Frontier and the California commission have been negotiating a deal that lays out the terms that will allow Frontier to buy a pile of California customers from Verizon. Basically, as will be detailed below, the CPUC will require Frontier to upgrade broadband for over a third of the customers it has in the state as part of the deal.
Occasionally, state commissions get the chance to come down on the side of broadband, mostly during these times of mergers, sales, and acquisitions. There are a handful of state commissions, such as California, New York, Illinois and a few others, that have always been aggressive in these circumstances. There are a whole lot of other commissions who seem to be friendlier to the big carriers and let these kinds of deals slide through without much comment.
It’s good to see commissions take an aggressive stand to improve broadband. But looking back on some similar past deals one has to wonder how effective such arrangements really are. For example, I recall an arrangement between the Pennsylvania commission and Verizon in 1993 that freed Verizon from rate-of-return regulation as long as Verizon would bring DSL to hundreds of rural communities. But Verizon never built that DSL and rural Pennsylvania today still has some of the worst broadband in the country.
There also have been deals made by other government entities and carriers that have not brought any results. For instance, dozens of eastern cities gave Verizon franchise agreements to sell cable TV for an agreement that the company would bring FiOS fiber to their whole city. Verizon never built that extra fiber in any of these communities and earlier this year finally admitted that it was never going to expand FiOS fiber any further.
The FCC just made a deal with AT&T to greatly expand their fiber product as part of the agreement to buy DirecTV. We’ll have to wait and see if the company meets this obligation, and most of the industry is still trying to figure out if AT&T is serious about fiber.
So these deals sound great, but one has to wonder how much teeth they have. In this case, if Frontier doesn’t come through over time it’s not like the California commission can undo the purchase of the Verizon properties. There really is not a lot that any regulatory commission can do these days with a carrier that chooses not to comply with such an agreement. There was a time when commissions held a lot of power over carriers. They controlled rate increases and had many other levers to influence carrier behavior. But in a world where all three of the triple play products are largely deregulated there is only so much that any government agency can do to a rogue carrier.
Back to the details of the Frontier deal. The agreement, which is still to be signed by the California commission, would have Frontier do the following:
- Provide 25 Mbps downstream and 2-3 Mbps upstream to an additional 400,000 households in California by December 31, 2022.
- Provide 10 Mbps downstream and 1 Mbps upstream to an additional 100,000 unserved households beyond its CAF II commitments by December 31, 2020
- Deploy 10 Mbps downstream and 1 Mbps upstream to 77,402 households in accordance with the CAF II requirements in the census blocks identified by the FCC
- Deploy 6 Mbps downstream and 1 to 1.5 Mbps upstream to an additional 250,000 households in California
Altogether this would bring better broadband to over 800,000 California homes. But I feel sorry for the homes that are being upgraded to 6 Mbps. This will likely be their last upgrade before their copper gets torn down in the not-too-distant future.