Verizon: Proposed Deployment Requirements for Frontier Deal Too Expensive

WASHINGTON, Jan. 9, 2025 – Verizon expanded on its opposition to deployment obligations included in a proposed decision that would approve its $20 billion acquisition of Frontier in California.

Verizon’s agreement to end diversity initiatives in exchange for federal approval has been an ongoing issue at the California Public Utilities Commission, the last state regulator that needs to clear the deal. 

But that’s largely been smoothed over, and the hang up is an obligation to deploy broadband 100 megabits per second (Mbps) download and 20 Mbps upload at all locations served by 88 rural wire centers in the state within five years.

“The wire centers targeted by this requirement are in some of the most remote and geographically challenging areas in the state. Broadband deployment costs in these areas could be prohibitively expensive and the build would be practically infeasible in many cases,” the companies wrote in comments posted Friday. “Although Ordering Paragraph 2,” which dealt with the deployment obligations, “affords Verizon flexibility to deploy a variety of broadband technologies, many of these locations remain inaccessible to FWA, let alone fiber.”

The ISPs said the CPUC should delete the paragraph entirely, or modify it to exclude locations served by another broadband provider and locations where no customer had requested service. Their proposed modifications would also allow Verizon to deploy reduced speeds, or potentially contract out the service to a “non-terrestrial” broadband provider, in places it would cost more than $10,000 per location to deploy fiber.

The companies' comments were signed by Kristin Jacobson, a partner at DLA Piper, Rudy Reyes, regional vice president and deputy general counsel at Verizon, and Patrick Rosval, a partner at BRB Law.

The companies have raised the concern in meetings with CPUC staff since the proposed decision was released by the agency judge overseeing the merger last month. 

Compromise possible, says New Street Research

New Street Research Policy Advisor Blair Levin wrote in a Thursday Research note that the two sides could probably reach a compromise based on Verizon’s proposals.

“For the most part, we see the issues currently dividing the [Proposed Decision] and Verizon as in the traditional bucket of how PUCs (and the FCC) treat mergers; as a way to accomplish objectives that are difficult to achieve through general regulation,” he wrote. “We can’t think of any transaction that was blocked due to the parties not finding a way to compromise on how to achieve those objectives, even if the result is not 100% of what either side wants. So here, we think there are compromises on all the issues that can lead to approval.”

Verizon and Frontier have been pushing for the CPUC to approve the merger before Feb. 13., when Justice Department approval of the deal will expire. That would require the companies to undergo another lengthy review before closing.

The earliest the CPUC could vote on the transaction would be its Jan. 15 meeting. Levin said the agency’s Feb. 5 meeting would be more likely given the number of things that still needed ironing out.

Oral arguments on the deal – some parties haven’t settled with the ISPs and are asking the CPUC to axe the transaction – are scheduled for Jan. 12 at the agency’s headquarters. The agency said in a December order that a webinar wouldn’t be available, but the arguments would be transcribed and posted online.