West Virginia Commission Betting that Frontier/Verizon Benefits Outweigh Deal’s Risks
In deciding to approve the Frontier/Verizon deal in West Virginia, the last state to weigh in on the transaction, its Public Service Commission focused on precedent, the official record, and its statutory obligations, the regulator said in the order issued last week (CD May 17 p5). Acknowledging that some intervenors “remain opposed to the proposal in any form,” the commission said its original review found some arguments for approval “vague and unsatisfactory.” Negotiations led Verizon and Frontier to offer conditions to which the commission added its own set of requirements. The commission granted approval knowing that uncertainties remain, it said.
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"The Commission has also taken note of the technical risks presented by a complex flash cutover of all Verizon WV lines and systems to Frontier and the risks associated with Frontier merging with an entity more than double its size,” the agency said. The deal also offers potential benefits to state residents and businesses if Frontier delivers on promises to build out broadband, the commission said. And Frontier offers a business plan “more responsive to West Virginia needs” and is “dedicated to providing quality service,” the regulator said.
Consideration was complicated by Verizon’s service quality troubles, as well as both companies’ losses of subscribers amid a nationwide trend away from landlines -- the “backbone” of traditional telecom, the commission said. In a move it acknowledged in the approval order as part of a strategy “more stick than carrot,” the agency recently told Verizon to put $72.4 million into escrow to cover needed improvements in its service and infrastructure.
"We are all too aware that both Verizon and Frontier face that same quandary imposed by economic forces,” the commission said. The contrast between the two companies’ business plans -- Verizon’s carrying it out of the rural landline business and into the urban wireless realm and Frontier’s propelling it into a blend of rural landline service and broadband -- dominated the commission’s review, the regulator said. The FCC must still approve the merger.