Thursday, March 11, 2010

Another Verizon Deal That Should Be Turned Down

It appears Frontier Communications has fallen further under the spell of Verizon's sales pitch, with the sale of Verizon's Oregon assets to Frontier being OK'd by Oregon's PUC.

But not everything is rosy. At least someone in one state is questioning the wisdom of the sale in light of the fate of other small rural-service telcos that bought what Verizon was selling.


The State Journal-Register newspaper in Springfield reports that [Administrative Law Judge] Lisa Tapia said in a 46-page report that allowing Frontier to purchase the Verizon lines in Illinois “will diminish Frontier’s ability to perform its duties to provide adequate, reliable, efficient, safe and least-cost public utility service.”

--snip--

Unfortunately for Frontier, they are caught up in the back wash of Verizon’s other local exchange divestments. Both FairPoint and Hawaiian Telecom completed similar transactions, and are both now in bankruptcy.

Both FairPoint and Hawaiian Telecom paid far too much for the assets they bought.

In northern New England FairPoint bought an increasing share of a decreasing market, always a formula for disaster. Wireline customers have been shedding themselves of traditional landlines and using either cell phones or VoIP services from their local cable companies for some time, both of which have been competitively priced compared to FairPoint. FairPoint lost over 13% of their customers since they took over operations from Verizon. And because of FairPoint's financial difficulties, its promise to expand broadband service to at least 95% of its service area has fallen by the wayside.

The best thing Illinois could do for telephone customers is to run from the Verizon-Frontier deal. In the end the only one such a deal helps is Verizon. Everyone else will be screwed. Frontier doesn't have the financial wherewithal to handle such a deal and will end up in the same situation as FairPoint and Hawaiian Telecom – in bankruptcy. That helps no one...except the lawyers.

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