Frontier-Verizon Gets Washington Commission’s Conditional Nod

Washington’s Utilities and Transportation Commission conditionally approved the purchase of Verizon’s landline network by Frontier, the agency said late Friday. The transaction has been approved by regulators in Arizona, California, Nevada, Ohio, Oregon and South Carolina. “We're pleased the Commission has acted and approved the transaction,” said Tim McCallion, president of Verizon’s West region. “We are now evaluating the order and the unique circumstances underlying the conditions."

Frontier also is cheered by the approval, which leaves pending responses from state regulators only in Illinois and West Virginia, and the FCC, company spokesman Steven Crosby said. “We're evaluating the conditions, and nothing looks problematic from our end,” he said. “In effect, the conditions represent what we're doing already in 24 states, so this simply means that we'll be doing the same thing in Washington."

In accepting and modifying five separate multi-party settlement agreements, the commission imposed numerous consumer protections. “The overarching decision we face here is which entity, Frontier or Verizon, will better be able and, more importantly, willing to address the long-term interests of the assets and consumers affected by the proposed transaction,” commissioners said in their written decision. “Although we consider the choice between approving and disapproving the transaction to be a very close call, we are persuaded that, on balance, Frontier is that entity."

The companies have 10 calendar days to accept the proposed modifications and conditions to the multi-party settlement agreements signed last winter. A party may also appeal the ruling to any Superior Court within Verizon’s service territory in Washington. In approving the landline sale, commissioners stipulated that local residential and business rates not increase for three years after the transaction is completed. Customers would receive credits if the new company, Frontier NW, does not deliver service quality that meets specific standards. Frontier NW also would have to pay $35, not the current $25, to residential customers for missed service repairs or installation appointments. Customers also would receive a $5 credit when a phone line is out of service for more than two days.

Customers using Verizon as their long-distance carrier would have 90 days to choose another provider without incurring a $5 switching fee. Existing Verizon long-distance customers could retain Frontier as their toll provider. Low-income customers qualifying for the Washington Telephone Assistance Program would receive a one-time $75 credit if the company fails to offer appropriate discounts or deposit waivers.

Other conditions include creation of a $40 million fund to be used by the company to expand broadband high-speed service in unserved and underserved areas; regular submission of detailed reports by Frontier for regulatory review; coverage of transition costs by stockholders, not ratepayers; establishment of an incentive plan to discourage drops in service quality; and penalties if service quality deteriorates. “To encourage customers to purchase the high-speed broadband services, Frontier proposes a promotion to offer free computers to customers who sign-up for voice and high-speed Internet services,” the order said.

Frontier must notify the commission of any changes in the transaction prior to closing; rigorously test its back-office and operating systems to ensure a smooth transition for customer services such as billing, repairing and ordering; and extend from one year to two years the period during which the company offers stand-alone Digital Subscriber Line services at current rates, terms and conditions. Verizon is the second-largest local telco in Washington, with more than 500,000 lines. About 273,000 Verizon long-distance lines in Washington will be transferred to Frontier. Verizon has about 1,300 employees in Washington, who would transfer to Frontier once the deal is complete.

Frontier is testing replicated systems in states that have granted approval, Crosby said. In 13 of the 14 states involved in the proposed transaction, Verizon operates legacy GTE systems similar to the GTE systems that Frontier operates, he noted. West Virginia’s system is the exception. “We expect to convert the West Virginia system,” Crosby said. “The others we gradually will migrate to our system over the next three to seven years -- or migrate our system to them.”