Verizon is continuing efforts to gradually retire its copper-wire facilities in parts of six states, replacing existing copper wiring with a fiber to the home network.

Verizon has notified regulators the company intends to drop support for traditional landline service, replaced with Verizon’s fiber-powered internet and digital phone service.

“As a general matter, the retirement of copper facilities will not result in changes to rates, terms, and conditions in cases where the affected service is converted to a like-for-like service that is available on fiber facilities,” Verizon told regulators.

The central offices affected (click bold link to get copy of list of affected addresses):

Massachusetts

Dorchester, Hyde Park, Milton, Roxbury and West Roxbury (Nov. 30, 2018)

Dorchester, Hyde Park, Roxbury and West Roxbury (Phase 2 – March 9, 2019)

Dorchester, Hyde Park, Roxbury, and West Roxbury (Phase 3 – June 28, 2019)

New York

Bedford Village (Oct. 1, 2018)

South Staten Island + 58 wire centers in: Queens, Brooklyn, Astoria, Corona, Manhattan, Bronx, Flushing, Forest Hills, Long Island City, Newtown, Staten Island, and Richmond Hill (Nov. 30, 2018)

47 wire centers in Brooklyn, Astoria, Manhattan, Queens, Corona, Flushing, Forest Hills, Bronx, Long Island City, Newtown, and Richmond Hill (March 9, 2019)

60 wire centers in Brooklyn, Manhattan, Staten Island, Bronx, Richmond Hill, Queens, Newtown, Long Island City, JFK Airport, Forest Hills, Flushing, Corona, and Astoria (June 28, 2019)

Pennsylvania

Bethel Park, Camp Hill, Carnegie, East Liberty, Enola, Middletown, Oakland, Paxtonia and Steelton (Nov. 30, 2018)

Pottsdown (June 28, 2019)

Rhode Island

Riverside (Nov. 30, 2018)

New Jersey

Mays Landing (March 9, 2019)

Virginia

Second Avenue – Richmond (March 9, 2019)

While celebrating its success at cutting $350 million in expenses, Frontier’s newest plan to keep the company from drifting towards bankruptcy is a $500 million increase in revenue (and hopefully profits) with a series of “revenue enhancements” and cost cutting.

Significant broadband upgrades in legacy DSL service areas are not on the table, as Frontier continues to spend most of its capital on matching Connect America Funds (CAF) and state grants to expand broadband into unserved and underserved rural areas.

“Approximately 80% of our capital program continues to focus on revenue generating and productivity enhancing projects,” said R. Perley McBride, Frontier’s outgoing chief financial officer. “The focus of our capital spending remains consistent. We continue to focus on our CAF builds, using both wired and wireless technologies.”

Frontier has been criticized by some for spending too much on its network and acquisitions and not enough on shareholder return. The company suspended its dividend in February, and the share price has remained below $6 a share since July. After announcing its latest quarterly results and a new $500 million EBITDA initiative on July 31, the average share price posted only modest gains of around $0.25 a share.

Frontier’s business remains troubled, with looming debt repayments in its future. The date to remember is Sept. 15, 2022 — the day Frontier needs to repay $2 billion in unsecured bonds to maintain its credibility in the credit markets. If it fails to pay, the company could find future financing difficult, which is often what triggers a trip to bankruptcy court.

The year 2022 is also very important to Californians. Frontier disclosed it planned to expand rural broadband service to 847,000 unserved/underserved rural residents by the end of 2022, with specific commitments in the next few years to upgrade 77,402 locations, in part with CAF funding, increase broadband speed for 250,000 households, and deploy newly available service to 100,000 homes.

Frontier’s own deployment goals in California — goals the company may not be honoring. (Image courtesy of: Steve Blum’s blog)

According to the California Emerging Technology Fund (CETF), Frontier has no intention of meeting its rural broadband commitments. In effect, similar to Charter Communications, it merely made the commitments to win approval of its acquisition of Verizon’s wireline and FiOS business in California.

A day of reckoning for the company’s alleged failure to meet its obligations is likely forthcoming. Steve Blum’s blog notes Frontier isn’t saying much:

In its formal response to CETF’s allegations, Frontier never actually says that it kept to that timetable. All it says is that “Frontier sent a letter to the Communication Division dated March 8, 2018 on its commitments that includes a confidential attachment reflecting completed locations through December 31, 2017”. It sent a letter, but doesn’t say what’s in the letter or even claim that the letter documents fulfillment of its obligations.

CETF told California regulators a disturbing story about Frontier’s failure to perform and other allegations in its filing with the California Public Utilities Commission, alleging Frontier is reneging on the deal it made with the state and various stakeholders in return for getting its acquisition approved. The group also accused Frontier of failing to deliver on its affordable broadband offering, because the company made signing up difficult and bundled extra fees and surcharges onto the bill.

“Frontier launched its existing affordable broadband offer in late August 2016 and to date only 9,173 adoptions have been achieved, a mere 4.5% of the 200,000 household adoption goal,” the CETF wrote. “Due to the initial Frontier eligibility requirement that Frontier customers be a telephone landline Lifeline subscriber and the total bundled cost, the affordable broadband offer has only attracted 7,452 low-income subscribers, which is 190,827 households short of the agreed-upon goal.”

Frontier has a employer turnover problem in California, evident from this filing by the CETF. (Courtesy: CETF)

The CETF said Frontier was “shirking” and should face the maximum fine of $50,000 a day retroactive to July 1, 2016 for failure to comply with its obligations. As of the end of July, 2018 that fine would amount to over $39 million.

To comply with existing obligations to California, Frontier could have to spend in excess of $1 billion in the next two years. But Frontier has told investors it planned to spend no more than $1.15 billion on capex in fiscal year 2018 across its entire national service area. This could explain why Frontier may be stalling on upgrades in California.

Also raining on Frontier’s parade is the muted reaction to Frontier’s latest money-raising scheme. Shareholders appear lukewarm, with some openly skeptical that Frontier can deliver what it promises.

The plan’s success depends on:

• Frontier’s ability to raise rates and find other “revenue enhancements” of $150-200 million. Rate increases drive customers to competitors, reducing revenue.
• Vague “operational improvements” are expected to bring $150-200 million.
• Customer care and support savings are anticipated to generate $125-175 million in EBITDA benefit.

Outgoing CFO McBride relies heavily on opaque corporate-speak like this, with few specifics:

“In addition to the dedicated resources, we are utilizing a new approach that will significantly accelerate the benefits of both revenue and expense initiatives. This new approach involves utilization of external expertise to significantly reduce the time to successfully realize our objectives. This will allow us to execute more initiatives in parallel while still managing day to day requirements of the business.”

In short, this suggests Frontier will outsource a lot of initiatives they used to manage in-house. The company also plans to start limiting truck rolls to customer homes if the company determines the problem is likely elsewhere in their network. It also claims it is cutting customer hold times at their call centers, which are still frequently outsourced.

What Frontier has made clear, again, is their determination to keep a cap on spending, which means much of the money Frontier will spend each year will go towards network maintenance, not service upgrades. Therefore, customers can expect incremental upgrades, usually when a construction project requires Frontier to replace existing copper wire infrastructure with fiber optics or at a building site for a new housing development. Most customers in existing neighborhoods served by legacy copper wiring on the poles since the 1960s will continue to be serviced by those lines until they are torn down in a storm or stolen. Frontier has consistently shown no interest in wholesale network upgrades in its legacy service areas.

Verizon Communications will bring fiber and enhanced DSL broadband service to an additional 32,000 New Yorkers in the Hudson Valley, Long Island, and upstate as part of a multi-million dollar agreement with the New York Public Service Commission.

When combined with an earlier agreement, Verizon has committed to bringing rural broadband service to more than 47,000 households in its landline service area, with the state contributing $71 million in subsidies and Verizon spending $36 million of its own money.

By the end of this year, Verizon expects to introduce high-speed fiber to the home internet service to 7,000 new locations on Long Island and 4,000 in the Hudson Valley and upstate regions.

“The joint proposal strikes the appropriate balance for consumers, Verizon and its employees,” said PSC Chairman John Rhodes. “The joint proposal builds upon and expands important customer protections previously approved by the Commission and it requires Verizon to expand its fiber network and invest in its copper network, both of which will result service improvements.”

The broadband expansion agreement will include copper reliability improvements in the New York City area, where FiOS is still not available to every home and business in the city. It also includes a commitment to provide fiber-to-the-neighborhood (FTTN) service in sparsely populated areas. This will allow Verizon to introduce or enhance DSL service capable of speeds of 10 Mbps or more.

Verizon has also committed to remove at least 64,000 duplicate utility poles over the next four years around the state. Utility companies have been criticized for installing new poles without removing damaged or deteriorating older poles.

For now, neither Verizon or the PSC is providing details about where broadband service will be introduced or improved.

The state has negotiated with Verizon for more than two years to get the company to improve its legacy landline and internet services, still important in New York. Verizon has complained that with most of its landline customers long gone, it didn’t make financial sense to invest heavily in older, existing copper wire technology. But Verizon suspended expansion of its fiber to the home network in upstate New York eight years ago, leaving many customers in limbo as landline service quality declined. There are still more than two million households and businesses in New York connected to Verizon’s copper wire network.

The state says the deal will “result in the availability of higher quality, more reliable landline telephone service to currently underserved communities and will increase Verizon’s competitive presence in several economically important telecommunications markets in New York.”

The upgrades will cover landline and broadband service improvements. Verizon has no plans to restart expansion of FiOS TV service.

The agreement was reached as the PSC continues to threaten Charter Communications with additional fines and Spectrum cable franchise revocation for failure to meet the terms of its 2016 merger agreement with Time Warner Cable.

Spending priorities: mergers & acquisitions, not upgrades.

Since 2012, two of the country’s largest phone companies spent enough money — $281.4 billion — to wire at least three-quarters of the  nation with fiber-to-the-home service and deliver vastly improved rural internet access to the rest of the country. Instead of doing that, AT&T and Verizon used the money to buy their competitors and content creators including AOL and Yahoo.

A 2017 Deloitte Consulting analysis estimates the United States will need between $130 and $150 billion in investment over the next 5–7 years to upgrade at least 75% of homes and businesses to fiber to the home service, with the remaining 25% serviced by technologies including 5G that are capable of delivering broadband speeds greater than the federal minimum standard of 25/3 Mbps.

AT&T could almost deliver the country a major broadband upgrade all by itself, having spent $138 billion on mergers and acquisitions in the past six years. Verizon could have easily handled the entire cost, but instead spent its $143.4 billion on business deals, including $130 billion to buy out former Verizon Wireless partner Vodafone. Among independent phone companies, things look equally bad. Frontier Communications is saddled with so much debt after acquiring former AT&T customers in Connecticut and Verizon customers in more than a dozen states, it has been forced to suspend its shareholder dividend and has been only able to make token investments in network upgrades for its mostly copper wire infrastructure in its original “legacy” service areas and a mixture of copper and fiber in acquired service areas. Both CenturyLink and Windstream have refocused many of their business activities on the commercial services marketplace, including the sale of hosting, business IT services, and cloud server networks.

More recently, both AT&T and Verizon have raced into content company acquisitions, buying up AOL, Yahoo, and Time Warner to offer their respective customers additional content. The phone companies are diversifying their business interests away from simply offering phone lines and internet access. At the same time, many of these acquisitions are depleting resources that could be spent on critical network upgrades.

The article in Light Reading claims the telecom industry’s traditional financial model of borrowing money to build networks and upgrade others is broken, because telecom companies now prefer to spend money acquiring other companies instead. Although AT&T has, in recent years, been more aggressive than Verizon in deploying fiber to home service, both companies have resisted committing large amounts of capital to a territory-wide fiber buildout, preferring to spend smaller sums to incrementally upgrade their networks in selected areas over the next decade. But the merger and acquisition teams at both companies are far less cautious, given the go ahead to pay handsomely for companies that often have little to do with providing telephone or internet service.

Light Reading reports AT&T’s debt climbed from $59 billion in 2010 to $126 billion at the end of 2017. Verizon’s debt increased from $45 billion to $114 billion. But those acquisitions have done little to attract new customers. Both companies’ operating cash flows have barely budged — $39 billion annually at AT&T (up from $35 billion) and Verizon’s actually declined from $33 billion in 2010 to $25 billion in 2017.

Mergers and Acquisitions (2011-2018)

AT&T

• 2012: AT&T buys $1.93 billion worth of spectrum from Qualcomm.
• 2013: AT&T buys Leap Wireless (Cricket) for $1.2 billion.
• 2014: AT&T pays $49 billion for the DirectTV, issuing $17.5 billion in debt in April.
• 2015: AT&T buys out assets from bankrupt Mexican wireless business of NII Holdings for around $1.875 billion.
• 2018: AT&T pays $207 million to acquire FiberTower.
• 2018: AT&T is cleared to merge with Time Warner in a deal valued at more than $84 billion.

Verizon

• 2011: Verizon acquires Terremark for $1.4 billion.
• 2014: Verizon buys out Vodafone’s 45 percent stake in Verizon Wireless, valued at $130 billion, with a mixture of stock and debt.
• 2015: Verizon buys AOL for a deal valued around $4.4 billion.
• 2017: Verizon acquires Yahoo Internet assets for $4.5 billion.
• 2017: Verizon buys spectrum holder Straight Path Communications for $3.1 billion roughly double rival AT&T’s offer, to build up 5G spectrum and footprint.

The more debt (and debt payments) that pile up at the two companies, the less money will be available to spend on fiber upgrades. In fact, there is evidence these companies are hoping to further cut costs in their core landline network operations. Some regulators have noticed. Verizon was forced to make a deal with New York regulators requiring the company to spend millions replacing failing copper-based facilities and upgrade them to fiber and remove or replace tens of thousands of deteriorated utility poles. Verizon faced similar action in Pennsylvania.

AT&T has spent millions lobbying the federal government to permanently decommission rural America’s landline network and replace it with a wireless alternative, while also working to replace the current regulated telephone network with deregulated alternatives like internet and Voice over IP phone service.

Wall Street analysts have occasionally questioned or at least expressed surprise over some of the phone companies’ odd acquisitions:

• Verizon acquired Terremark to beef up its cloud-based and server-hosting businesses. But shortly after acquiring the company, Verizon began replacing top management, sometimes repeatedly, and ultimately divested itself of its data center portfolio, including Terremark, just five years later.
• AT&T bought DirecTV to help it reduce wholesale TV programming expenses for its U-verse TV subscribers. But DirecTV has lost more than one million satellite TV customers since AT&T acquired it in 2014, despite new marketing efforts to convince would-be U-verse TV customers to choose DirecTV instead.
• Verizon saw value in web brands that were major players more than 18 years ago but are mostly afterthoughts today. The company spent almost $9 billion to acquire Yahoo and AOL, and their low quality content portfolios, which rely heavily on clickbait headlines, advertiser-sponsored content, and articles designed to maximize mouse clicks to boost the number of ads you see.

“The telcos are trying to diversify into content when they should instead be focused on their core business — building networks and charging for value-added technology,” said Scott Raynovich, founder and principal analyst at Futuriom. “It’s clear they see content as part of the value-add but customers so far don’t seem to be reacting that way. It’s clear they are allergic to paying higher prices for bundled content.”

AT&T and Verizon’s customers are not clamoring for more content deals. When surveyed, most want better internet service at more affordable prices.

A growing number of Frontier Communications employees are sharing their dissatisfaction working at a phone company that continues its decline with nearly $2 billion in losses and more than a half-million customers departing in 2017. Employees who find themselves in such challenging situations may explore legal remedies for hostile work environments.

According to Perelson, using proactive communication in the workplace increases the productivity of your staff and helps you stay ahead of potential speed bumps that can impede project completion.

Workers describe a deteriorating workplace with increasingly hostile and disappointed customers that want to take their business elsewhere, and employees that are increasingly frustrated and predict the company is headed towards bankruptcy.

“This is a company in a long-term decline, which is good and bad for workers and customers,” said ‘Geoff,’ a Frontier employee in California who wished to remain anonymous for obvious reasons. “It’s good because you know there is still some time left in case of a miraculous turnaround, but bad because like a glider slowly descending toward the ground, it is inevitably going to land or crash at some point in the not-too-distant future.”

Geoff was formerly employed by Verizon Communications before Frontier completed an acquisition of Verizon’s landline, fiber, and wireline networks in California in 2016. Now he’s employed full-time as a network engineer for Frontier.

“The trouble started almost immediately, because Verizon’s methodical, if not bureaucratic way of doing business was replaced with Frontier’s never ending chaos,” Geoff told Stop the Cap! “We were warned by techs in Connecticut, Indiana and West Virginia that Frontier’s management was very uneven, changes direction on various executive whims, and is very disconnected from mainline workers, and boy were they right.”

Geoff and his team, responsible for managing Verizon’s FiOS fiber network in Southern California, were split up after Frontier took over and put under severe budget restraints, which have grown tighter and tighter as Frontier’s economic condition deteriorates.

“Under good leadership, cost cutting can be an effective way to deal with wasteful, creeping spending that sometimes happens at large companies when budgets still reflect the priorities of several years ago, but Frontier just wants costs cut willy-nilly, including investments that actually save the company a lot of money, time, and frustration,” said Geoff. “Those cuts are also responsible for the deteriorating infrastructure and increasing failures customers are experiencing.”

“As a network engineer, I can see each day what Frontier’s network looks like and I talk to many other engineers at this company who are seeing much the same thing in their areas,” Geoff said. “If you live in an area where Verizon upgraded its network to fiber before selling it to Frontier, you will probably experience the least number of service problems, although the company’s billing systems are still troublesome. If you live in what Frontier calls its legacy (copper) markets, it’s a real mess and things are not getting better near fast enough, and customers are going elsewhere.”

Geoff’s views are shared by a growing number of hostile employee reviews being left on websites like Glassdoor. When cumulatively examined, those reviews show common points of complaint:

• Customers are treated to aggressive sales tactics, offered products and services they cannot use, while rushed off the phone when reporting service problems.
• Management is out of touch with employees and issue directives for new policies and services that cannot be easily managed from antiquated software and systems still in use at the company.
• Because company is performing poorly, managers can be very protective of their employee teams and attempt to keep them independent and insulated from management chaos. New employees perceive this as ‘cliquish’ and they often do not do well when assigned to one of those teams, as they are viewed with suspicion.
• Major cuts in training budgets have left employees with inadequate knowledge of Frontier’s own systems. In sales, this results in customers being sold plans they cannot actually get in their areas, incomplete orders, misrepresentation of pricing and product information, and customer trouble tickets being accidentally erased or left incomplete. Constant process changes are expected to be implemented by employees not trained to implement or manage them.
• No significant upgrades are coming, but employees are trained to tell customers to be patient for better service that is unlikely to be forthcoming.

Many employees share the view, “we’re all in the same boat, except that boat is sinking.”

The Better Business Bureau offers this advisory about Frontier Communications, which received a grade of “F” from the consumer organization.

“Sally,” who works at a Frontier internet support call center, tells Stop the Cap! she has noticed customers are getting increasingly hostile towards the company.

“The frustration level is enormous for customers and those of us tasked to help them,” Sally said. “Frontier markets itself as a solutions company and we sell a lot of ‘Peace of Mind’ support services for technology products, including our own, but sometimes the only answer to a problem has to come from the company investing in its facilities and not making excuses for why things are not working.”

Sally explains many Frontier customers do not have much experience troubleshooting technology problems.

“Most of my calls come from our rural customers who don’t have a choice in internet providers or are from lower and fixed income customers that cannot afford the cable company’s prices for internet access,” Sally said. “They know what they want to do with their internet connections but call us when they can’t seem to do it, whether that is sending email or watching video or using an internet video calling application to see their grandkids. You can only imagine what they feel when we tell them their DSL connection is unstable or their speed is too slow to support the application they want to use. We end up disappointing a lot of people because the internet and technology is moving much faster than Frontier is and our network just cannot keep up.”

Sally has been on the receiving end of profanity and a lot of slammed down phones, but there is little she can do.

“We can send a repair crew out but considering some of our lines are decades old, there isn’t much they can do about it,” Sally said. “This is a problem only management can solve and they’ve been distracted trying to deal with shareholders, acquisitions, and if you don’t mind me saying, being very preoccupied with their performance bonuses. We always know when another bad quarter is coming because of last-minute directives from top management designed to really push sales and hold on to customers to limit the damage. That is also around the time they start taking perks away from us in various cost-cutting plans. My co-workers are starting to leave because they don’t feel valued and do not want to work for a company in a long-term decline.”

“It seems like Frontier has just given up trying to compete with cable companies for internet services and now just sells internet to rural customers it can reach with the help of government subsidies,” adds Geoff. “It’s easy to do business with customers who don’t have any other choice for internet access.”