Frontier Reorg Gets Calif OK, Might Face Delay
Frontier Communications could soon emerge from Chapter 11 bankruptcy after getting final regulatory OK Thursday (see 2103150030). A late change to the proposed decision might cause turbulence. California Public Utilities Commissioners voted 5-0 at their virtual meeting to clear the reorganization -- with conditions. The order is a "critical moment of really ensuring that Frontier be a better company for California,” said Commissioner Martha Guzman Aceves.
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Frontier has approvals from all states needed to close the deal. The FCC gave its nod in January. A bankruptcy court approved Aug. 27.
The order take effects March 29 at 5:01 p.m. PDT due to Tuesday revisions to the settlement among Frontier and Communications Workers of America, The Utility Reform Network (TURN) and CPUC Public Advocates Office. Settlement parties have until 5 p.m. then to support or object to those changes, said the CPUC’s revised proposal in docket A.20-05-010. TURN and others plan to object by Friday, but the goal isn't to delay the deal beyond month-end, said Managing Director-San Diego Christine Mailloux to us. Frontier didn’t comment now.
TURN disagrees with revising the settlement requirement that the company build fiber-to-the-premise to 150,000 locations with a 20% maximum internal rate of return. The commission tweaked the requirement to specify that those locations should be in places only where the telco is the only service provider, with at least 10% in rural areas. “The requirement that this target be met in areas that are unserved by carriers other than Frontier responds to Frontier’s concern that its investments not duplicate those made by others,” said the revised plan.
The CPUC otherwise adopted three settlement agreements the carrier made with those parties, the California Emerging Technology Fund and the Yurok Tribe. It agreed to enforcement and other conditions the agency proposed last month.
Commissioners didn’t back down from a proposed condition that tribes and local governments get a right of first offer to buy any property divested by the carrier in their areas, despite CWA concerns (see 2103150027). The agency clarified that preference goes to tribes. Regulators praised the condition. Commissioner Cliff Rechtschaffen said he's “very supportive and appreciative of the revision ... to address the local governments' right of second refusal.”
Wildfires make tougher service-quality rules and penalties more vital, Rechtschaffen said. Frontier has a track record of failing to meet service-quality metrics, but the order’s enforcement provisions should improve that, said Commissioner Genevieve Shiroma. With the settlements and compliance monitor, the reorg will “substantially benefit” the state, tribes and Frontier employees and customers, said CPUC President Marybel Batjer.
The tribal and municipal first-offer right could "raise a significant speed bump if Frontier tries to sell off its Californian systems," said Tellus Venture Associates President Steve Blum, a consultant for California local governments. "It's a useful precedent and might have greater impact in the future if it's applied to cable system transactions, or perhaps even AT&T."
Members voted 5-0 to extend the deadline for a Frontier service-quality probe in docket I.19-12-009 until Sept. 20. More time is needed to consider issues Batjer raised in February, she said.