Sale of Verizon lines to Frontier comes with strings attached

Verizon and Frontier have agreed to four voluntary commitments as a condition of Federal Communications Commission approval of Verizon’s plan to sell 4.8 million rural access lines in 14 states.

In a statement announcing its approval of the deal on Friday, the FCC said the voluntary commitments included Frontier’s agreement to significantly increase broadband deployment to lines involved in the transaction and to deploy fiber to libraries, hospitals and other anchor institutions. In addition, the FCC said Frontier agreed to make data on its broadband deployment progress available to the Commission “at an unprecedented level of detail to enable effective monitoring of Frontier’s compliance with its commitments.” Finally, both Frontier and Verizion made a series of commitments to protect wholesale customers, including honoring all obligations under Verizon’s current wholesale arrangements that are in effect at closing.

About a year and a half have passed since Verizon announced plans to sell the lines to Frontier and, as Bernstein Research noted in a report about the deal issued on Friday, some things have changed in that time. The researchers noted, for example, that line losses for the properties involved in the deal, which had previously been better than Verizon’s company average, have accelerated and cumulative losses are now nearly as bad as for the company as a whole. Perhaps hastening this trend is the fact that competitors, including cable companies serving the areas involved in the deal, have had ample time to launch fear campaigns about the acquisition.

Frontier may be able to reverse this trend through wider deployment of broadband, which is currently available to only 62% of homes in the areas that will be changing hands. The commitments that Frontier made to the FCC call for deploying broadband at speed of at least 3 Mb/s downstream to at least 85% of transferred lines by the end of 2013 and to increase that speed to 4 Mb/s by 2015. In addition, all new broadband deployments must support speeds of at least 1 Mb/s upstream.