Frontier spent $8.5 billion in 2010 for Verizon’s DSL and landline customers, and is close to spending another $2 billion for AT&T’s Connecticut DSL and landline customers. As Karl noted several weeks ago, Frontier seems intent on growing just to grow, without much concern for customer support scaling or being able to upgrade aging DSL lines. Even though Frontier has tried their best to spin this deal as some sort of "win" for them and their customers, it is easy to see that even Frontier is running out of excuses to make this deal look good for Frontier.
In a recent article in the Hartford Business Journal, Frontier’s Chief Operating Officer bluntly conceded that Frontier simply wants market-share.
quote:
Daniel McCarthy, the company's chief operating officer, said in a recent interview that Frontier plans to try to grab market share — and possibly win back some cord cutters — through a combination of smart product pricing, geographic sales organization, and spending $60 million to upgrade Internet speeds in Connecticut's rural areas with the hopes of upselling customers."We're going to introduce products designed for cord cutters," McCarthy said.
Except Frontier isn't known for cutting edge speed or low broadband prices (well, unless you sign up for a
copper landline), and despite company rhetoric on network investment, can't afford to upgrade vast swaths of the territories they're busy buying just to impress investors with scale. Cord cutters aren't particularly interested in expensive 3 Mbps DSL lines force-bundled with a $40-$50 POTS line they don't want or need.
Other Frontier executives admit that the landline industry that they are buying into in Connecticut is not likely to "come back." To make matters worse for Frontier, Connecticut is one of the most saturated cable and Internet markets (over 90% of the state is covered) amid competition from Verizon, Comcast, Cox, Charter and others.
So, how exactly will Frontier make this work financially? On top of Frontier needing to borrow to finance the deal, Frontier will only repeat the same line of how their business operates at a "lower cost structure" than AT&T…with absolutely zero additional specifics.
There is one part of this “lower cost structure” that analysts seem to agree that Frontier will act on. Slashing jobs and offices across the board. Frontier President tried to calm fears of job losses and price hikes but instead made people more worried by stating that customers would see “changes” while not detailing what exactly those changes would be.
Connecticut state regulators still need to approve the deal.
