The Utah Division of Public Utilities (DPU) has launched a formal investigation into the performance of Frontier Communications of Utah after the state received an “abnormal number of complaints” over the past few years about the company’s ability to provide adequate landline phone and internet service in the state.

Frontier only services a small part of Utah, and many of the complaints come from the community of Castle Valley, a small town in Grand County in east-central Utah. The community has a population of just over 300 residents. Frontier is the sole telecommunications provider for much of the area.

“Providing adequate, reliable telecommunications services to the residents of Utah does not happen by chance. It is the result of monitoring a number of factors such as capacity, trouble reporting, and aging of infrastructure,” writes the DPU in a discussion about the investigation. “This monitoring provides support for wise capital investments that prevent outages, such as those being investigated in the current dockets. However, operating conditions can create unique challenges even with optimal investments. The DPU has also observed (through annual reports filed with the DPU) that in recent years Frontier has reported declining levels of annual capital investment. For these reasons the DPU initiated its own investigation into Frontier’s service quality.”

Castle Valley, Utah

The regulator noted Frontier has (so far) ignored a request for information filed with the phone company on June 11, 2019.

The DPU’s primary concern is with Frontier’s lack of investment in its legacy networks, which include those in Utah. Without appropriate investment, service quality deteriorates, particularly in rural areas where long stretches of copper cable have much greater exposure to the elements and have more opportunities for failure. Frontier has already indicated it plans no significant investments in its legacy copper service areas in 2019.

Frontier Communications has publicly admitted its residential telephone service in rural and “high-cost” service areas is “unsustainable,” resulting in an increasing number of lengthy service outages and unreliable service.

Javier Mendoza, vice president of Frontier Communications, made the admission in response to a growing chorus of complaints about rapidly deteriorating landline service in the state of West Virginia. Service has gotten so bad it prompted the senior senator from West Virginia to complain directly to Frontier CEO Dan McCarthy.

“In times of crisis, no one should ever have to think twice about whether he or she will be able to call for help,” Sen. Joe Manchin (D-W.V.) wrote in a letter directed to McCarthy. “Unfortunately, I have been alerted of several instances where my constituents who utilize Frontier’s landline service have not been able to complete calls due to service outages.”

The West Virginia Public Service Commission is currently auditing Frontier’s operations in the state after seeing “a large increase” in complaints about Frontier’s service. Frontier has been the state’s largest telecom company since 2010, when it acquired Verizon’s wireline network in West Virginia.

According to some customers, service has been going downhill ever since.

“I don’t always depend on it to work because I know it is probably not going to do that,” Frontier customer Lawrence Gray told WSAZ-TV. “So it used to be a real shock when you picked it up and it didn’t work. The other day when I picked it up and you couldn’t get a dial tone, I was like well here we are again. It is the way it is.”

Frontier is the dominant phone company in West Virginia.

Lawrence’s wife Patrecia notes they are both in their 70s and are anxious about being able to reach 911 in an emergency. Frontier has experienced several 911 outages in West Virginia as well.

“If we ever want to call 911 and it is not working, what do you do because we have no call phone service here,” Patrecia said.

The Gray family reports that it typically takes Frontier five to seven days to restore their phone service after an outage. That is unacceptable to Sen. Manchin.

“The safety of my constituents is my highest priority and the fact that so many of them are unable to do something as basic as calling 911 for assistance is unacceptable,” Manchin wrote Frontier. “Access to phone service is not a luxury; it is a critical lifeline that could mean the difference between life and death and I implore you to resolve this problem within your company immediately.”

Frontier’s response, through Mendoza, is to blame the situation on the unprofitability of Frontier’s landline network in rural West Virginia, after choosing to buy it nine years ago.

“Frontier serves only about ten percent of the state voice lines in its service area—and falling—but has 100 percent of the universal service obligation to serve the most rural and high-cost areas,” Mendoza said in a statement. “Our customer base continues to decline, while the cost of service per line has increased dramatically. This has resulted in an unsustainable model for providing service in rural and high-cost areas, manifesting in increased numbers of service complaints. We plan to reach out to the state’s leaders to collaboratively find solutions to this difficult challenge.”

Those challenges may be more difficult than imagined, considering the frequent complaints received by the Public Service Commission about the ongoing service problems experienced by customers.

Doug and Patricia Stowers represent a case in point. The Stowers family lives in Griffithsville, an unincorporated community in eastern Lincoln County. The nearest cell phone coverage in this part of West Virginia is a 14-mile drive into the town of West Hamlin. A landline is essential in Griffithsville and many other parts of West Virginia where cell service is spotty at best. The only choice of provider is often Frontier Communications.

This branch was left hanging on Frontier’s phone line… after a service call reporting branches on Frontier’s cable was finished. (Image courtesy of the Stowers family)

The Stowers family installed their landline in 2012. A single Frontier technician laid nearly one-quarter of a mile of phone cable, sections of which were laid on the ground next to the roadway.

“Since 2012, coverage has been sporadic. It took us a few service interruptions before we noticed a connection of when the county mowed [along the roadway] and the phone going out,” wrote Patricia Stowers. “When we found a long section of main line had been laid along the edge of the road, we walked the road, and made sure the line was thrown over edge out of the reach of the mowers.”

That is where Frontier’s phone cable stayed, for years. In areas where the phone cable was hung above ground, tree limbs and brush often cover the line, even after Frontier dispatches repair crews to address the latest service outage. At one point, the family discovered parts of their phone cable were now exposed to the core. A Frontier technician temporarily “patched” the cable and then placed it back on the ground, this time at the bottom of a dry creek bed.

When the family reports service outages to Frontier, having patience is a virtue.

“When we call for repairs, we are scheduled three to seven days out. To me this is unacceptable,” writes Patricia. “If we had a choice, trust me, we would not have phone service from Frontier, however, we are at their mercy.”

An attorney for Frontier Communications in Charleston disputed parts of the Stowers family complaint, noting that each time the family reported an outage, the company dispatched a technician to repair the trouble and the family was given credit on their bill.

The attorney also noted that the service address in question was a “weekend/vacation residence.” The cable lying in the creek bed was “not in service” and was “scheduled to be removed.” Further, despite the Stowers’ claims that branches were left laying on their phone line, the attorney claimed Frontier found only “a small branch lying on the 2-pair cable servicing the weekend/vacation residence” and it would be removed “with a pole saw.”

Frontier routinely responds to service complaints filed with the PSC with this declaration:

Pending final resolution and dismissal of this matter, Frontier respectfully reserves all defenses and objections, including without limitation the right to demand strict proof of each and every allegation of the Complaint not expressly admitted in this Answer.

WSAZ-TV in Huntington, W.V. reports Frontier’s landline service in the state is deteriorating, and Frontier admits its rural phone service is “unsustainable.“ (2:41)

Third party contractors hired to install fiber optic infrastructure that will deliver Google Fiber internet service in parts of North Carolina are getting an increasing number of complaints from frustrated residents upset with the pace of the work, the mess it creates, and disruptions caused when crews accidentally damage existing utilities.

In Cary, construction crews are testing the patience of residents on Kilarney Drive, who have endured multiple power outages caused by Google’s contractors digging up the streets in the area.

In one neighborhood, crews removed a section of a sidewalk and installed a utility cabinet in its path. In others, cabinets were installed on the wrong side of the street. In some areas, Google’s contractors are still experimenting with shallow dug fiber installations. Some residents reported they unearthed their underground Google Fiber connection after raking their lawns. Others claimed their home’s water service line was cut by construction crews. Last winter brought multiple outages when snowplows dragged up fiber lines buried just an inch or two into the pavement and held in place with foam.

This summer’s service disruptions are coming at inopportune times, Cary residents complain. Recently, crews mistakenly cut through cables providing power, phone, and cable service, knocking out power for four hours and cutting off air conditioning on a 92 degree day.

Watching the crews slowly move through the neighborhood also has some residents concerned.

“It took them a week or two to do a couple hundred yards,” Cary resident Ed Fillback told WRAL-TV. “How long is it going to take to do the town?”

Google Fiber officials shared a response to the disruptive work in a prepared statement.

“Building a brand new fiber network is a big and complex project, and we’re sensitive to the impact construction has on a community. We want to be good neighbors, and do everything we can to minimize disruption, respond to residents, and resolve issues quickly.”

WRAL in Raleigh reports neighborhood frustration with Google Fiber’s buildout in North Carolina is growing. (2:56)

 James

New York Attorney General Letitia James and California Attorney General Xavier Becerra today filed an unusual multi-state lawsuit, along with eight other State Attorneys General to halt the proposed merger of telecom giants T-Mobile and Sprint, deciding not to wait for a decision from the Department of Justice, which is also reviewing the merger. The complaint, filed in the federal Southern District of New York court in coordination with Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin alleges that the merger of two of the four largest national mobile network operators would deprive consumers of the benefits of competition and drive up prices for cellphone services.

“When it comes to corporate power, bigger isn’t always better,” said Attorney General Letitia James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country. That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

“Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it,” said Attorney General Xavier Becerra. “This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices. Today, along with New York and eight other partner states, we’ve filed a lawsuit to block this merger and protect the residents of our state.”

The states departed from traditional courtesies in the case, deciding to launch a pre-emptive legal challenge to the transaction without providing Justice Department officials advance notice of their decision to sue. That decision may have come after FCC Chairman Ajit Pai gave his full support for the merger, with indications the Republican majority on the FCC would also vote in favor of approving the deal. Staffers in the Antitrust Division of the Justice Department object to the merger, and are recommending it be rejected. But the Justice Department’s unpredictability, and its poor track record trying to block the AT&T-Time Warner (Entertainment) merger in court may have pushed the state attorneys general to also act on their own.

T-Mobile USA and Sprint are the third and fourth largest mobile wireless networks in the U.S., and are the lower-cost carriers among the “Big Four” — with market leaders Verizon Wireless and AT&T controlling the larest share of the wireless market. Intense competition, spurred in particular by T-Mobile and Sprint, has delivered declining prices, increased coverage, and better quality for all mobile phone subscribers. According to the Labor Department, the average cost of mobile service has fallen by roughly 28 percent over the last decade, while mobile data consumption has grown rapidly. The merger, however, would put an end to that fierce competition, argue the attorneys general, which has delivered a great number of benefits to consumers.

States with large urban poor communities are particularly sensitive to the merger, because both T-Mobile and Sprint focus their coverage on urban areas. With the average U.S. household spending $1,100 annually on wireless phone service, even small rate increases can dramatically increase service suspensions or disconnections due to late or non-payment.

“Low-and moderate-income (LMI) New Yorkers put a greater share of their household income toward their phone bill, and when you are looking at a budget that is already stretched thin, every dollar counts,” said Mae Grote, CEO of the Financial Clinic. “Cellphones now not only give us the ability to communicate with friends and family, here and abroad, but are increasingly the way we engage with many critical services. Our customers use cellphone apps to access public information, send and receive money, manage their SNAP benefits, look for a job, and even communicate with their doctors, and maintaining competition in the market for this critical service ensures LMI consumers have the same access to quality, affordable service as the more financially secure. The Clinic is proud to advocate on behalf of the communities we serve to protect their inclusion in the modern economy.”

The attorneys general investigation laid bare many of the alleged merger benefits offered by T-Mobile and Sprint to win approval of the merger. The group found many of the claimed benefits were completely unverifiable and were likely to be delivered years into the future, if ever. But within weeks of approving such a merger, the companies would have an immediate incentive to raise prices and reduce service quality. Sprint’s network, in particular, was scheduled to be largely mothballed as a result of the merger, even though Sprint provides coverage in some areas that T-Mobile does not. Although the two companies could identify several self-serving deal efficiencies that would reduce their costs and staffing needs, there is no evidence the merger would deliver consumers lower prices and were outweighed by the merger’s immediate harm to competition and consumers.

Additionally, the merger would harm thousands of hard-working mobile wireless independent dealers in New York and across the nation. The ten states are concerned that further consolidation at the carrier level would lead to a substantial loss of retail jobs, as well as lower pay for these workers in the near future.

Becerra

“CWA applauds the Attorneys General and especially General Letitia James’ leadership in taking decisive action today to prevent T-Mobile and Sprint from gaining anti-competitive power at the expense of workers, customers, and communities,” added Chris Shelton, president of the Communications Workers of America (CWA). “Reducing the number of national wireless carriers from four to three would mean higher prices for consumers, job loss for retail wireless workers, and downward pressure on all wireless workers’ wages. The states’ action today is a welcome development for American workers and consumers, and a reminder that regulators must take labor market concerns seriously when evaluating mergers.”

Before filing suit, the states gave significant consideration to T-Mobile and Sprint’s claims of increased coverage in rural areas. However, T-Mobile has yet to provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint. As stated in the complaint, the U.S. previously won the “race to LTE” as a direct result of vigorous competition among wireless carriers. Finally, continued competition, not concentration, is most likely to spur rapid development of a nationwide 5G network and other innovations.

“This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service,” stated Carri Bennet, general counsel for the Rural Wireless Association. “We are pleased that the New York Attorney General, along with nine states have filed their lawsuit to block the merger. The process at the FCC has not been transparent and the FCC appears to be blindly accepting New T-Mobile’s words as truth.”

The complaint was filed under seal, because it contains unredacted confidential information, in United States District Court for the Southern District of New York.  A redacted copy of the lawsuit is likely to be made available later.

T-Mobile currently has more than 79 million subscribers, and is a majority-owned subsidiary of Germany’s Deutsche Telekom AG. Sprint Corp. currently has more than 54 million subscribers, and is a majority-owned subsidiary of Japan’s SoftBank Group Corp.

As AT&T bleeds satellite and streaming TV customers, a new class action case is planned on behalf of investors who feel ripped off after buying AT&T stock on assurances from top executives that the company was aggressively seeking a leadership role for its DirecTV Now streaming service.

According a complaint from the Schall Law Firm, AT&T made false and misleading statements to the market and caused some investors to lose more than $100,000 from the declining value of AT&T stock.

DirecTV Now entered the streaming business with a generous package of TV channels and a significantly lower price than some of its competitors. It also offered high value promotions including free equipment, and for some AT&T wireless customers, free service. By October 2018, DirecTV Now grew to a peak of 1.85 million customers.

But several weeks later, AT&T CEO Randall Stephenson announced the service was cutting back on promotions and planned to raise prices and cut back on the number of channels to boost profits.

“This resulted in existing customers leaving the service when their discount expired, and new customers avoiding the service altogether based on high prices,” the Schall Law Firm said in a press release. “Based on these facts, the company’s public statements were false and materially misleading. When the market learned the truth about AT&T, investors suffered damages.”

Publicly traded companies cannot lie or deceive investors in public statements about the company or its performance, according to securities laws. Shareholders are entitled to prompt and forthcoming disclosures about materially adverse events that could significantly impact on the performance of a company. AT&T has already lost over 500,000 TV customers in the first quarter of 2019. Stephenson this month told investors at a J.P. Morgan Conference he now expects more customer losses for the rest of 2019, including more than a half-million more anticipated cancellations during the second quarter of this year. Stephenson called it a “customer cleanup” that will purge “low value” subscribers.

Investors with significant losses were encouraged to reach out to the law firm before May 31, 2019.