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FCC Approves Verizon Frontier Deal With Wimpy Conditions
4 Mbps DSL by 2015? How about ISDN by 2030? Carrier pigeon by 2040?
by Karl Bode 06:15PM Friday May 21 2010
With a late Friday announcement (the kind PR folk generally hope get lost in the weekend), the FCC has announced (pdf) that they've approved Verizon's $8.5 billion sale of more than 6 million DSL and landline customers to Frontier Comunications. Despite opposition by unions and consumer advocates who say the deal is good for Verizon only, West Virginia last Friday was the last state needed for deal approval. So what was the lofty conditions the FCC affixed to the deal? 4 Mbps broadband to 85% by 2015:
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3 Mbps downstream to at least 85 percent of transferred lines by the end of 2013, and actual speeds of at least 4 Mbps downstream to at least 85 percent of the transferred lines by the end of 2015, with all new broadband deployment offering actual speeds of at least 1 Mbps upstream...
Hopefully Frontier doesn't pull a muscle trying to deploy last-generation broadband technology to what will ultimately constitute a handful of additional households. In a statement (pdf), FCC boss Julius Genachowski proclaimed he was "pleased" by Frontier's willingness to play nice with regulators and their dedication to slow, last-generation DSL technology:
I am pleased by Frontier’s robust commitments to increase private investment in broadband in rural America; to deploy broadband with actual speeds of 4 Mbps downstream and 1 Mbps upstream, consistent with National Broadband Plan targets, to more than 4 million homes; to launch an Anchor Institution Initiative to provide fiber solutions of at least 1 gigabit per second to unserved and underserved libraries, hospitals, and public buildings; to direct new broadband universal service funding to households with no other option for broadband; and to make available to the Commission an unprecedented level of detailed data regarding Frontier’s deployment...
I am pleased by Frontier’s robust commitments to increase private investment in broadband in rural America
-Easily pleased FCC Boss Julius Genachowski
Of course more than a few people (including an Illinois Judge) have noted that the deal infuses Frontier Communications with so much debt that next-generation upgrades probably won't be possible anytime soon. As it stands, Frontier Communications isn't exactly know for cutting edge connectivity anyway -- delivering 3 Mbps DSL to most markets. What's more, the company recently launched a new over-charging "trial" that could result with those user paying up to $250 a month for last-generation broadband. Such aggressive billing schemes are only made possible by a lack of competition in a carrier's markets.

The company of course also has to suddenly deal with a huge influx of new customers that will triple its size. Companies like Comcast can generally attest to how that impacts your customer satisfaction rankings. Unions and consumer advocates alike are worried the entire deal could wind up like Fairpoint Communications, who acquired Verizon networks in New England -- and then subsequently imploded. For whatever it's worth, Genachowski says he takes these concerns "seriously" -- but found that the benefits of the deal outweighed the risks:
I take seriously concerns that have been expressed about the risks this transaction poses for consumers, employees, and competitors. The Commission has conducted a rigorous, data driven, transparent, and thorough review of the transaction, including a close look at potential transaction-specific harms and benefits. No transaction is without risk, and this one has its fair share. But based on our review, considering the issues and concerns with the status quo path and Frontier’s enforceable commitments to be good stewards of this vital infrastructure on behalf of consumers in its regions, we conclude that on balance the likely public-interest benefits outweigh the potential public-interest harms.
In other words, the FCC thinks these users are better off with a debt-crippled, marginally competent phone company that overcharges users but at least wants these users. As opposed to keeping these users under the control of Verizon, who has pretty clearly shown they couldn't give a damn about rural American broadband infrastructure. Still, the FCC could have taken the opportunity to impose a few conditions that raised the bar just a little (gosh, bonded ADSL2+ to 35%? 6 Mbps to 75%?). Instead, as with all U.S. mergers, they timidly assumed bigger was better, and chose conditions that were largely for show.

The last two Verizon efforts to offload unwanted markets (Fairpoint, Hawaiian Telcom) involved using a complicated financial trick (legal since 1996) known as a Reverse Morris Trust to thrust debt, angry regulators and annoyed unions onto fairly stupid small telco executives -- debt free. We use the editorially-aggressive term "stupid" because Verizon plans to return to these markets later and win these users back with LTE wireless broadband. That should work out nicely, given the partners involved will be so debt-crippled -- most users will still be on sluggish DSL by the time Verizon has their LTE network built out.

Frontier has continually insisted this deal won't end like these previous deals did (bankruptcy, users crying, carrier inability to answer the god-damned telephone). Users will soon get to see if that's true -- as Frontier expects the deal to close by July 1. Enjoy your ridiculously expensive 3 Mbps DSL, everyone.

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Sun Prairie, WI

2 recommendations

reply to FFH

Re: Alternative to sale is worse than the sale

And even if Frontier goes bankrupt, that will just lower costs to Frontier & allow Frontier to meet promises to the states and the FCC at lower cost; though the unions won't be real happy as their leverage for high paid contracts and benefits goes up in smoke.
And the execs will keep all of their bonuses and pensions, while the average worker will lose theirs and will suffer along with the customers who will get poor service. It is pretty ironic at how easy it is to abrogate a contract that covers thousands of people, yet the contracts that cover one person are held sacred.

The service levels are already eroding and will only get worse. Garages have already lost 50-75% of their seasoned techs as they are smart enough to know to get out under Verizon so their pensions{vested at 5 years} will not be lost when Frontier files for bankruptcy. Their positions are now being filed by CSRs, who are given 1 month of piss poor training and thrown in the field. This will be worse than either the Fairpoint or Hawaiin Tel Bankruptcies as it covers many more people across more of the country.

Maybe it will be the wake up call the FCC and Governemnt needs to get them to act on real Telecom/Broadband reform. It is time that the Cable Cos and Telcos are held to the same exact standards for all of their services. The semantics of POTS vs VOIP being different classes of services when provided by the Telcos and Cable Cos is tired and should not apply. Cable service is delivered thru a combo of Fiber and coax to to the premise--it is still a landline as it would not work without the premise connection. The migration to pure wireless service is still decades away due to limitations of distance, signal interference, bandwidth, and latency issues.