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PSC APPROVES VERIZON SALE


Publication: THE CHARLESTON GAZETTE
Published: Friday, May 14, 2010
Page: 1A
Byline: ERIC EYRE STAFF WRITER


The state Public Service Commission on Thursday night approved Verizon's plan to sell off its telephone landlines to Frontier Communications in West Virginia - exactly a year after the companies announced the $8.6 billion deal.


The three-member commission concluded that the sale's benefits outweigh "the negatives or potential risk."


"The commission believes Frontier will emerge as a successful telecommunications utility company to serve West Virginia," commissioners said in a news release.


West Virginia becomes the last of 14 states to sign off on the sale. Frontier expects to pick up 547,000 residential and small-business customers from Verizon across the state.


The companies hope to complete the sale by June 30, pending approval from the Federal Communications Commission. Verizon has said it wants to shed its landline operations to focus on wireless and broadband services.


"The record developed in this case provides comprehensive evidence and assurances that the transaction with Frontier is in the public interest and will provide many benefits to West Virginia residents, including increased investment and broadband availability in the state, while protecting jobs and promoting employment," said Verizon West Virginia President B. Keith Fulton.


Samford, Conn.-based Frontier has promised to expand high-speed Internet service in West Virginia and open a Southeast regional headquarters in Charleston.


The PSC's approval came with a series of conditions. Frontier and Verizon already had agreed to most of the stipulations.


For instance, Frontier previously pledged to spend $231 million in West Virginia to improve the state's landline network, and another $48 million to increase broadband availability over the next three years - two of the monetary conditions outlined in Thursday's PSC order.


"There doesn't seem to be anything new," said Ron Collins, district vice president of the Communications Workers of America, which opposed the sale. "We're going to have to dissect this order and see if the commitments are adequate for West Virginia."


Earlier this week, the PSC ordered Verizon to set aside $72.4 million over the next four years to improve landline service. Verizon is reviewing the decision, which was prompted by a state-mandated service improvement plan. Frontier has promised to comply with the plan after the sale.


The Communications Workers of America and the PSC's Consumer Advocate Division have criticized the Verizon-Frontier deal, saying Frontier would take on too much debt and struggle to keep its promises.


For months, the union has railed against the deal in television commercials and full-page newspaper advertisements. In recent years, Verizon has sold off its landlines in other states to smaller companies that have since filed for bankruptcy.


The union has 10 days to decide whether to ask the Public Service Commission to reconsider its decision.


"We're keeping all of our options open," Collins said. "CWA is disappointed in the order."


Byron Harris, who heads the PSC's Consumer Advocate Division, called the commission's decision a "mixed bag." He said he was pleased that the PSC placed limits on the dividends Frontier could pay shareholders.


"They can't drain the utility of cash," Harris said. "They can't suck all the cash out of West Virginia to pay their high dividend rate."


The commission's order requires Frontier to cap Verizon's rates for a year, and to waive early termination fees for 90 days after the sale closes, if Verizon customers with bundled services decide not to switch to Frontier.


"These are good consumer protections," Harris said.


On the other hand, Harris said he was disappointed that the commission didn't require an independent audit of Verizon's plan to switch over its operating systems to Frontier.


The companies have said that Verizon phone-line and broadband customers will have an easy time switching over to Frontier.


Once the deal closes, Frontier would control 85 percent of the landlines in West Virginia. Frontier already has 138,600 landline customers in the state. The company would have more customers in West Virginia than in any other state.


"We're very excited and ready to do business with the rest of West Virginia," said Steve Crosby, a Frontier spokesman.


Verizon's 2,100 employees in West Virginia will become Frontier workers. Verizon must continue to fund the pension accounts for employees moving to Frontier, according to the order.


Frontier plans to offer high-speed broadband to 85 percent of its customers by 2013 - another condition in the PSC's order. Verizon now offers broadband to about 60 percent of customers.


"We believe we're the right company to be taking broadband to the state of West Virginia," Crosby said.


Frontier also has pledged to honor existing labor agreements and not lay off any technicians and installers for at least 18 months.


Although Frontier has promised to open a regional headquarters in Charleston and add 40 management jobs, union officials have predicted Frontier would shift many customer support jobs to offices in other states, resulting in a "net job loss" after the sale.


Frontier also plans to hire nine general managers who will oversee geographic markets throughout the state.


"The state of West Virginia must make Frontier keep their word concerning treating their employees decently, and improving the service Verizon was required to do all along," Kanawha County Commission President Kent Carper said Thursday.


Across West Virginia and the 13 other states, Frontier's wire lines would increase from 2.2. million to 7 million after the companies complete the deal. Frontier's employment would jump from 5,600 to 16,000 workers.


Reach Eric Eyre at ericeyre@wvgazette.com


or 304-348-4869.


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