To complete an acquisition of landline assets in California, Florida, and Texas from Verizon Communications, Frontier Communications is hoping to raise $6.6 billion in “speculative-grade debt” to finance the deal.

Frontier will begin selling the securities better known as “junk bonds” starting today with a target date of Sept. 15 or 16 to complete the sale, according to Bloomberg News.

Wall Street raised its eyebrows at the amount of the transaction — the second largest junk-rated deal since Valeant Pharmaceuticals sold almost $10 billion in junk bonds in March.

Frontier plans to offer a high yield to attract investors – the kind that know how to invest in Amazon and other big companies, and some already favoring the company’s stock for its reliable shareholder dividend payout. Frontier has been a popular choice for investors relying on dividend income — money Frontier distributes to shareholders — that critics contend limit Frontier’s ability to improve its network of largely rural landlines.

Californian consumers are among those most concerned about a Frontier takeover of landline and FiOS service. Verizon ventured far beyond its original service area extending from Maine to Virginia after it acquired independent telephone networks operated by General Telephone (GTE) and Continental Telephone (Contel) in 2000. In 2015, the company wants to return to its core landline service area in the northeast.

David Lazarus, a consumer reporter for the Los Angeles Times, wonders how ratepayers will benefit from a Frontier takeover.

“Financial analysts are generally upbeat about the deal, but that reflects the projected benefits to the corporate players, not consumers,” Lazarus wrote.

Verizon’s claims the sale will help refocus the company on its “core markets” in the east and Frontier’s suggestion the Verizon acquisition will enhance Frontier’s footprint with “rich fiber-based assets” didn’t seem to excite Lazarus.

“I honestly wonder if corporate leaders know how ridiculous they sound when they spout such gobbledygook,” he added.

Lazarus suspects Verizon is worried the Obama Administration may eventually extend universal service obligations to broadband, which would force phone companies to deliver broadband to any telephone customer that wants the service, regardless of how much it costs to offer it. Universal Service remains an important legacy of wireline landline telephone service. Your landline survives under a regulatory framework not applicable to the wireless business, where both AT&T and Verizon Wireless now make the bulk of their profits.

As AT&T and Verizon ponder ditching high-cost landline customers, so long as there are companies like Frontier willing to buy, the deal works for both. Verizon gets a tax-free transaction that benefits both executives and shareholders. An already debt-laden Frontier satisfies shareholders by growing the business, which usually makes the balance sheet look good each quarter.

Even as Frontier takes on a massive new tranche of debt, in the short-term the more landlines Frontier acquires, the happier shareholders will be. More customers equal more revenue — revenue that can assuage fears of Frontier’s eye-popping debt load. That added revenue often also means a nice dividend payout to shareholders, unless that money has to be diverted to debt payments or network improvements. To manage these financial challenges effectively and secure the company’s future, consider seeking Proactive Business Insolvency Assistance.

Unfortunately, like a Ponzi scheme, Frontier will have to continue acquiring new landline customers from other companies indefinitely to make it all work. If it can’t, or if customers continue to flee Frontier for more capable providers, revenue numbers will worsen, only making the company’s large debt obligations look even more ominous. Some shareholders think Frontier’s days of paying very high dividends are already behind them as the company takes on even more debt. The value of Frontier stock has dropped 35% in the last six months. In the second quarter of 2015, Frontier reported losses of $28 million. Last year at the same time, Frontier reported $38 million in profits.

Those losses have to be reflected somewhere, and customers complain they are paying the highest price. West Virginians are among those that regularly accuse Frontier of chronically under-investing in broadband service in the state. Many rural communities obtaining broadband for the first time initially appreciated Frontier’s efforts, but have since grown critical of the performance of Frontier’s DSL service, which can slow to 1Mbps or less during the evenings because Frontier has oversold its network and not kept up with usage demands.

Frontier’s deal with Verizon allows it to acquire a large state of the art FiOS fiber to the home network Frontier has never been willing to build itself. Keeping an existing fiber network up and running is considerably less expensive than building one from scratch. That explains why Frontier customers in ex-Verizon FiOS areas enjoy relatively good service while legacy customers still connected to copper phone lines that were installed in the 1960s (or earlier) are stuck with uneven and slow-performing DSL that rarely meets the FCC’s minimum definition of broadband — 25Mbps. Where customers have a choice between Frontier DSL and another wired provider, most choose fiber or coaxial-based Internet service. Frontier’s rural service focus protects the company by limiting the effects of that kind of competition.

In the near term, Frontier’s biggest threat could eventually come from wireless 4G LTE broadband from AT&T and Verizon Wireless, if the companies can deliver an affordable service for rural residents without a punishing low usage allowance. That remains a big “if.”

(Illustrations by Chris Serra.)

Sandra Hartman has been a Verizon DSL customer for more than 10 years. She doesn’t have much of a choice.

In her small town outside of Binghamton, N.Y., Verizon is her only option. Time Warner Cable doesn’t come close to providing service in this part of upstate New York and cell service is abominable, even with Verizon and AT&T.

“I live in an area just large enough to have given Verizon the justification to offer DSL, but 3Mbps service is about all we have ever been able to get, but it has been better than nothing,” Hartman tells Stop the Cap!

Hartman signed up for a package that included $19.99 DSL with her landline a decade ago, a price that went up $10 after the sign-up promotion ended but has remained stable for years.

“Then Verizon decided to raise the price without improving the service,” Hartman says.

In fact, the price hikes have been fast and furious lately, beginning last fall when Hartman received this notice Verizon was raising the price to $34.99 a month:

Dear Valued Verizon Customer,

We realize you have choices when it comes to choosing your Broadband provider, and would like to take this opportunity to say thank you for being a loyal customer and for choosing Verizon.

In order to continue to bring you quality service and product innovation, at times we need to raise our rates. Your monthly rate will increase by $5.00 and will be reflected on your bill within the next two months. This rate will remain in effect for one year. If you currently have any credits or discounts on your account, these will remain in effect until their original expiration date.

If you would like to review your account to see if you may qualify for additional savings or if you have any questions, please log on to verizon.com/myverizon or give us a call at 1.888.213.9932.

We value you as a customer and look forward to continuing to serve you.

Sincerely,
Your Verizon Team

“What choices?,” Hartman wondered. “We have no choice and after the rate increase, we’ve seen no improvement in the quality of the service or any evidence of Verizon’s ‘product innovation.’ It’s the same DSL service we’ve had for a decade — we’re just paying $60 more a year for the same thing.”

In the unusual case of Pennsylvania, Verizon is required by law to offer access to broadband to any customer that wants the service by the end of 2015. This map shows Verizon’s service areas in green, 96% of which now have access to at least DSL service. That same requirement is absent in most states.

To save money, Hartman downgraded her Verizon landline to the cheapest possible plan and switched to Voice over IP provider Ooma, which works over her DSL line. But Verizon is now back for more with another rate increase notice — this time looking for another $7 a month starting this fall, putting the price of 3Mbps DSL up to $41.99 before fees, surcharges, and taxes.

“I called Verizon and they told me rates are reviewed ‘for competitive reasons’ and reflect the cost of providing the service, which is apparently now up another $84 a year,” she said. “Verizon’s equipment, sitting in the elements on a phone pole or humming away in their phone office actually appreciates in value it seems. I wish my 10-year-old laptop was worth more today than the day I bought it, but my laptop wasn’t made by Verizon.”

Hartman complained to customer service the successive rate increases do not seem to be spent on any improvements. In fact, it seems Verizon is no longer accepting new DSL customers in her area.

“A real estate agent friend of mine told me selling homes in this town has gotten difficult because Verizon will simply not sell DSL to new customers here, claiming they have no capacity,” Hartman said. “If you can’t get DSL from Verizon, you don’t have broadband service, it’s as simple as that.”

DSL availability from Verizon is not just a problem for Hartman. Several central offices in upstate New York no longer accept new Verizon DSL customers, claiming the service is at capacity. Some customers in the Finger Lakes region keep DSL service year-round at their seasonal cottages, fearing if they suspend service for the winter they will not get it back next spring. Time Warner Cable offers service to many lakefront properties, but those who own cabins and homes away from the lakeshore usually cannot get cable service and depend on Verizon for service.

The Verizon DSL forum on DSL Reports has more examples of customers that discover their entire exchange is no longer qualified to get Verizon DSL. One such example is in Purcellville, Va., west of Washington, D.C., a quick drive to the Maryland and West Virginia borders.

“DSL suddenly has disappeared from my wire center entirely – regardless if your 10 feet from the CO or out of a remote terminal with a DSLAM,” wrote Zenit. “Even the industrial section of town which has its own fiber fed DSL equipped RT shows negative for service, and there are plenty of vacant units there.”

Similar stories were reported in communities like Pittsfield, Mass. and Netcong, N.J.

Customers have been able to push back against Verizon’s price increases, especially in competitive areas. Some customers are switched to lower cost bundled packages while others are given straight service credits that lower a customer’s bill. Customers need only ask Verizon for a better price and let them know you are shopping around for a better deal.

”After considering all of our options, your leadership has decided not to go on strike at midnight tonight, even though we have not yet reached a contract agreement,” came word Sunday from Dennis Trainor, vice president for CWA District One, which represents Verizon workers in New Jersey, New York and Massachusetts.

Verizon’s workers will stay on the job for now, launching a new strategy that will include sharing information with customers about Verizon’s unwillingness to invest in FiOS fiber expansion and improved broadband and phone service. The PR war will extend not just to customers but also to the media, politicians, and regulators. The union’s message: “Verizon’s greed knows no bounds.”

“Despite $18 billion in profits over the last 18 months, and a quarter of a billion in compensation to its top executives over the last five years, this greedy corporation is still insisting on destroying our job security, forcing us to pay thousands of dollars more for our health care, and slashing our retirement security,” Trainor said in a bargaining update. “It’s a disgrace.”

“But we are not going to let our anger allow us to walk into a trap,” Trainor added. “It’s quite possible that Verizon is trying to provoke us into a long strike in order to try to break us. They have spent tens of millions of dollars preparing for a strike, training managers, hiring scabs and contractors, advertising against us on TV and radio. So your leadership has decided that if and when we strike, it will be on our terms, on our timing.”

Verizon’s FiOS expansion is still dead.

The union wants Verizon to expand FiOS throughout the company’s entire service area, not just a select few communities and wealthy suburbs. That’s a win for customers and for workers running fiber optic cables, installing and maintaining the service, according to the union. A series of radio ads from the CWA are running in New York and Pennsylvania telling customers “you just can’t trust Verizon” after the company failed to bring FiOS service across both states.

The CWA says the New York mayors of Albany, Syracuse, Kingston, Rome and Utica, as well as the town supervisor of Brookhaven, have joined the CWA in sharing their concerns Verizon has refused to build out its FiOS broadband and TV services across upstate New York, leaving customers with a neglected legacy copper network Verizon barely maintains.

Verizon spokesperson Rich Young attacked the CWA’s efforts to bring politicians looking for better broadband from Verizon into the negotiating process.

“The CWA owes these mayors an apology,” Young said. “These elected officials should be outraged that union leaders wasted their time attending a negotiating session today that had nothing to do with FiOS. Unfortunately, the mayors were seemingly misled to think FiOS deployment is an issue that’s being negotiated. It’s not. Sadly, it seems the mayors were just a ploy as part of this bargaining publicity gimmick.”

Sheil

“I can assure you, none of these mayors were misled,” said Kevin Sheil, president of CWA Local 1103. “Does the company really believe that the mayor’s constituents need for reliable High Speed Internet so underprivileged children could have additional educational opportunities is a union gimmick, or do they just not give a shit about the consumers in their footprint.”

Union officials expressed concern about Verizon’s latest contract offer, which would allow the company to transfer employees to any Verizon service area, in or out-of-state, on short notice. The union also noticed Verizon is limiting job opportunities in rural service areas, which could be another clue Verizon is planning to eventually sell off much of its rural landline network to another company. Some utilities that have experience fighting over infrastructure issues like telephone poles believe all signs point to Verizon’s exit of the landline business to focus on more profitable wireless service instead.

Union officials admit they could be in for a long fight with Verizon before another contract is signed. The hostility is coming from both sides. Verizon took heat for creating what the CWA is calling a “spy app” it has distributed to non-union employees to document and report bad behavior by union workers if a strike occurs. The app records a photo and the time and exact place of any vandalism or intimidation non-union workers encounter, and asks the user to write a short incident report that will be sent to corporate security.

The Communications Workers of America is running this radio ad slamming Verizon’s lack of FiOS deployment in Pennsylvania. (0:30)

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

“Verizon should stop focusing on clever new ways to fire people and start focusing on bargaining in good faith towards a contract that protects workers’  job security and standard of living, and ensures that every customer is getting the highest quality service,” said Bob Master, legislative and political director for CWA District One. “The company’s petty attempts to intimidate workers do not bring us any closer to a fair collective bargaining agreement.”

Amy Seifer, Verizon associate general counsel for labor and employment, told RCR Wireless News, “The app serves three primary purposes: the first is a means for our management employees to report or document an unsafe situation, unlawful act, or violation of our code of conduct, and it will also be used by managers who have been assigned into these union positions for the duration of the strike to ask questions about installations or repairs they are handling. It also provides a means for our employees to submit suggestions on process improvements.”

“The answers [they receive in response] will be wrong anyway,” countered Ed Mooney, vice president of CWA District 2-13 on a town hall conference call.

Seifer did admit the app’s primary purpose was to assist non-union workers taking over during a work stoppage.

“If we get reports of misconduct, our corporate security office will do a thorough investigation then determine a course of action whether that’s suspension, termination or no action at all will be based on the outcome of the investigation,” Seifer said.

“We will rally, engage in informational picketing, build political and regulatory pressure on the company, follow all the company rules to the letter, never take shortcuts, pressure company executives and members of the board of directors,” said Trainor. “We will be disciplined, militant and united. This was not an easy decision. But it is the smart decision. And if and when the time comes, we will strike the company on our terms.”

The Communications Workers of America is airing this radio ad across upstate New York, telling consumers they were bypassed for Verizon FiOS because of the company’s broken promises. (0:30)

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

Zibelman

After the N.Y. Public Service Commission heard an earful about Verizon’s broken promise to deliver FiOS service to every resident in New York City, the head of the PSC has sent a letter to Verizon reminding them of their obligation and requesting an explanation:

At a recently conducted July 15, 2015 Public Statement Hearing held in the City of New York in the matter of the Study on the State of Telecommunications in New York State […] citizens of the City expressed concern over the pace of Verizon New York Inc.’s (Verizon) Fiber-to-the Premises (FTTP) build-out. Some of the commenters stated that they called Verizon to find out when FiOS would be available in their building and the Company could not provide a specific date or time. Others asked why some buildings had been wired for FiOS while others were still being served over the copper network.

Among the Commission’s minimum requirements and terms included in the approval of Verizon’s cable franchise agreement with the City, is the requirement to complete upgrading its wire centers to video serving offices (VSO) and have its FTTP network “pass all households served by [Verizon’s] wire centers within the Franchise Area” 1 by no later than June 30, 2014.

Audrey Zibelman, chair of the PSC, acknowledged Verizon’s repeated explanation that building owners have often been reluctant to let Verizon engineers into their buildings to initiate the FiOS upgrade, noting Verizon has filed more than 45 petitions for Order of Entry with the PSC over the past two years, identifying over 3,000 buildings with “access” issues of one type or another. Approximately 50% of the building access problems have been identified in Manhattan; about 20% each in Bronx and Queens; 13% in Brooklyn, and the rest in Staten Island and Long Island.

But Zibelman assumes at least some of those disputes have since been settled and now wants details about where Verizon is still unable to offer FiOS in New York City and why. She also wanted to make sure Verizon was not favoring certain areas over others for fiber service:

The agreement also provides that Verizon will conduct the build-out in a way that will prevent redlining, or discrimination based on income, by requiring Verizon to build-out simultaneously to all boroughs and in a manner relatively proportionate to household income. Specifically, the median household income of all homes passed shall not be greater than the average household income of all the households in the City.

“Indicate whether Verizon has achieved its six-year build-out in the cable franchise agreement,” Zibelman asked. “If Verizon has not achieved that build-out, please provide all documentation that Verizon provided to the City to justify the basis for any delay. In addition, please provide a current status of the FTTP build-out, by Borough, indicating the percentage and number of buildings served, and the remainder of buildings yet to be served. Provide a status update of the buildings identified in previous Verizon petitions for Orders of Entry.”

Zibelman reminded Verizon it has an absolute obligation under 16 NYCRR §895.5 to “provide service to any customer upon request.” To verify that, Zibelman wants Verizon to accept and record all requests for service and respond to all of her concerns within 14 days.

[flv]http://www.phillipdampier.com/video/WNBC NY Verizon FiOS Not Installing High-Speed Internet for 25 Percent of NYers Who Want It Audit 7-15-15.flv[/flv]

WNBC in New York reports a quarter of New Yorkers still cannot sign up for Verizon FiOS, despite a commitment from the company to wire the entire city. (2:01)

Verizon workers attend a mass rally at Verizon headquarters on July 25, 2015. (Image: CWA)

If Verizon management and its unionized workforce cannot come to terms on a new contract by this Saturday, up to 39,000 Verizon landline workers from Massachusetts to Virginia will begin a strike industry observers predict could last for weeks.

Verizon Communications has increasingly shifted attention and investment away from its wireline networks, which include copper landline service and its FiOS fiber to the home network. The workforce of line technicians, installers, and engineers that are trying to keep Verizon’s wired networks running well are under pressure to accept concessions the company says reflect the reality of a dwindling number of landline customers and competition for its FiOS network.

As of Monday, representatives for the Communications Workers of America District 1, the International Brotherhood of Electrical Workers (IBEW) Local 2213 and IBEW New England Regional committees continued to call out Verizon for insisting on a list of benefit and job security reductions:

• Eliminating protections against layoffs and mandatory transfers/temporary reassignment to different Verizon service areas, including those in other states;
• No Cost of Living increases;
• Adding Sunday as part of the basic work week;
• Possible elimination of corporate profit-sharing;
• Eliminating caps on overtime and limiting payouts to 1.5x regular pay;
• Reduce the notice given to workers if Verizon has plans for any major technological change (ie. getting rid of rural landlines, selling FiOS, moving customers to wireless, etc.);
• Reductions in medical benefits including higher deductibles, co-pays, premiums, and co-insurance;
• Eliminating the union’s ability to negotiate retiree health care benefits, often at risk in other companies;
• Eliminate the lump sum pension option and introducing new restrictions on pensions and new fees on 401K plans;
• Eliminate accidental disability coverage;
• Eliminate family care leave.

Verizon spokesman Rick Young countered that Verizon has offered workers a straight 4% wage increase but admitted many existing contract provisions are decades old and no longer reflect current business reality. Young added Verizon union network technicians are paid $160,000 a year on average in total compensation, including salary, pension and health care. But Verizon management is insistent on cutting back the company’s health care costs, noting Verizon successfully reduced the cost of covering nonunionized workers to about $16,700 per family while union workers still receive coverage worth $20,000-24,000 a year per family.

Union officials counter Verizon was able to manage that by slashing non-union employee benefits and forcing workers into high deductible medical plans that offer lower levels of coverage. In 2011, Verizon fought its unions over the same issues, including a company demand workers accept health care plans with a $5000 out-of-pocket deductible before medical coverage kicked in. That led to a contentious two-week strike.

“Negotiations are going poorly,” Communication Workers of America’s Bob Master told CBS News this week. “We are far apart.”

With 86 percent of union members voting to strike if negotiations fail, it seems an almost certainty workers will be on the picket lines by next week if negotiations remain unsuccessful. Workers believe Verizon’s profits have been shared mostly at the top through executive bonuses and ever-increasing compensation packages while ordinary workers are asked to forego benefits and job security.

In solidarity with Verizon customers, the unions are also fighting to force Verizon to further build out its FiOS fiber network to more customers and stop allowing its copper network to deteriorate to the point of unusability.

“On the one hand, Verizon refuses to build its high-speed FiOS network in lower-income areas and on the other, they are systemically ignoring maintenance needs on their landline network,” said Ed Mooney, vice president for CWA District 2-13, which covers Pennsylvania to Virginia.  “This leaves customers at the mercy of a cable monopoly or stuck with deteriorating service while Verizon executives and shareholders rake in billions.”

Trainor

A highly critical audit of Verizon’s FiOS rollout in New York City found that Verizon failed to meet its promise to deliver high-speed fiber optic Internet and television to everyone in the city who wanted it, claims the union.  During its negotiations for a city franchise, Verizon promised the entire city would be wired with fiber optic cables by June 2014 and everyone who wanted FiOS would get it within six months to a year.  The audit found that despite claiming it had wired the city by November 2014, Verizon systematically continues to refuse orders for service.  The audit also found Verizon stonewalled the audit process.

The CWA also contends rates for basic telephone service have increased in recent years, even as Verizon has refused to expand their broadband services into many cities and rural communities, and service quality has greatly deteriorated. Verizon’s declining service quality especially impacts customers who cannot afford more advanced cable services, or who live in areas with few options for cable or wireless services.

But the company is not hurting for money, argues union officials.

“Verizon made $9.6 billion in profits in 2014 and reported $4.4 billion in profits just in the 2015 second quarter alone,” said Dennis Trainer, vice president of CWA District One in a statement.

“In 2012, during a time of great economic stress, the company came to the union and after 15 months of bargaining, including mediation, reached an agreement that the company said they had to have to survive,” wrote an official updating workers represented by CWA District 2-13 (Mid-Atlantic region) in a bargaining update. “Since then, every year they have made billions of dollars in profits and not one executive officer at Verizon has made a single sacrifice like they told us they needed us to do. The latest insult being [Verizon CEO] Lowell McAdam getting a 16% raise in one year while we have paid more in healthcare, lost pensions for new hires, froze pensions for current members, made significant changes in incidental absence payments and made other changes to our contract that have resulted in stressful working conditions and excessive discipline to our members.”

CWA officials in District 1, representing New York and New England workers, were more blunt in responding to an unsolicited email sent to every worker signed by Marc Reed, Verizon’s executive vice president and chief administrative officer.

“Reed suggests in his e-mail that he has a concern for you and your family,” wrote one official. “Ask yourself, if he really gave a shit about you and your family why is he proposing to gut the contract that provides for you and your family.”