CWA Challenges AT&T’s Connecticut Wireline Transfer to Frontier

"CWA is vitally concerned with the outcome of this proceeding because our members and their families will be affected by the transaction as workers, consumers, and residents,” said the union. It represents 2,900 employees of AT&T’s Southern New England Telephone Co. (SNET) affiliates in Connecticut, and 3,800 Frontier employees nationwide. “This transaction could adversely affect the economic health of households, businesses, and communities throughout” Connecticut, said CWA.

AT&T and Frontier made only “vague claims that Frontier will improve service and maintain and expand broadband” without “specific commitments to back up those claims,” CWA said. Nor did the telcos tell the FCC “exactly which assets and liabilities are being transferred to Frontier and which will remain with AT&T,” which makes it impossible for CWA or the commission to truly evaluate the transaction, said the union.

The deal “is expected to have no negative effect and may have a positive effect on employment in Connecticut,” said Kathleen Abernathy, Frontier executive vice president-external affairs, in deposition testimony filed with the state Thursday (http://bit.ly/NeH4La). “Frontier anticipates that, at a minimum, it will maintain jobs in the State.” Frontier plans to bring additional “dispatch jobs” and “certain other professional positions” to Connecticut, said Abernathy, an ex-FCC Republican commissioner. The deal might add up to 85 new positions, and more than half could be union jobs, she said. “Frontier will honor all collective bargaining agreements."

The transaction will serve the public interest, Abernathy said in the deposition. “A locally-owned and operated Company relying on a management team entirely focused on providing customers with an advanced wireline network and services” will help state residents, she said. Wholesale customers won’t be harmed by the transaction, she said. Frontier is “confident that the documents we have filed and will file with the FCC will clearly demonstrate the merits of this acquisition to Connecticut customers and AT&T employees in the state,” Cecilia McKenney, executive vice president-human resources, told us in a statement.

The level of detail required when presenting the asserted benefits of a transfer is “highly case-by-case dependent,” said Pantelis Michalopoulos, head of the telecom group at Steptoe & Johnson, who’s not involved in the case. “It depends on how central the assets are to the commission’s public interest calculus. So there’s not any cookie cutter answer."

State Challenge

CWA was the only organization to oppose the transfer of control at the FCC, where oppositions were due Thursday. The union has also been active at the Connecticut Public Utilities Regulatory Authority (PURA), where it’s an intervener in the proceeding (http://bit.ly/1fxaA5S). Frontier “does not have the financial and technological expertise and resources of AT&T,” CWA told the state regulator. The union said it was “concerned” that the proposed transaction would have an “adverse impact” on CWA and its members, both as employees and customers of SNET.

Like it did at the FCC, CWA challenged the breadth of the information AT&T and Frontier submitted to PURA. The filed stock purchase agreement is “not a complete copy” and “does not contain any of the exhibits, schedules, annexes, or other ancillary documents that are an integral part of the agreement,” CWA told the state. “CWA does not know what the actual agreement between AT&T and Frontier contains and cannot determine how it might affect CWA’s members or the public."

AT&T challenged CWA’s status as an intervener, arguing the union is “attempting to inject labor issues” where they aren’t relevant. “Federal law precludes PURA from considering the labor issues raised by CWA in its Petition and in its discovery requests -- issues that are currently part of ongoing effects bargaining,” the telo said.

"CWA is certainly aware that Frontier doesn’t have as deep a pocket as AT&T,” said Thomas Lynch, a telecom attorney in Annapolis, Md. “The benefits and viability of its union operations with Frontier could drop significantly as compared to AT&T.” Filing its objection at the FCC “could be merely to stall the transfer, while providing leverage for CWA to negotiate with Frontier while the application is pending,” said Lynch, who’s not involved in the proceeding.

Others Concerned in Connecticut

CWA is not the only entity intervening in the transaction at the state commission. Connecticut Light and Power Co. and SNET jointly own half the 700,000 utility poles in the 149 towns in CL&P’s service territory, the utility said. The Frontier/AT&T Connecticut application says “most contracts” will not be affected by the transaction. “It is unclear whether Frontier’s commitment to honor ‘most contracts’ includes or excludes CL&P’s existing contracts with SNET,” the utility said. CL&P said it doesn’t want to end up like its electric utility affiliate, Public Service Co. of New Hampshire: After New Hampshire approved the 2008 sale of Verizon’s landline business and jointly owned poles to Fairpoint, Fairpoint went bankrupt. That “had repercussions” for the electric utility company, CL&P said.

"As a stock purchase, the Transaction does not alter the existing contractual obligations of SNET,” Abernathy said in the deposition. “It is Frontier’s intention to work constructively with all stakeholders."

One potential condition of the transfer of control may be that the telcos relinquish ownership of the utility poles, Bill Vallee, state broadband policy coordinator for the Office of Consumer counsel, told us. AT&T has “not done a great job maintaining the poles,” which are older and in worse shape than the electric company poles, he said. Electric companies have asked PURA in a separate docket to become manager of the poles. That single pole administrator docket could streamline management of poles in the state, Vallee said, while also making broadband attachments easier and bringing more ISPs into the state. United Illuminating is another power company that intends to intervene, said Vallee. Fiber Technologies, a fiber provider, has also applied to be an intervener, Vallee said.

Deciding how detailed to make a transfer application “is more an art than a science,” said a longtime telecom attorney not involved in the proceeding. PURA has asked AT&T and Frontier for more information, including the companies’ credit ratings and ramifications of financing the change of control; how Frontier will finance SNET over the next five-year period; and how the SNET pension plan will be impacted by the change of control (http://bit.ly/1nqbyuv). The agency also wants to know how the purchase price was determined. Briefs aren’t due until later this summer, and oral argument is scheduled for Oct. 14 (http://bit.ly/1fxenQG).