Verizon gets out the black marker to redact information it considers “confidential.”

The New York Public Service Commission Monday rejected most of Verizon’s request to keep secret the state of its landline network and details about the company’s plans to distribute Voice Link as an optional wireless landline replacement in the state.

Nearly two months after Verizon announced it was abandoning its original plan to replace defective landlines on Fire Island with Voice Link, Verizon is bristling over a Freedom Of Information Law (FOIL) request from consumer advocates and a union for disclosure of reports filed with the PSC regarding Verizon’s network and its upkeep — information the company considers confidential trade secrets. To underline that belief, Verizon provided the PSC with edited versions of documents it filed with the state considered suitable for public disclosure, one consisting of 330 pages of blanket redactions except for the page headings and page numbers.

“[These discovery requests] are designed solely to advance the Communications Workers of America’s self-serving efforts to prevent Verizon from offering its Voice Link product, even on an optional basis, and to investigate the relationship between Verizon and Verizon Wireless — matters that are beyond the scope of this or any other pending Commission proceeding,” wrote Verizon deputy general counsel Joseph A. Post. “On September 11, 2013, Verizon announced that it had decided to build out a fiber-to-the-premises (“FTTP”) network on western Fire Island, and targeted Memorial Day 2014 for the completion of construction and the general availability of services over the new network.”

The PSC disagreed with Post, ruling the majority of documents labeled “confidential” by Verizon were, in fact, not.

“[…] The information claimed by Verizon to be trade secrets or confidential commercial information does not warrant an exception from disclosure and its request for continued protection from disclosure is denied,” ruled Donna M. Giliberto, assistant counsel & records access officer at the Department of Public Service.

Verizon has until Nov. 14 to file an appeal.

Common Cause New York, the Communications Workers of America-Region 1, Consumers Union, the Fire Island Association, and Richard Brodsky used New York’s public disclosure laws to collectively request documents shedding light on their suspicion Verizon has systematically allowed its landline facilities to deteriorate to the point a wireless landline substitute becomes a rational substitute. They also suspect Verizon diverted funds intended for its landline network to more profitable Verizon Wireless.

“In spite of its obligations under New York law, in spite of the investment by ratepayers in the FIOS wireline system, in spite of the needs and expectations of the people, businesses and economy of the state, Verizon is intending to and has begun to shut down its wireline system,” declared the groups.

Many involved took note of Stop the Cap!’s report in July 2012 that warned then-CEO Lowell McAdam had plans to decommission a substantial part of Verizon’s copper landline network, especially in rural areas, where it intended to replace it with wireless service:

“In […] areas that are more rural and more sparsely populated, we have got [a wireless 4G] LTE built that will handle all of those services and so we are going to cut the copper off there,” McAdam said. “We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there and then I can focus the investment on that to improve the performance of it. The vision that I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper. We are going to just take it out of service and we are going to move those services onto FiOS. We have got parallel networks in way too many places now, so that is a pot of gold in my view.”

Some consumer groups suspect Fire Island represented an opportunity to test regulators’ tolerance for a transition away from copper landlines in high cost service areas. As Stop the Cap! reported this summer, New Yorkers soundly rejected Verizon Voice Link, with more than 1,700 letters opposing the wireless service and none in favor on record at the PSC.

In early September, a well-placed source in Albany told Stop the Cap! Verizon’s request to substitute Voice Link where it was no longer economically feasible to maintain landline infrastructure was headed for rejection after a constant stream of complaints arrived from affected customers. Verizon suddenly withdrew its proposal on Sept. 11 and announced it would bring FiOS fiber optics to Fire Island instead.

Although Verizon now insists it will only offer Voice Link as an optional service for New York residents going forward, public interest groups still believe Verizon has allowed its landline network to deteriorate to unacceptable levels.

Verizon originally claimed 40% of its facilities on Fire Island were damaged beyond repair when they were assessed after Hurricane Sandy. But residents claim some of that damage existed before the storm struck last October. Some fear Verizon is engaged in a self-fulfilling prophecy, allowing its unprofitable copper wire facilities to fall apart and then point to the sorry state of the network as their principle argument in favor of a switch to wireless service.

Herding money, resources, and customers away from landlines to Verizon Wireless

“In fact, the vast majority of defective lines are a consequence of the failure and refusal of Verizon to maintain and repair the system over time,” the groups assert. “The Commission must make a factual determination of the cause of the 40% defect allegation as part of this proceeding. If, as asserted herein and elsewhere, the evidence shows a pattern of inadequate repair, maintenance and capital investment, the Commission can not and should not approve any loss of wireline service to any customer, as matters of law and sound policy.”

“We assert that Verizon has systematically misallocated costs thereby distorting the extent to which the wireline system has suffered losses, if any. […] It is fair to say that substantial losses in the landline system are repeatedly used by the Commission and the Company as a justification for rate increases and regulatory decisions affecting the scope, cost, adequacy and nature of telephone service provided to customers of Verizon NY.”

Verizon would seem to confirm as much.

In 2012, Verizon’s chief financial officer Fran Shammo told investors the company was diverting some of the costs of Verizon Wireless’ upgrades by booking them on Verizon’s landline construction budget.

“The fact of the matter is wireline capital — and I won’t get the number but it’s pretty substantial — is being spent on the wireline side of the house to support the wireless growth,” said Shammo. “So the IP backbone, the data transmission, fiber to the cell, that is all on the wireline books but it’s all being built for [Verizon Wireless].”

Funds diverted for Verizon Wireless’ highly profitable business were unavailable to spend on Verizon’s copper wire network or expansion of FiOS. In 2011, Verizon diverted money to deploying fiber optics to 1,848 Verizon Wireless cell towers in the state. In 2012, Verizon deployed fiber to an extra 867 cell tower sites in New York and Connecticut. Public interest groups assert the costs for these fiber to the cell tower builds were effectively paid by Verizon’s landline and FiOS customers, not Verizon Wireless customers.

Since 2003, Verizon has been subject to special attention from the New York Public Service Commission because of an excessive number of subscriber complaints about poor service. As early as a decade ago, the PSC found Verizon’s workforce reductions and declining investment in its landline network were largely responsible for deteriorating service. Each month since, Verizon must file reports on service failures and its plans to fix them.

In September alone, Verizon reported significant failures in service in rural areas upstate, almost entirely due to the weather:

• Heuvelton: A summer filled with significant thunderstorms resulted in downed poles and service disruptions. Verizon reported the central office serving the community was in jeopardy in June. By mid-July, 7% of customers reported major problems with their landline service.
• Amber: Nearly 11% of customers were without acceptable service in May because a 100-pair cable serving many of the community’s 274 customers was failing.
• Chittenango: Nearly 9% of the community’s 1,059 landline customers had significant problems with service because Verizon’s central office switching system in the exchange was failing.
• Sharon Springs: Almost 11% of Verizon’s customers in this small rural office of 417 lines were knocked out of service in July.
• Elenburg Dept.: More than 8% of Verizon’s 324 lines in this rural Adirondack community were out of service, usually as a result of a thunderstorm passing through.
• Hartford: When it rains hard in this Adirondack community, landline service fails for a substantial number of customers. In September, 2.43 inches of rain left 12.4% of customers with dysfunctional landline service.
• Valley Falls: Nearly one-third of Valley Falls’ 722 landlines were out of service in September after lightning hit several Verizon telephone cables. Problems only worsened towards the end of the month.
• Kendall: Almost 9% of Verizon customers in the Rochester suburb of Kendall were without service after a rain and wind storm. When a cold front moves through the community, landlines service is threatened.
• Bolivar: More than 20% of customers lost service July 19th after heavy rain, winds, and power outages hit.
• Cherry Valley: Verizon blamed seasonal service outages in Cherry Valley on farmers that dig up or damage buried telephone cables. More than 7% of customers were knocked out by harvested phone lines in July.
• Edmeston: More rain, more service outages for the 801 landlines in this small community in area code 607. More than 13.5% of customers called in with complaints in July. Verizon blamed heavy rain.
• Clinton Corners: Service failures come after nearly every heavy rainfall due to multiple pair cable failures in the aging infrastructure. More than 9% of customers reported problems in June, 13.2% in July, 8.2% in August, and 12.5% in September.

Verizon’s landline trouble reports disproportionately come from rural communities, exactly those Verizon’s former CEO proposed to serve by wireless. Weather-related failures are often the result of deteriorating infrastructure that results in outages, especially when moisture penetrates aging cables. Rural communities are also the least-likely to be provided fiber service, exposing customers to a larger percentage of the same copper wiring critics charge Verizon is allowing to deteriorate.

Phone companies looking for a cheap way to increase broadband speeds are turning away from fiber optics and towards advanced forms of DSL that don’t bring cost objections from shareholders.

Whether your provider is AT&T or an ISP in Europe or Australia, financial pressure to improve broadband on the cheap is fueling research to wring the last kilobit out of decades-old copper phone wiring.

Alcatel-Lucent suggests VDSL2 Vectoring is one such technology that can enable download speeds up to 100Mbps using noise-cancelling technology to suppress interference.

But the advice doesn’t impress fiber optic fans who suggest any reliance on deteriorating copper phone lines simply postpones an inevitable fiber upgrade that could come at a higher cost down the road.

VDSL2 Vectoring and G.Fast are only as good as the copper wiring that extends to each customer. Up to 45 percent of North American wire pairs are in some state of disrepair.

Vectoring has been described as “pixie dust” by Australia’s former Communications Minister Stephen Conroy. Conroy was overseeing Australia’s switch to fiber service as part of the National Broadband Network. But a change in government has scrapped those plans in favor of a cheaper fiber to the neighborhood broadband upgrade advocated by the new Communications Minister Malcolm Turnbull that resembles AT&T’s U-verse.

“Malcolm can sprinkle pixie dust around and call it vectoring and he can do all that sort of stuff but he cannot guarantee upload speeds,” Conroy told Turnbull.

As with all forms of DSL, speed guarantees are extremely difficult to provide because the technology only performs as well as the copper wiring that connects a neighborhood fiber node to a customer’s home or office. Upload speeds are, in practical terms, significantly slower than download speeds with VDSL2. Turnbull expected download and upload speeds on Australia’s VDSL2 network to be around a ratio of 4:1, which means a customer who has a download speed of 25Mbps per second would receive an upload speed of around 6Mbps.

In the lab, VDSL2 Vectoring delivers promising results, with speeds as high as 100Mbps on the download side. DSL advocates are excited about plans to boost those speeds much higher, as much as 1,000Mbps, using G.Fast technology now under development and expected in 2015. VDSL2 Vectoring and G.Fast both require operators to minimize copper line lengths for best results. Unfortunately, dilapidated copper networks won’t work well regardless of the line length, and with many telephone companies cutting back upkeep budgets for the dwindling number of customers still using landlines, an estimated 15-45 percent of all line pairs are now in some state of disrepair.

Assuming lab-like conditions, G.Fast can deliver 500Mbps over copper lines less than 100 meters long and 200Mbps over lines between 100 and 200 meters in length.

G.Fast also allows for closer symmetrical speeds, so upload rates can come close or match download speeds.

This cabinet houses the connection between a fiber optic cable and copper phone wiring.

Providers prefer the copper-fiber approach primarily for cost reasons. There are estimates deploying a G.Fast-capable VDSL service to a home would cost around 70 percent less than fiber to the home service. Workers would not need to enter customer homes either, offering less-costly self-install options.

Telekom Austria and Swisscom are among providers committed to launching the technology. Both countries are mountainous and have many rural areas to serve. Fiber rich providers are also looking at the technology for rural customers too costly or too remote to service with fiber.

Critics question the real world performance of both VDSL2 Vectoring and G.Fast on compromised copper landline networks. Decades of repairs, deteriorating insulation, corroded wires, water ingress, and RF interference can all conspire to deliver a fraction of promised speeds.

Many critics also point to the required aggressive deployment of fiber/VDSL cabinets — unsightly and occasionally loud “lawn refrigerators” that sit either in the right of way in front of homes or hang from nearby utility poles. To get the fastest possible speeds, one cabinet may be needed for every four or five homes, depending on lot size. Australia’s VDSL network, without Vectoring or G.Fast requires at least 70,000 cabinets, each powered by the electric grid and temporary backup batteries that keep services running for 1-2 hours in the event of a power failure. The batteries need to be decommissioned periodically and, in some instances, have caused explosions.

The costs of electric consumption, backup batteries, infrastructure, and maintenance of copper lines must be a part of the cost equation before dismissing fiber to the home as too expensive.

Verizon Voice Link

Verizon’s wireless solution for landline infrastructure damaged during last year’s Hurricane Sandy has not been a runaway success for the phone company, only attracting 120 customers on New Jersey’s barrier island.

After Hurricane Sandy damaged the telephone network on the peninsula, Verizon announced it would reinstate telephone service using Verizon Voice Link — a wireless landline replacement that works over Verizon Wireless’ network. The announcement was not well received by New Jersey residents — customers don’t want the service and after Verizon Wireless experienced a major service outage in Ocean County, N.J. in September, many don’t trust the service to be as reliable as the landlines it replaced.

Mantoloking resident Peter Flihan thinks Verizon delivered its own blow to the island, post-Sandy. Flihan has Voice Link, but after using it he says he wants his old landline back and is very unhappy with the performance of Verizon’s wireless replacement.

“They told us this was the greatest thing in the world,” Flihan told the New York Times.

But the service takes away more than it provides, argue consumer groups including the AARP. Flihan’s old landline worked during power outages, Verizon Voice Link only has two hours of backup battery talk time. Landlines reliably reach 911. Verizon is less confident about Voice Link, going out of its way to disavow any responsibility if a customer cannot reach the emergency number because of technical problems or network congestion. Data services of all kinds don’t work with Voice Link either, even the venerable old dial-up modem. Neither will fax machines, medical monitoring equipment, or home security systems.

Flihan complains Verizon’s Voice Link can’t even reliably manage the function it was designed for — making and receiving voice phone calls.

Flihan told the newspaper roughly 25 percent of the calls he makes through the landline replacement do not go through the first time he dials, or sometimes the second or third. Other times, calls are disturbed with unusual clicking sounds, static, and other voices breaking into the line.

Fire Island residents report Voice Link also misses incoming calls, refuses to ring phone lines and often sends callers straight to voice mail. Others get recordings or busy signals.

Verizon disclaims legal responsibility for failed 911 calls in its Voice Link terms and conditions.

Verizon’s attempt to retire landlines in high cost areas has proven to be a public relations debacle for the phone company. More than 1,700 negative comments have been received by the New York Public Service Commission about Voice Link’s performance on Fire Island. Politicians also delivered repeated lashings to the phone company, claiming Verizon was abdicating its responsibilities by seeking to offer second-rate phone service.

In New Jersey, residents at least have a choice. Verizon maintains a monopoly on Fire Island, but in New Jersey it competes with Comcast, which also provides phone service.

Lee Gierczynski, a Verizon spokesman, noted Verizon’s landline business suffered even before Hurricane Sandy arrived. The FiOS-less island has left Verizon with a 25 percent market share. Verizon Voice Link’s numbers are even lower. Gierczynski admitted Verizon Voice Link has only 120 (out of 540 affected customers) signed up on the island.

While Verizon has refused to invest in an upgraded network for impacted customers, Comcast issued a press release announcing major upgrades for the New Jersey shore.

Comcast upgraded 144 miles of infrastructure supporting the hardest hit communities, reopened renovated service centers with increased staffing and extended hours, increased the number of available service technicians, and provided free access to an expanded Wi-Fi network.

“We know that Hurricane Sandy complicated life for millions of people, and many of our employees and facilities were affected by the storm,” said LeAnn Talbot, senior vice president of Comcast’s Freedom Region. “We were here for the Jersey Shore during and immediately after Sandy, we have been here to support since then and will remain as a partner tomorrow and beyond as people and communities work to rebuild.”

This summer, Comcast introduced its X1 set-top platform, rolled out a new Wireless Gateway, added a home security option, and opened thousands of additional Wi-Fi hotspots across coastal New Jersey. Customers were also given a dedicated phone number to reach Comcast regarding its rebuilding efforts.

Comcast invited Verizon customers to switch to its telephone service and noted it works fine for faxing, security systems and medical devices.

But Mantoloking resident Christine Wilder still isn’t happy.

“I didn’t want Voice Link,” Wilder told the Asbury Park Press last summer. Wilder signed up for Comcast, but would rather have her copper landline back.

Unfortunately for Flihan and Wilder, although Fire Island residents’ loud displeasure drowned Verizon’s plans for Voice Link in New York, those affected in New Jersey are fewer in number. To date, their criticism of Voice Link has not made Verizon uncomfortable enough to change course as they have on Fire Island and bring a FiOS fiber network solution to Mantoloking and other affected boroughs.

That face “troubles” New Jersey Rate Counsel Stefanie A. Brand.

“I am not sure why New Jersey is not getting the same level of service as New York from Verizon,” Brand told the newspaper in September. “It’s not enough to simply say there is cable in Mantoloking; therefore we don’t need to meet our obligation. Why are they not willing to do it for similarly situated customers in New Jersey?”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Verizon Voice Link A Reliable Alternative 10-3-13.mp4[/flv]

Verizon produced this video defending Voice Link as a reliable alternative to customers experiencing persistent problems with their landline service. (2 minutes)

CenturyLink is seeking “greater flexibility” to set its own prices, terms and conditions of service without a review by Washington State regulators, even as its broadband customers complain about bait and switch Internet speeds and poor service.

Three years after the Monroe, La., based independent phone company purchased Qwest — a former Baby Bell serving the Pacific Northwest — CenturyLink continues to lose customers to cell phone providers and cable phone and broadband service. Since 2001, CenturyLink and its predecessor have said goodbye to 60 percent of their customers, reducing the number of lines in service from around 2.7 million to just over 1 million.

CenturyLink is apparently ready to lose still more after upsetting customers with a notice it intended to seek deregulation that could lead to rising phone bills.

Docket UT-130477, filed with the Washington Utilities and Transportation Commission (WUTC) proposes to replace currently regulated service with what CenturyLink calls “an Alternate Form Of Regulation.” (AFOR)

If approved, CenturyLink will “normalize” telephone rates in Washington State, language some suspect is “code” for a rate increase. For CenturyLink customers in cities like Seattle, Spokane, and Tacoma, the maximum rate permitted for basic phone service for the next three years will be $15.50 (unless a customer already pays more), before calling features, taxes, and surcharges are applied. Most observers, including the state regulator, suspect CenturyLink will limit rate hikes to $1-2 if approved. A higher increase might provoke more customers to leave.

Washington residents already pay the nation’s second highest taxes on wireless service. Now landline customers also pay more. (Graphic: The Spokesman)

“We don’t think they can do much because, in our view, all (a big rate increase) is going to do is accelerate people dropping the landline into their homes,” Brian Thomas, a spokesman for the Washington Utilities and Transportation Commission told The Spokesman-Review. “A lot of people are cutting the cord.”

Frontier Communications, which previously won its own case for deregulation within its service areas including Everett, Wenatchee, and Tri-Cities, raised rates about $1 beginning this month.

A spokesman for the company confessed Frontier’s phone service is becoming obsolete.

“It’s safe to say plain old telephone service is in the process of becoming archaic for some people,” Frontier’s Carl Gipson said. “Five years from now, it will be almost – but not quite – extinct.”

Every rate change seems to provoke a review of whether landline service is still necessary.

Earlier this year, CenturyLink jumped on board legislation that purposely increased phone rates by several dollars a month by removing the sales tax exemption on residential telephone service. Wireless companies did not enjoy the same exemption and sued for parity.

A confidential settlement with state regulators made Washington phone customers, instead of telecom companies, liable for the sales tax starting in August. As a result, some residential phone bills went up at much as $5 based on retroactively charged sales tax.

Customers sticking with CenturyLink often say it is the only broadband provider in rural towns across the state. Although better than satellite broadband, the lack of regulatory oversight and technology investments have allowed CenturyLink to sell Internet speeds it cannot provide to customers.

At a hearing held this week by the San Juan County Council, members criticized CenturyLink officials on hand for selling fast service but delivering slow speeds to the group of islands between the mainland of Washington State and Vancouver Island, B.C.

Hughes

“Last night I did a speed test at my house and I am paying for 10Mbps but only getting 4.74Mbps,” complained Councilman Rick Hughes (District 4 – Orcas West). “I am paying for 10 and I am only getting 5Mbps, so how is that fair? There has been a ton of frustration over the last two years we have worked on this broadband issue. Everywhere I go and every meeting I talk to all I hear is complaints about CenturyLink. No matter what they are paying for, it’s a poor broadband connection to the end customer.”

CenturyLink provides broadband to 88% of the territory the company serves in Washington. Like most telephone companies, CenturyLink relies on DSL in much of its footprint and has upgraded central offices, remote equipment, and the telephone lines that connect them. On the San Juan Islands, most customers used to receive 1-3Mbps, but CenturyLink claimed at this week’s hearing it spent billion on infrastructure improvements that can now deliver faster Internet service across the state. In San Juan County, CenturyLink claims:

• 58% of all qualified addresses were upgraded to 10-25Mbps;
• 66% now qualify for more than 10Mbps (but less than 25Mbps) versus 46% prior to upgrades;
• 29% of customers now qualify to sign up for 25Mbps service.

CenturyLink warned the council its speed claims were not to be taken literally, noting DSL “speed is dependent on distance from equipment; speeds drop quickly as distance increases.”

Hughes told CenturyLink officials residents appreciated the investment, but customers were still disappointed after being promised higher speeds than actually received.

“When people call customer service, there is always an excuse about why there is a problem,” said Hughes. “If people are paying for something, they want to receive it.”

“For our long-term financial interests in this county, we need to have reliable 10-25Mbps service to customers on any part of the islands,” Hughes added. “My goal has always been 90+ percent should be able to get 25Mbps or better connectivity in the county.”

The problem for CenturyLink is the amount of upgrade investment versus the amount of return that investment will generate. San Juan County is disconnected from the mainland and collectively house only 15,769 residents. But it is also the smallest of Washington’s 39 counties in land area, which can make infrastructure projects less costly.

CenturyLink committed to continue investment in its network “where economically feasible.”

San Juan County’s Orcas Power & Light Cooperative (OPALCO), a member-owned, non-profit cooperative electric utility may have a partial solution to the problem of meeting Return on Investment requirements.

OPALCO originally proposed a hybrid fiber-wireless system designed to reach 90% of the county with a $34 million investment, to be built over two years. When completed, all county residents would pay a $15 monthly co-op infrastructure fee and a $75 monthly fee for broadband and telephone service. To gauge interest, OPALCO asked residents for a $90 pre-commitment deposit. By the annual meeting in May, the co-op admitted only 900 residents signed up and it needed 5,800 customers to make the project a success.

Some residents balked at the high cost, others did not want wireless broadband technology, and some local environmental activists wanted OPALCO to focus on clean, affordable energy and avoid the competitive broadband business.

The lack of commitment forced the co-op to modify its broadband plans, offering a “New Direction” to residents in June 2013.

OPALCO elected to stay out of the ISP business and instead announced a public-private initiative, providing fiber infrastructure to existing service providers. In effect, the co-op will cover the cost of building fiber extensions where CenturyLink is not willing to invest. For a $3-5 million investment from the co-op, ISPs like CenturyLink will be able to commission OPALCO to build fiber in the right places to make DSL service better. CenturyLink would have non-exclusive rights to the fiber network and would have to pay the co-op a service lease fee.

Unlike ISPs in other communities that have shunned publicly funded fiber infrastructure, CenturyLink says it will contemplate a trial — buying bandwidth from OPALCO instead of enhancing its own fiber middle mile network — to test what level of improved service CenturyLink can offer customers.

Regardless of CenturyLink’s plans, OPALCO is moving forward installing limited fiber connections as part of an effort to develop a more modern electric grid.

“Our data communications network brings exponential benefit to our membership,” OPALCO notes. “It includes tools that allow the co-op to: control peak usage and keep power costs down, remotely manage and control the electrical distribution system, manage and resolve power outages more efficiently, integrate and manage community solar projects and improve public safety throughout the county.”

There are some drawbacks, reports Wally Gudgell from The Gudgell Group.

“It will take longer to implement, and will impact fewer businesses and households,” Gudgell writes. “While about two-thirds of the islands will eventually be covered, more remote areas will have to work with a local ISP and potentially pay more for service.  DSL coverage for homes that are further than 15,000 feet from CenturyLink fiber-served distribution hubs will be challenging. Some homeowners may need to pay for fiber to be run to their homes by Islands Network (fiber direct is costly, estimated at $20/foot).”

Frontier Communications is interested in buying landlines bigger phone companies like AT&T and Verizon might want to sell.

CEO Maggie Wilderotter sat down with The Wall Street Journal to answer questions about her leadership of the independent telephone company.

Despite ongoing landline disconnects and a challenging business environment that led to a second quarter loss of $38.5 million, Wilderotter says Frontier is “well positioned for success” and is willing to acquire new customers castaway by larger phone companies like AT&T and Verizon.

“I would do acquisitions only if they’re smart,” Wilderotter said. “We would buy assets that drive more scale. We would look at another carve out like the Verizon acquisition or acquiring stand-alone rural telephone companies.”

Frontier’s last acquisition in 2010 nearly tripled its size after picking up landlines sold off by Verizon Communications.

Independent telephone companies like Frontier are not just buyers, however. Wilderotter hinted Frontier has received offers encouraging a sale of the company, perhaps even one from a satellite provider like Dish Network or DirecTV.

“Other players [like] CenturyLink have similar assets,” Wilderotter said. “Some unconventional folks might look. The satellite category [for instance]. We have had conversations in the past. They weren’t the right offers.”

Many shareholders stay loyal to Frontier because the company pays a significant dividend to those holding stock. Anything that threatens the dividend typically drives Frontier’s stock price lower, so Wilderotter was quick to note any other acquisitions will not come at the expense of that dividend.

Wilderotter

“We would do acquisitions in a way that preserves the dividend,” Wilderotter said. “We might take on more debt instead.”

Frontier’s business plan relies heavily on selling service in less competitive rural areas often bypassed by large cable operators. Because of inherent network limitations created by copper telephone lines, Frontier maintains market dominance mostly in communities where cable service is not widely available or is provided over antiquated infrastructure unsuitable for significant broadband upgrades.

In the last two years, Frontier has spent several billion dollars to upgrade its own infrastructure to offer faster and more reliable Internet access, but the upgraded service is still out of reach for many Frontier customers who need it the most. In central West Virginia, Frontier customers in Gilmer (pop. 8693) and Braxton (pop. 14,523) Counties can’t wait to drop satellite Internet access for Frontier DSL. The infrastructure has been reportedly in place for several months, but the service has not yet been switched on.

Additional Frontier broadband expansion depends on company investment and federal broadband improvement funds.

In September, West Virginia’s congressional delegation announced an award of roughly $24.1 million in leftover federal funds to continue construction of broadband infrastructure in rural areas of the state.

“With help from the FCC, so many more of our families and businesses will soon have the transformative and necessary power of high-speed Internet at their fingertips, opening the doors to many new educational and economic opportunities,” said Democratic Sen. Jay Rockefeller.

Frontier also recently applied for an extra $28.9 million from the Connect America Fund to target broadband for another 47,000 homes and business in West Virginia.

Gilmer County, W.V.

If Frontier receives 100% of the requested amount, the Obama Administration’s broadband funding programs will have contributed $63 million towards service improvement in West Virginia.

Frontier Communications manager Daniel Page said the next target areas for broadband improvement are in Pleasants (pop. 7,605) and Ritchie (pop. 10,236) Counties, both in northwest West Virginia.

Wilderotter says 85% of Frontier customers now have broadband access available to them, up from 60% in 2011.

“Our goal is to be able to reach over 90%, probably by the end of this year or first part of next year,” Wilderotter said.

The biggest challenges facing Frontier over the next year?

“Technology disruption—and [industry players’] business models being challenged,” Wilderotter told the newspaper. “Customer expectations on how they utilize the Internet continue to morph as rich applications are made available.”

To manage increased traffic, Frontier can invest in capacity upgrades or start network management measures to limit subscribers’ Internet usage.

Frontier has run a usage limit trial in Kingman, Ariz., Elk Grove and Palo Cedro, Calif., Mound, Minn. as well as Cookeville and Crossville, Tenn. for over a year to measure bandwidth consumption by application type. In those areas, Frontier DSL is usage capped at 100 or 250GB per month. Customers exceeding their allowance are advised to either limit usage or convert to a “high user” service plan starting at $99.99 a month.

[flv width=”640″ height=”332″]http://www.phillipdampier.com/video/Fox Business News Frontier Broadband 8-8-13.flv[/flv]

Frontier CEO Maggie Wilderotter told Fox Business News in August the company was “laser focused” on broadband.  (5 minutes)