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Commission staff recommends rejecting Verizon’s phone line sale to Frontier

Nov. 3, 2009
Docket Number: UT-090842

Editor’s note: This news release reflects the position of the telecommunications staff of the Washington Utilities and Transportation Commission (UTC) and NOT the views of the three-member commission. It discusses a staff recommendation that the commissioners have not yet reviewed. Any positions taken or comments offered by the commission staff regarding this proceeding should be attributed clearly to staff members and NOT to the UTC.

OLYMPIA, Wash. – Saying the sale would harm customers, state utilities’ commission staff is recommending rejecting a proposed sale of Verizon’s landline residential and commercial telephone business in Washington to Frontier Communications.

In raising objections to the proposed Frontier-Verizon transaction, Washington Utilities and Transportation Commission (UTC) staff members concluded the business deal is not in the public interest. The proposed purchase does not include Verizon Wireless customers.

The three-member UTC, which will make the final decision early next year, will consider whether state ratepayers would be harmed by the proposed transaction, which is part of an $8.6 billion bid by Frontier to acquire 4.8 million Verizon phone lines in 14 states.

“There may not be any way for Frontier to provide benefits to Washington customers that offset the financial harm and operational risks,” said commission staff in their written testimony. “The failure of the companies to offer adequate consumer benefits or protections puts customers at risk of being served by a company without enough financial strength to make necessary improvements to local telephone facilities and widen deployment of broadband access.”

Commission staff doubts that Frontier would be able to raise capital for wireline improvements because the company’s credit rating is lower than Verizon’s.

UTC staff also is concerned Frontier will not succeed in generating synergies from this transaction because the phone company will face higher per unit costs in the Washington operations than Verizon faces today.

UTC staff members are worried Frontier could suffer the same fate as other Verizon spin-offs in Hawaii and New England that have resulted in bankruptcies.

On May 29, Verizon Communications, Inc., and Frontier Communications Corp. filed an application with the UTC for approval of Verizon’s sale of its landline residential and commercial phone business in Washington to Frontier Communications. The Federal Communications Commission must approve the transaction and government regulatory approval is needed in nine states.

The commission has received 93 public comments with five in favor, 40 undecided and 48 opposed to the proposed sale. Customers who would like to comment on the case are encouraged to do so by mailing their correspondence to: P.O. Box 47250 Olympia, Wash., 98504; e-mail comments to comments@utc.wa.gov or call toll-free 1-888-333-9882. The commission’s deadline for accepting public comments is Jan. 11, 2010.

Verizon, created in 2000 by a merger of Bell Atlantic and GTE, is the second-largest local telephone service provider in Washington, serving about 487,000 phone lines in cities including Redmond, Kirkland, Everett, Bothell, Woodinville, Wenatchee, Kennewick, Pullman, Chelan, Richland, Naches, Westport, Lynden, Anacortes, Mount Vernon, Newport, Oakesdale, Republic and Camas-Washougal. Headquartered in Stamford, Conn., Frontier Communications serves 2.3 million customers in rural and smaller-city markets. Currently, Verizon has approximately 1,300 employees in Washington.

The UTC is the state agency in charge of regulating the rates and services of telephone companies operating in the state of Washington.

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Editor’s note: A copy of the UTC staff members’ testimony is available at: www.utc.wa.gov/090842

Staff contact: Marilyn Meehan
Posted/updated: 12/24/2009

 

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