Frontier COO on integrating Verizon assets

Frontier Communications’ $5.3 billion purchase of 4.8 million Verizon access lines in 14 states today came as some surprise, as the last party to acquire rural Bell lines in bulk like this, FairPoint Communications, still is struggling to integrate them into its back-office systems (not to mention the regulatory hurdles). Dan McCarthy, executive vice president and chief operating officer for Frontier, spoke with Telephony this morning about why Frontier’s transformation will go easier than FairPoint’s.

On back-office integration: The entire transaction was structured to ensure that it wasn’t any kind of duplication of anything that happened with [FairPoint Communications or Hawaii Telcom]. From a back-office perspective, Verizon is creating a separate instance of all of their systems, every last one of them that they use today to manage the business. Those will be set up separately and put into SpinCo [the name for the acquired assets], so it will be stood up as its own stand-alone company. So there’s no issue at all on day one of any kind of problems with orders or customer service, whether it's retail or wholesale customers being able to access information or order flow or transparency of orders on the wholesale side.

The systems that support those states today will be set up as a separate instance; [Verizon] will create a new set of servers and partition out those servers and move separate instances of that same exact software that is operating today. So there’s no risk at all for the customers to have any issues from a back-office support perspective. They’re copying all the systems, all the software, all the platforms used to support the business. They’re creating kind of a copy of what they have today and moving it on to a different server, and those servers will be dedicated to supporting this company, so there’s really no collapsing or migration from the Verizon point of view; they’re just copying exactly what they have today and moving it into a new set of servers in a data center in Indiana.

[Frontier will migrate those assets to its own back-office systems] in a very controlled way over time. We’ve not made any determination on how quickly we’d do that. There would be no pressure to move it very quickly. [Note: According to Frontier CEO Maggie Wilderotter, operations in one state, West Virginia, which includes 13% of the access lines Frontier is acquiring, are required to be coverted at the time the deal closes next year.]

[Until Frontier migrates the systems], we’ll get maintenance support for the software from [Verizon], but there’s no transition services agreement, which was in place between FairPoint and Verizon.

One of the biggest issues I think FairPoint ran into was their ability to convert the systems onto their own. They were trying to build their own systems from scratch. We’re not going to have that issue.

UPDATE: In a conference call today, McCarthy added: At the outset, we'll pay [Verizon] a maintenance fee to maintain the systems for about a year. On six month's notice, we can identify which systems we want to own the source code for…We can move them to us and maintain them ourselves or have a third party maintain them. These are systems and code that [Verizon] owns; they're not owned by third parties. GTE developed them, and [Verizon] sort of enhanced them.

E-mail me at ed.gubbins@penton.com.