Frontier waits, cable guys pounce

Competitors are pouncing on Verizon's move to sell 4.8 million access lines to Frontier Communication in 14 states, reaching out to Verizon customers in those areas and urging them to switch providers before the network changes hands.

In particular, Comcast has been targeting customers in Oregon and Washington, said Donald Shassian, chief financial officer for Frontier. Those attacks are made easier by the high-profile service problems Verizon customers saw in the Northeast after they became Fairpoint Communications customers in a similar transaction. Frontier said it knows how to avoid the problems that beset Fairpoint. But in the meantime, while its deal is still pending (perhaps until next summer), Frontier can't fight back in markets it has yet to acquire.

“We can't force [Verizon] to come up with a new promotion or new incentives or change their marketing,” Shassian said at a recent investor conference. “It's been challenging to compete against Comcast's campaign like that. We can't advertise in those markets because we don't have regulatory approval. That [would be] poking a regulator in the chest. You can't assume you're going to get something. You've got to sit back on your heels and hope Verizon does their best.”

Revenue from the assets Frontier is acquiring dipped 2% sequentially in Q3 to just over $1 million. That followed a nearly 6% year-over-year decline in the first half of the year. While Shassian acknowledged that cable competition might be partly to blame for that third-quarter softness, it is also due to maturation of some Indiana markets, where Verizon's fiber-to-the-premises network is thoroughly deployed.

Regulators in Oregon recently spelled out stipulations to their approval of the deal, including $10 million in broadband expansion and flexibility in long-term contracts for FiOS customers. The state is expected to green-light the deal soon, when Washington regulators take their own turn.

Frontier may face its toughest battle in West Virginia. Debate is already heating up in the state, which contains about 10% of the lines Frontier is acquiring. The Communications Workers of America held a recent press conference in which a Vermont firefighter — recounting his experiences with the Verizon/Fairpoint transfer — warned of the potential threat to 911 service posed by the Frontier deal.

A Verizon spokesperson replied, “Shame on them.”