Verizon-Frontier spin-off faces more roadblocks

Verizon's plan to sell off $8.6 billion worth of broadband assets to Frontier Communications has no shortage of opposition. The proposed merger spans across 14 states and is subject to approval by the FCC and 10 state utility commissions.

The Public Utilities Commission of Ohio (PUCO), mandated to assure "Ohioans adequate, safe, and reliable public utility services at a fair price" fielded citizen's concerns at a public hearing on Wednesday, October 7.

PUCO's public inquiries come in the wake of the Office of the Ohio Consumers' Counsel's recommended rejection of the merger. The Consumers' Counsel's recommendation arose from concern regarding Frontier's capability "of maintaining and improving Verizon's Ohio residential local telephone service if the merger is approved at the state and federal levels".

At issue are Frontier Communication's ability to provide the same quality and breadth of service as Verizon. The Communications Workers of America commented that:

"There are significant questions concerning Frontier's capacity successfully to operate and fund a new company that is three times its size. Indeed, the sale poses significant risks to consumers, workers and the economic health of our communities. These risks overwhelm any supposed benefits from the deal".

The Communications Workers of America see this merger as Verizon's latest attempt to ditch debt using a tax loophole known as the "Reverse Morris Trust". The loophole allows a company to "sell off their unwanted assets without paying taxes on their gains".

In 2009 Verizon used a similar transaction to offload operations in Maine, New Hampshire, and Vermont to Fairpoint communications, a company which is now on the verge of bankruptcy.

Hetty Scofield, a Communications Workers of America representative, criticized the Verizon - Frontier deal as a blow to broadband expansion and innovation: "They want to dump rural America. They don't make any money on it".

The Public Utilities Commission of Ohio (PUCO)

PUCO adds three public hearings on proposed Verizon-Frontier transfer (PUCO)

FairPoint In Talks to Revamp Its Debt (Wall Street Journal)

Proposal to merge two phone companies may face tough sledding (Athens News)