PSC has questions as Verizon proposes acquisition of Frontier’s services in West Virginia

As Verizon and Frontier are requesting approval for the former to take over the latter’s services in West Virginia, the state Public Service Commission last week noted some concerns regarding the potential merger and how it could affect customers in the Mountain State.

According to a memo issued by PSC staff, the commission is seeking further information on how Verizon would address some long standing issues that have occurred with Frontier customers in West Virginia. 

Those include issues arising from a lack of maintenance to copper infrastructure while fiber networks are being expanded in the state, unreliable connections to the state’s E911 network, complications retiring DSL connections in areas without other options and ongoing challenges with the company missing appointments or giving extended appointment times to customers, among other things.

Verizon and Frontier initially filed their joint application with the PSC to transfer control of the latter company to the former on Oct. 31. That application follows an agreement made between the two companies on Sept. 4. Under that agreement, if finalized and approved by all necessary entities, Verizon will acquire all of Frontier and its subsidiaries, including those in West Virginia.

According to the Oct. 31 application with the PSC, the acquisition would be “seamless” for customers in the Mountain State as it is occurring between the holding companies. If finalized, Frontier — which will become a subsidiary of Verizon — will still be bound by all contractual obligations made before the acquisition and Verizon, as the parent company, will honor any and all agreements between the company, its customers and other stakeholders.

Frontier’s potential acquisition by Verizon comes as the former company, according to the joint filing from October, is facing “obstacles to its continued growth and long-term competitiveness.” 

Frontier emerged from bankruptcy in 2021 and since has committed to a “fiber-first” strategy, installing and extending fiber optic cables throughout its service regions. 

In West Virginia specifically, the company has already met its goal of deploying fiber connectivity in 150,000 locations across the state and investing more than $200 million for broadband expansion as of December 2023, according to the acquisition application. 

Frontier has made similar commitments nationwide, promising to offer fiber in at least 10 million homes across the country — many in rural areas where internet connectivity is still scarce — by 2026. The company, according to filings, is well on its way to meet that goal, but not without cost.

According to the filings, Frontier “does not have funding in place” to expand or invest further in those services past its current obligations. If acquired by Verizon, however, the larger company — which garnered about $134 billion in revenue last year compared to the $5.8 billion earned by Frontier — would be better positioned to both meet the goals set by Frontier and ensure more long term investments, including for future maintenance to lines that are installed.

As of June 30, Frontier was about $12 billion in debt for the work it has taken on nationally to expand fiber. That debt is expected to grow by several billion each coming year, according to filings, and on top of principal payments, the company incurs an interest of around $800 million annually. 

“These debt obligations may place a significant strain on Frontier’s ability to make additional investments in its network going forward. Specifically, its current debt level will impact Frontier’s ability to obtain additional debt or equity financing on favorable terms,” the October joint filing reads. “This will make it harder for Frontier to keep investing in fiber at the level necessary to compete and meet the needs of its customers.”

At the local customer-level, while the companies assert in their joint application that “West Virginia will greatly benefit” from the potential acquisition, it’s unclear what exactly the impacts will be on service quality or cost.

Verizon, according to the joint application, offers low-income pricing options to assist customers who may struggle to afford its services. The PSC filings, however, do not detail what changes in pricing could occur if the larger company acquires Frontier’s services in West Virginia. It’s likely those details will come in future filings with the PSC as the joint application process unfolds.

To date, no parties have filed to intervene in the ongoing case. Two individuals so far have submitted comments on the ongoing case, with one in support and one against the proposed acquisition. As the process moves forward, representatives for Frontier and Verizon will need to respond to the issues raised by PSC staff in last week’s memo, which will bring more details about what the acquisition could mean for local customers.