Frontier digs a deeper digital divide in rural California with taxpayers’ shovel

by Steve Blum • , , , ,

Frontier verizon pole santa barbara county 10oct2015

A handful of rural communities in Lassen, Modoc and Kern counties will get their first taste of wireline broadband service from Frontier Communications if the California Public Utilities Commission approves infrastructure construction grants next month.

Unfortunately, it’s just a taste.

Frontier’s (and AT&T’s) strategy, as identified by a CPUC study earlier this year, of “disinvesting in infrastructure overall”, which is “most pronounced in the more rural and low-income service areas”, continues to be business as usual. Both of Frontier’s projects up for California Advanced Services Fund grants propose to deliver low speed service over ageing copper telephone lines. The $11 million would be spend on a desperately needed 137 mile fiber route and essential central office equipment upgrades, but Frontier’s interest in improving rural infrastructure, even when taxpayers are picking up the tab, ends there. As the CPUC’s draft resolution approving the Kern County grant describes the project, “Frontier will upgrade the existing communications facilities to increase broadband capacity but will not replace the copper cable infrastructure”. Likewise, the northeastern California project adds middle fiber and electronic equipment, but leaves “legacy copper infrastructure” in place.

It’s not an accident or anomaly. It’s deliberate.

Frontier continues to bleed customers and revenue, and selective fiber upgrades are the solution, according to CEO Dan McCarthy, who spoke about the company’s third quarter 2019 financial results

We achieved a sequential improvement in fiber net losses with only 1,000 in the third quarter. However, consumer copper losses of 52,000 were worse than the second quarter. In copper, although we experienced a sequential increase in gross additions, this was offset by a sequential increase in churn and we continue to manage this business for a decline. Fiber broadband gross additions increased sequentially in the third quarter and we also had a slight sequential improvement in fiber broadband churn. With the completion of the upgrades of the fiber network to be 10 gigabit capable, we have increased our emphasis on selling at higher speed tiers.

Frontier’s strategy is economically rational, and is probably its best shot at pulling shareholder value out of penny stock territory. What makes it rational, though, is the California legislature’s irrational (but well compensated) decision to subsidise 1990s era broadband service over 1890s era copper wires, and not hold incumbent telcos to the same standards in rural communities as they voluntarily and rationally adopt in densely populated, high income cities and suburbs.