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story category Regulators Nervous About Verizon/Frontier Deal
Though Frontier insists this deal will be different...
09:25AM Thursday Aug 27 2009 by Karl Bode
tags: business · consumers · Verizon FIOS · Verizon Online DSL · FrontierNet Internet Access
When Verizon divested their landline networks in Hawaii, the result was a largely dysfunctional company named Hawaii Telcom that struggled under the load and filed for bankruptcy last December. When Verizon divested their landline networks in Maine, New Hampshire and Vermont last year, the result was a largely dysfunctional company named Fairpoint Communications that struggled under the load and has very serious problems.

As such, obviously, everybody's concerned that Verizon's latest effort to offload unwanted (largely rural) DSL, FTTH and landline customers to Frontier Communications will also end badly. The $8.5 billion deal, announced back in May, will eventually infuse Frontier with 4.8 million new residential and small-business phone lines and 1 million broadband connections. 11,000 Verizon employees will be transferred. Frontier currently has just 2.3 million customers.

Nothing has really changed yet. Strangely, Verizon's still even deploying FiOS in areas that will ultimately be sold to Frontier in Washington State. Local Washington regulators are well aware of the problems that plagued Fairpoint and Hawaii Telcom, insisting to local reporters that "we're doing everything we can to prevent that here." Frontier, meanwhile, continues to insist they're nothing like Fairpoint, given they have a better bankroll.

But according to the Cleveland Plain Dealer, local consumer advocates in the state aren't so sure. "We are concerned that Frontier will not be able to afford to maintain and improve residential customers' service," says Ohio Consumers' Counsel Janine Migden-Ostrander. "We need a guarantee that consumers' needs will not be on the back burner," she said in a statement.

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  8. Verizon Again Hints At Metered Billing
Forums » Regulators Nervous About Verizon/Frontier Deal
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EPS

join:2008-02-13
Hingham, MA

VZ Spinoffs

You didn't complete the trio of Verizon spinoff failures- when Verizon divested its phone book publishing business, the result was a largely dysfunctional company named Idearc that struggled under the load and filed for bankruptcy...

All I can say is, the VZ shareholders who end up with shares of Frontier should sell them ASAP... I forsee them plummeting shortly after the spinoff completes, and not going back up.
Bob61571

join:2008-08-08
Washington, IL
·Verizon Online DSL
·DIRECTV

Why I'm Nervous

Verizon was cause of summer street construction delays in 2 Peoria, Illinois area towns. A 7-week delay and a 8-week delay.
Are these related, in any way, to the Verizon/Frontier deal?

1)7 week delay in Washington, Illinois
»www.washingtontimesreporter.com/···ext-week

Quotes from Washington, IL article above:
+++++++++++++++++++++++++++++++++++++++++++++
Construction on North Cummings Lane is seven weeks behind, and traffic will be rerouted beginning Monday in an effort to expedite the project.

Work on the roadway has been suspended since June 1 due to “Verizon’s prolonged delays in relocating its underground phone cables,” said city administrator Bob Morris.

City engineer Ken Newman said the phone company finally moved the cables Friday, and work on the sewer system was expected to resume Tuesday, weather permitting.
Work on the sewer system should be completed by the end of the week, allowing road construction crews to resume their work next week.

“They tell us they have everything out of the way, and I hope we don’t run into anything more,” Newman said.

Still, Newman said, it has been a “frustrating process,” and Verizon had no excuse to delay its responsibilities for nearly two months.

The telephone company had frequent communication, including several pre-construction meetings, with city officials in the months leading up to the project, Newman said.

Morton also reportedly had problems with Verizon and has had to postpone a project on East Jefferson Street because of the phone company’s failure to relocate its utilities.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++

2) 8 week delay in Morton, Illinois
»www.mortontimesnews.com/news/x18···e-months

Quotes from Morton article above:
++++++++++++++++++++++++++++++++
Superintendent of public works Bob Wraight said the project is starting about eight weeks later than planned because Verizon workers discovered phone wires in an unexpected area of the street.

“We had engineers out there last fall and didn't see it and Verizon didn't know it was there either. The cables have been relocated and moved now, but if we cut that, the whole east end of town would be out of service,” Wraight said.
++++++++++++++++++++++++++++++++++

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN

Re: Why I'm Nervous

Neither problem is related to the sale. Both jobs would be required to be performed long before the Frontier deal would ever be considered close to being completed. Stalling would have done nothing except cause further issues with franchising authorities and building departments. While the delays were probably unreasonable, in the second case it's not all that uncommon. It happens with many utilities where the lines are misplaced, forgotten about over time, etc.

spewak
R.I.P Dadkins
Premium
join:2001-08-07
Elk Grove, CA
·SureWest Internet
·FrontierNet Intern..

Lining 'em up

Frontier is next in line to fail.
Heck, they already fail at offering supposed broadband. Even if, as the article states that Frontier has wads of cash, they will reduce service to the point of frustrating their new customers.
Guaranteed!!
--
The weekend is here, grab a can of beer!

pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD
·Comcast

Shrug

Verizon can't be blamed for the failures of the companies that buy its assets.

I am guessing that customers in affected markets probably got tired of the buying company's inability to offer service at the price demanded and simply moved to competitors like voip and cell service.
--
Blagojevich / Madoff 2012!
Nuts

join:2006-04-27
Forest, OH

Re: Shrug

What competition.

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN

said by pnh102 See Profile :

Verizon can't be blamed for the failures of the companies that buy its assets.
From a business and legal standpoint, I would agree. However from a regulatory standpoint, regulators need to look at the situation not as can Verizon be blamed, but rather can the spun off assets be supported and maintained long term by the new owner. With Fairpoint and Hawaii, both examples where treated similarly to how the Frontier is shaping up. Regulators need to look at what may or may not make this sale different, or why the outcome might be different in this case as compared to those transactions.

N O Y B
St. John 3.16

join:2005-12-15
Forest Grove, OR


4 edits

Re: Shrug

Rather than the regulators spending a bunch of effort on this, I can help them out for free.

The result will not be different than Farpoint and Hawaii. There, now they don't need to waste everyone's time and effort. They need to put a stop to this nonsense right now.

Farpoint going from 2.3 mln to 7.1 mln subscribers (more than 3 times current size). Get real. Somebody's eyes are bigger than their stomach.

--
Be a Good Netizen - Read, Know & Complain About Overly Restrictive Tyrannical ISP ToS & AUP »comcast.net/terms/ »verizon.net/policies/
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Its a Secret
Whatever
Premium
join:2008-02-23
U B Funny
·Shaw

said by pnh102 See Profile :

Verizon can't be blamed for the failures of the companies that buy its assets.
They can when the company that buys the assets doesn't have a pot to piss in. Time to regulate. Again.

When will people learn?
--
"In the future, that which is not mandatory will be illegal"
"Nobody knows the age of the human race, but everybody agrees that it is old enough to know better" - Anonymous

pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD
·Comcast

Re: Shrug

said by Its a Secret See Profile :

said by pnh102 See Profile :

Verizon can't be blamed for the failures of the companies that buy its assets.
They can when the company that buys the assets doesn't have a pot to piss in. Time to regulate. Again.
How will regulating help? In all the situations described by the article summary, it was the regulators which made the decisions to allow for companies which couldn't do the job to buy the assets.

The regulators should have known better.
--
Blagojevich / Madoff 2012!
Sammer

join:2005-12-22
Canonsburg, PA

said by pnh102 See Profile :

Verizon can't be blamed for the failures of the companies that buy its assets.
No but the regulators who approved the deals in HI, ME, NH, and VT certainly can be blamed. The regulators were warned of the potential for failure resulting from those deals and the regulators are being warned about the Frontier deal so what's the difference?

N O Y B
St. John 3.16

join:2005-12-15
Forest Grove, OR

Doomed & Dumb

Does not take much thought to realize just how doomed and dumb this is.

4.8 mln subscribers Verizon deems not profitable enough to keep, being pawned off onto a company with less than half that many subscribers. Yeah you bet, that will be successful. NOT!

--
Be a Good Netizen - Read, Know & Complain About Overly Restrictive Tyrannical ISP ToS & AUP »comcast.net/terms/ »verizon.net/policies/
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PDXPLT

join:2003-12-04
Banks, OR

Re: Doomed & Dumb

Well I have nothing to lose. Verizon is unwilling to sell to me the only service I wish to buy from them - broadband.

In the worst case, Frontier will also be unwilling to sell me broadband. So I've lost nothing.

Every other residential service Verizon/Frontier sells (voice, TV), I can buy elswhere, each from a number of different suppliers.
dlarkin_dc

join:2009-08-24
Alexandria, VA
·Cox HSI

Smart Business Strategy, but is immoral or illegal?

Sure, regulators and customer alike should be very afraid. It's the same VZ play all over again.

Step 1.
Verizon is immediately unburdened from supporting landline services and shrinking customer base to VOIP.

Step 2.
Meanwhile, keep deploying FIOS in the same reigon.

Step 3.
Then when the local telcos spin-out VZ pick up customers' telephone business on newer FIOS, then charging landline rates for what is, essentially, a VOIP service.

It seems too easy spin off the landline user base as a commodity to a small-fish company that doesn't know it's getting into or greedy enough to want it more than they can handle it.

Regulators should focus on keeping companies honest, both VZ and telcos, and cutomers protected.
jadziedzic
Premium
join:2005-12-12
Nashua, NH


1 edit

Re: Smart Business Strategy, but is immoral or illegal?

said by dlarkin_dc See Profile :

Step 2.
Meanwhile, keep deploying FIOS in the same reigon.
In the three-state northern New England area all of the assets - including fiber - were included in the sale. It would have been great had Verizon decided to keep the fiber part of the assets, but there aren't that many large communities around here to make it worth their effort to separate the FiOS product from the landlines.
dlarkin_dc

join:2009-08-24
Alexandria, VA

Re: Smart Business Strategy, but is immoral or illegal?

Thank you for the correction. I guess they had getting all-out in mind, not so good consumers.
hottboiinnc
ME

join:2003-10-15
Cleveland, OH
·Time Warner Cable
·buckeye cable

Ohio Consumers' Counsel

is a bunch of idiots that don't do anything. They lobbied for First Energy's rate increases when they claim they're not needed. They'll say anything you pay them to say and are full of nothing but a bunch of morons.

the OCC is just speaking for the Unions and what they want and thats it.
WhatNow
Premium
join:2009-05-06
Charlotte, NC

It wil not work

In the past the reason the Bell System was successful was Long Distance paid for all the extras. When the company broke up that changed to the big and medium sized cities paid for the small towns and the rural areas. This was before cell phones and VOIP. Now many of the rural areas in the east coasts states just use their cell phones which makes those areas even less profitable. If they can not get decent broadband speeds they have little use for a landline.
If the areas that Verizon is dumping were making a profit they would keep them. My guess is either Verizon or AT&T will buy the bankrupt companies get them on the cheap and debt free. Only then they may break even in those areas. Until fiber can be pulled to FTTH the best bet would be upgraded wireless. That is what I figure Verizon plans to do dump the landline upgrade the wireless that will support slower internet speed but higher then the nothing you can get over the wired landline plant.
EPS

join:2008-02-13
Hingham, MA

Re: It wil not work

Just to note, for the most part (except West Virginia, IIRC), these areas were part of the "General System", that is to say GTE, not the Bell System.
PX Eliezer
Premium
join:2008-08-09
New Jersey
·Callcentric
·Optimum Voice
·callwithus
·voip.ms

Re: It wil not work

said by EPS See Profile :

Just to note, for the most part (except West Virginia, IIRC), these areas were part of the "General System", that is to say GTE, not the Bell System.
Correct. Most were old GTE areas, but West Virginia was C&P which was Bell.

I recall many years ago it was either General Telephone or United Telephone that had an advertisement with a picture of Mr. Bell. The caption was, "He may have invented the telephone but he didn't invent us"!
hottboiinnc
ME

join:2003-10-15
Cleveland, OH

Re: It wil not work

And United Telephone was Sprint's original name.
Bob61571

join:2008-08-08
Washington, IL
·Verizon Online DSL
·DIRECTV

Yes, EPS, you are correct.
General Telephone , also known as Gen Tel or GTE.

This can be a shock to many urbanites, who had the mistaken belief that, back in the old days, the Bell companies served 100% of the USA. Noticed this in the 1970's when new college students arrived every year in Bloomington/Normal Illinois(home of a major GTE office headquarters).

mikedz4

join:2003-04-14
Weirton, WV
·DIRECTV
·Verizon Online DSL
·Comcast Digital Vo..
·Comcast

have a bad feeling this will be approved

I have a sinking feeling in my stomach that this will be approved by the states and the federal government as well. If this is approved I am dumping verizon for comcast. I already have comcast tv and had their internet and phone up until january. My contract expires in january so I will drop verizon for comcast then probably. If frontier succeeds and upgrades areas to fiber then i may consider frontier somewhere down the line but i don't forsee them succeeding let alone upgrading anyone to fiber.
nocannothave

join:2006-10-14
Kennewick, WA
·Charter Pipeline
·Verizon Online DSL

Re: have a bad feeling this will be approved

"But! But! I am SURE we can succeed where the others have failed! We're more awesomer!"

Give FairPoint an increase of 50% from their current customer list and see if they can handle it for 18 months. This will never happen of course.
lgkahn
Premium
join:2005-02-15
Londonderry, NH
·Comcast
·Verizon Online DSL

fairpoint in nh

i had fairpoint business dsl.. paying close to 200 a month and they couldnt even keep that working correctly

1. 3meg down and 768 up the fastest they could offer was getting long in the tooth
2. they were dropping web packets all over the place.. no one could get to their webmail accounts reliably.. denied it was their problem..

3 now on comcast bus. with 50 down 10 up.. (ok i only get about 8 up) but webmail magically works fine again for everyone go figure?
Bestrate

join:2009-08-19

Frontier

I don't think Frontier can handle being 3 times it's present size almost overnight! And I doubt that Frontier has the capital to pick up the load that Verizon is dumping on them.
--
Google Phone
bicker

join:2007-05-10
Burlington, MA


3 edits

The Root of the Problem

Most of the criticisms of deals like this miss the root of the problem: How regulation and the projection of unfounded expectations foster an environment where a service provider is better off investing their money in securities rather than in infrastructure. Every dollar a company would spend on maintaining and enhancing service offerings must compete with every other possible use for that dollar. If maintenance or enhancement comes up lacking as an investment, then there is no rationality in directing money in that direction. In such cases, it is the marketplace that is at fault -- specifically the lack of the marketplace to offer sufficient financial motivation. Think of it as if it was your money being invested: Would you invest it in a lesser investment or a better investment? The rational personal would always choose the latter.

Regulators need to address the root of the problem. They need to make changes to the marketplace that foster better profits. That will not only preclude situations such as this, but will also provide incentive for yet-even-more competitors to enter the market.

As an alternative, regulators should view their position as having "right of first refusal" -- if they don't think selling those assets to that specific buyer is good for the people, then let the people step in and buy the assets from the seller for the agree-upon price. Let the state see if it can do a better job, and also let the state deal with the fact that in some cases there simply isn't enough will on the part of consumers to pay a reasonable amount for the services that they need and want. I don't advocate that approach, but it is a fair bit fairer than presuming to enslave a private enterprise, which is what a lot of folks are alluding to as the so-called remedy of this problem.
Ulmo

join:2005-09-22
San Jose, CA
·Comcast
·SONIC.NET


1 edit

Re: The Root of the Problem

Your thought path is definately good. Continuing on that path until a solution that works in real life would be quite good.

I won't claim that the specific example implementation you brought up is the perfect answer.

You reminded me of a point that I oft made in the past: I moved to the super-expensive (for real-estate) urban area to get the benefits of density, one of which, in splendid and spectacular form, is better communications per resource applied (cheaper better more available Internet). Rural people get the wonderful benefits that the low-density areas provide: less localized density problems, less density-related pollution, more space, less noise, etc.. The rural people don't get the benefits of high density areas, because the rural people don't pay the super-expensive (real-estate) urban rates. Therefore, they should pay more for lower quality communications, since that's what is available in less density.

If we eliminated the USF and its mandates of universal service to everyone everywhere, then farmers could castle up and only the rich would have nice connections, and everyone else would either have to move to the city or not have communications. Ok, perhaps the local government can tax the local people of that town a bit to spread out some essential communications just for governance quality (avoid kings taking over of places), but in practice, Ham radio is decent enough to bridge that divide. Then, we won't need superfragilistic Hawaii or whereever telecom.

I concede that even though we don't need it, those areas can still crow about what they're getting. In this case, I think of it like a baby crying for candy in the grocery store next to the candy in the checkout lane -- tell their parents to grow up and discipline their child not to cry for such a thing. That's how I see rural subsidy for communications. Give me back my money, you stupid immature low class crybabies.

Edit: clarify that "super expensive" is referring to real-estate, i.e., physical space (thus "high density").
bicker

join:2007-05-10
Burlington, MA


4 edits

Re: The Root of the Problem

Your point about USF raises a critical question: For the vast majority of people -- let's call them the urban and suburban people, are they going to be happy with the idea that they are paying substantially more, as a "tax", so that rural customers get the same level of service the urban and suburban customers get, even though the cost of providing that level of service to rural customer is so much higher? More specifically: Many people extol the virtues of living in a rural community, over living in more densely-packed areas. It is often considered by the people living there as an advantage, a choice they make as a matter of quality of life. Shouldn't there be a cost to them for that advantage? Is it fair to essentially have urban and suburban people subsidizing the rural way of life? Also: There is a higher cost associated with providing policing in urban and suburban areas. In the same vein of fairness you assert, shouldn't rural people be assessed a "tax" to help subsidize the policing of urban and suburban areas?

I don't propose to provide answers to any of the questions I raised, but I think the trend has been, over the past thirty years or so, to have people take more responsibility for the aspects of their life that cause them to have to pay more. We're having a big fight, in Congress, this year, that goes directly to that issue, with roughly half the people opposing the idea that everyone should have comparable access to a certain amount of health care as it means that others ostensibly end up contributing toward subsidizing that. Again, I don't propose to provide answers to that question either -- it's a political question and discussion of it here in this forum is inappropriate -- I put it forward only as a demonstration that there is a very substantial disagreement whenever such issues are raised, with very substantial constituencies on both sides of such issues.

daddywarbuxx

@verizon.net

Re: The Root of the Problem

Very good points you all make regarding the root issue here.

I hope we can come up with a solution that will allow us to remain competitive, innovative, and continue to lead the word in invention and technology. I am very skeptical of Frontier's ability to successfully manage this new business unit. Furthermore, should Verizon be forced to continue operating a business unit it does not wish to?
Forums » Regulators Nervous About Verizon/Frontier Deal


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