Frontier says California approval delayed is funding denied

by Steve Blum • , , , ,

Let’s hope there will be something to celebrate come New Year’s Eve.

It’s worth $192 million to rural areas of the state if the California Public Utilities Commission sticks to the schedule it set for reviewing Frontier Communications’ proposed purchase of Verizon’s wireline telephone systems. That’s one of the significant points of a joint response made by the two companies to questions posed by the Federal Communications Commission as it also reviews the transaction.

Frontier says it will use state and federal subsidies to upgrade broadband infrastructure in California

If Frontier is able to obtain regulatory approvals for the Transaction prior to December 31, 2015, it will utilize available funding for broadband deployment in the high cost areas within the Transferring Companies’ territories. For example, in California Frontier is seeking to be able to use CAF Phase II support of approximately $32 million annually over the next six years for broadband deployment in the Verizon California high cost service areas. Over this six-year period, Frontier estimates that the CAF support funding will enable approximately 77,000 locations in high cost areas of Verizon California service territory to obtain 10 Mbps downstream /1 Mbps upstream broadband service. Absent acceptance of the funding, however, there will be a multiple-year delay for deployment in these areas, if broadband is deployed at all. …Frontier also plans to utilize other available supplemental funding programs, including the California Advanced Services Fund [CASF], to expand broadband availability.

Those “high cost areas” are nearly exclusively in remote rural regions of California. The federal funding stream of $32 million a year for six years is an operating subsidy and not a direct payment for construction work, so it doesn’t necessarily translate into $192 million worth of new infrastructure. But combined with money from CASF and Frontier’s own capital, it represents both a substantial investment in broadband upgrades and an enforceable promise, if the CPUC recognises it as such when it – presumably and timely – approves the deal.