Frontier CEO confirms affluent, urban communities to get 1,000X better broadband than poor, rural ones

Frontier 2q2019 broadband results

On Tuesday, Frontier Communications’ CEO confirmed the findings of a California Public Utilities Commission study that concluded that Frontier (as well as AT&T) is “disinvesting in infrastructure overall”, and the disinvestment is “most pronounced in the more rural and low-income service areas”. The company released its financial results for the second quarter of this year on Tuesday, announcing a $5.3 billion loss for the three months and 71,000 fewer broadband subscribers.

Most of the lost accounts – 46,000 – were DSL customers, served, at least in California, via decaying copper networks Frontier acquired from Verizon. Much of that territory is rural, and falls under the federal Connect America Fund subsidy program. Frontier affirmed it is switching to low capacity fixed wireless broadband systems in CAF territories, which in theory will deliver the 10 Mbps download and 1 Mbps upload speeds (actually, 8 Mbps down/800 Kbps up, 80% of the time) that the program requires.

That’s in contrast to the 10 Gbps upgrades that Frontier announced it was making in high capacity, fiber-to-the-home (FTTH) systems formerly owned by Verizon, which are predominantly in more affluent urban and suburban communities. This thousand-fold disparity between Frontier’s rural and urban infrastructure is a deliberate strategy, according to the Seeking Alpha transcript of CEO Dan Murphy’s conference call with Wall Street analysts…

Our objective continues to be to optimize our business, leveraging our best assets for future growth, while managing the elements of our business in secular decline by executing on cost efficiency programs and selective capital investment.

“Best assets” = FTTH to people with money to spend; “elements…in secular decline” = copper systems where household incomes are low. Murphy was straightforward with the analysts, not just because that’s what they wanted to hear but also because there are criminal penalties for lying to Wall Street.

Unlike lying to the CPUC: when seeking approval to take over Verizon’s systems, it claimed it “is strategically focused solely on wireline telecommunications” and “all of Frontier’s capital and human resources are concentrated on wireline communications services”.