost of U.S. taxpayers. Last fall, the U.S. Department of Commerce’s inspector general announced an investigation into how Frontier spent a $42 million federal stimulus grant in the state. The inspector general is reviewing thousands of pages of documents turned over by the company. Critics contend Frontier spent the stimulus funds to defray the cost of a statewide fiber network Frontier now owns and controls.

Cowles told the Gazette that despite the media attention on the issue, he remained unsure if Smith’s bills would ever reach the House floor for consideration.

At least three House members — two Republicans and one Democrat — work for Frontier.

Frontier’s Acquisition of Verizon Landline/FiOS Properties in Calif., Tex., and Fla. Called “Insane”

Frontier Communications today announced a $10.54 billion all-cash acquisition of Verizon’s wired networks, including landline and FiOS properties, in the states of Florida, California, and Texas.

Frontier will acquire Verizon’s wireline operations that offer services to residential, commercial and wholesale customers numbering 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS video connections. The acquired territory is 54 percent served by FiOS fiber to the home service.

frontier expanded improvement

“This transaction marks a natural evolution for our company and leverages our proven skills and established track record from previous integrations,” said Maggie Wilderotter, Frontier Communications chairman and chief executive officer. “These properties are a great fit for Frontier and will strengthen our presence in competitive suburban markets and accelerate our recent market share gains. We look forward to realizing the benefits this transaction will bring to our shareholders, customers and employees.”

Dan McCarthy, Frontier’s president and chief operating officer, commented, “This transaction is an exciting opportunity for Frontier. We are well-positioned to maximize value for our shareholders and create a great experience for new customers. We have four FiOS markets today from our 2010 transaction with Verizon, and a high level of familiarity with the systems underlying these properties. We plan to flash-cut convert these properties to Frontier’s systems as we did in states including West Virginia and Connecticut.”

frontierBut Frontier’s “flash cut” conversions in West Virginia and Connecticut led to months of serious service and billing problems leading to two state-level investigations into Frontier’s performance. Problems are still ongoing in parts of Connecticut several months after Frontier transferred Connecticut territories from AT&T. Customers in West Virginia continue to criticize Frontier Communications for its underwhelming broadband performance.

Saibus Research, a Wall Street analyst, said they were “stunned” Frontier was repeating the same mistake it made back in 2010 when it acquired other former GTE service areas from Verizon.

“We remembered that its $8.7 billion wireline purchase in 2010 did not work out so well for it,” wrote the analyst. “When we consider that Frontier’s share price declined by nearly 60% from 2010-2012 after the deal closed before recovering those losses since 2012, we were shocked that Frontier’s share price increased by 10.6% in response to its announcement that it was buying assets from Verizon. Frontier’s pro forma revenue has declined by 30% since 2009, its residential consumer base declined by 33%, its operating income declined by 34% and its dividend declined by 60% since then.”

“Albert Einstein said that insanity is doing the same thing over again and expecting a different result and we think that Frontier’s CEO Maggie Wilderotter has come down with a serious case of insanity for her willingness to buy whatever Verizon is selling,” said Saibus Research. “As such, we think income-oriented telecom investors should consider accumulating shares of Verizon, and selling or shorting Frontier.”

Frontier will accumulate billions in new debt to fund the transaction, bad news for legacy Frontier customers still served by the company’s copper wire networks. Frontier hoped to realize $500 million in cost reductions from its 2010 acquisition of Verizon territories in the Pacific Northwest, West Virginia, and several midwestern states. Instead of savings, it ended up spending millions to rehabilitate deteriorating landlines Verizon underinvested in for years. The new unsecured debt load will likely cut into available funds to upgrade older networks, particularly in the northeast and inside New York, Ohio and Pennsylvania.

Frontier will get marginal improvements in programming costs from the greater volume discounts its larger customer base qualifies to receive. But outside of Connecticut (Frontier U-verse) and Washington, Oregon, Indiana and South Carolina (Frontier FiOS), the rest of Frontier’s customers will continue to be offered Dish Network satellite service and various flavors of DSL.

If approved by regulators, the transaction will be finalized in 2016.

Verizon Preparing to Sell $15 Billion in Cell Tower/Wired Assets – Tex., Calif., and Fla., Landlines Likely for Sale

Phillip Dampier February 3, 2015 Consumer News, Verizon 1 Comment
Verizon's landline coverage map.

Verizon’s landline coverage map.

Verizon is working on a sale of its cellphone towers and a portion of its landline assets in a series of deals that could fetch the company more than $15 billion, according to a breaking report in the Wall Street Journal.

The company is looking to raise cash to pay down debt incurred when it bought out Vodafone’s 45% share of its wireless unit and to cover $10.4 billion in wireless licenses the company just won in a government auction last week.

The most likely targets in a landline sale are Verizon territories outside of the northeast.

Verizon has already dumped its landline assets in Hawaii (sold to Hawaiian Telcom), northern New England (sold to FairPoint Communications), West Virginia and many smaller city and suburban territories acquired from GTE (all sold to Frontier).

In its 2010 sale to Frontier, Verizon retained assets in the Tampa-St. Petersburg area, central Texas and Southern California regions. But now all three states are prime targets for a sale. Likely buyers include Frontier Communications, which already has a major presence in Florida including a national call center, and CenturyLink, which acquired Qwest and has a large service area in the southwest and western United States. Frontier remains the most likely buyer, having aggressively expanded its landline network in legacy AT&T (Connecticut) and Verizon service areas.

Verizon CEO Lowell McAdam has shown little interest in maintaining Verizon’s wired assets or growing FiOS and has been willing to sell off major parts of Verizon’s landline network to continue prioritizing Verizon Wireless. McAdam led Verizon Wireless from 2006-2010, before being named CEO of Verizon Communications.

Verizon-logoHe foreshadowed the forthcoming landline sale in January when he told an investor conference he was willing to make significant cuts to Verizon’s wired networks.

“There are certain assets on the wireline side that we think would be better off in somebody else’s hands so we can focus our energy in a little bit more narrow geography,” he said at the time.

Verizon is also expected to follow AT&T’s lead in selling off much of its cell tower portfolio. It will lease access to the towers it sells.

Verizon maintains FiOS networks in Texas, California, and Florida, but that is not expected to deter the company from selling its landline assets. Frontier acquired Verizon FiOS properties in the 2010 sale in both the Pacific Northwest and Indiana. Those services operate under the Frontier FiOS banner today.

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