California consumers the big winners in Frontier acquisition

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OPINION – California has another opportunity to expand high-speed internet for millions of residents — while strengthening the industry for the future. But time is of the essence to make this happen.

A year ago, Verizon requested that the California Public Utilities Commission (CPUC) approve its acquisition of Frontier, another major internet provider serving many Californians. The Commission has led a thoughtful, systematic process considering the evidence and consumer input. As a part of this process, Verizon has made commitments that’ll deliver big wins for California: connecting 75,000 households to fiber, add 250 new 5G cell sites that’ll improve wireless communications, create 600 new jobs for skilled union workers, generate $40 million to get 100,000 low-income households online, and invest $500 million for small businesses.

This merger, and the commitments made by Verizon, represent a major step towards closing the digital divide and achieving the Governor’s Broadband for All initiative.

Frontier’s financial distress must be addressed
Frontier needs additional capital because it has invested so much to upgrade its network to better serve customers — converting old copper telephone lines to fast fiber and investing more than $4 billion to make high-speed internet available to 7.6 million homes and businesses nationwide, including $1.9 billion in California in 3 years. Frontier pledged to reach 350,000 homes and businesses in the state with fiber by 2026, but exceeded that target 3 years early, deploying service to more than 450,000 new locations by the end of 2023.

That progress has come at a significant financial cost. Frontier now has a debt of $12 billion, and the company faces $1.35 billion in debt payments coming due in 2027, followed by a staggering $3.64 billion in 2028. With annual interest expenses of $800 million consuming its resources, Frontier’s ability to maintain — let alone improve — its network hangs by a thread.

CETF has worked closely with Frontier for more than a decade, a collaborative and sincere partner in closing the digital divide. They provided 50,000 Chromebooks for households completing Digital Literacy Training, half of which were distributed by CETF during the pandemic to 41 School Districts and 43 Tribal Organizations.

Verizon’s partnership with Frontier would enhance competitiveness that both benefits consumers while also infusing vital cash into Frontier to ensure they remain a significant provider in several communities in the state–many of which are rural and underserved.

How the merger expands access, affordability, and opportunity
Perhaps most importantly, this merger will help address the affordability crisis that keeps too many California families offline — 35.6% of unconnected households cite affordability as the primary reason why they are not connected to the Internet, while only 2.6% cite the lack of infrastructure.

Through the public benefits agreements, Verizon has committed to maintaining its discount high-speed internet subscription program for a full decade, offering plans as low as $20 per month. When combined with California’s LifeLine program, many families could see monthly internet costs reduced to between $0 and $20 — real relief for working parents, students, and seniors struggling to stay connected.

It also is vital to underscore that Verizon has reaffirmed in the CETF public benefits agreement its commitment to equal opportunity, non-discrimination, and digital inclusion. And, for the first time, Verizon will lead the industry by voluntarily reporting its efforts to increase the number of people with disabilities in its workforce and who are vendors, which is currently not required by either regulation or state law.

Action now serves the public interest
The CPUC has led a constructive process that has vetted all the issues and facilitated unprecedented public benefits agreements. Community organizations, consumer advocates, and labor leaders now support swift approval of the transaction.

The time is now to approve the Verizon acquisition of Frontier and to memorialize the public benefits agreements in that decision.

Sunne Wright McPeak is the President and CEO of the California Emerging Technology Fund (CETF).