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Concerns remain after PSC approves Frontier bankruptcy agreement

CHARLESTON — West Virginia became the 12th state to accept the bankruptcy reorganization plan from Frontier Communications, even though lawmakers still have concerns as to whether Frontier can live up to its promises to expand broadband service across the state.

The state Public Service Commission released two orders Friday: one accepting a proposed settlement agreement between Frontier, PSC attorneys, the PSC’s Consumer Advocate Division and the Communication Workers of America union and the other accepting the results from a long-anticipated focused management audit of the company.

The two orders impose strict conditions on Frontier to improve its copper-line phone and internet services, as well as expand its fiber broadband internet service. Under the joint stipulation agreement approved by the PSC, Frontier agreed to spend $200 million on capital improvements by Dec. 31, 2023, and to deploy fiber high-speed internet to at least 150,000 locations in the state by Dec. 31, 2027.

“The commission is pleased with the resolution of these two cases,” said Charlotte Lane, chairwoman of the PSC, in a statement Friday. “These Orders allow Frontier to proceed with its bankruptcy reorganization, emerge a stronger corporate structure and make much needed investments in West Virginia’s internet infrastructure.”

According to the proposed stipulation agreement, Frontier’s operations in West Virginia would be known as “InvestCo.” As part of the designation, Frontier agreed to voluntarily deploy gigabit broadband services to no less than 150,000 locations. Frontier is required to spend no less than $50 million annually.

A request for comment was not immediately available from Frontier.

The locations will allow Frontier to deploy fiber to homes and businesses when people subscribe, also called FTTP. Frontier set a goal of FTTP broadband deployment to 75,000 locations three years after it emerges from bankruptcy, which is expected in early 2021.

“The commission appreciates Frontier’s decision to designate West Virginia as an InvestCo state,” the order stated. “The economic growth of a state requires a solid bedrock of infrastructure. High-speed broadband internet service is rapidly becoming as necessary as roads, schools, and public utilities as a component of that infrastructure.”

While the commission has authority over issues arising from Frontier’s phone service, Senate Bill 576, signed into law in 2015, prohibits the commission from having jurisdiction over internet protocoled-enabled services and voice-over-internet-protocol-enabled service.

However, with Frontier entering into the order, that makes the order binding even if Frontier should change West Virginia’s InvestCo designation.

In the PSC’s order, Frontier is required to send the PSC multiple reports, including how it plans to spend the $200 million. That report is due by March 15 and will include monthly and annual updates and tracking reports to the PSC. The PSC also required cash-flow projections, quarterly reports on the progress meeting audit requirements for Frontier’s copper network, fiber optic capabilities, maintenance, tree trimming, pole inspections, and manpower.

“The commission has a responsibility to make sure Frontier lives up to the commitments it has made,” according to the order. “The commission will require that Frontier supply additional information and reports that will permit the commission to monitor Frontier’s progress towards meeting those commitments … To the extent a lack of progress towards meeting those commitments becomes apparent to the commission through required reports or otherwise, we will undertake further proceedings to assure those commitments are met in a reasonable and timely fashion.”

In the PSC’s order, if Frontier does not hold up its part of the stipulation agreement, the PSC could implement surety requirements that would include monetary penalties should Frontier not meets its obligations. The PSC will review Frontier’s progress on Sept. 30 and every three months from then on.

“This potential surety requirement is a condition for our approval in this proceeding and we will require that Frontier submit an affidavit that it understands the condition and agrees to provide future surety for the capital expenditure budgets related to this proceeding and the Management Audit case, as described in our order in that proceeding, if, after hearing, such surety is required by the commission,” the order states.

Frontier has been under scrutiny from state and federal lawmakers after its winning bid in phase I of the Federal Communication Commission’s Rural Digital Opportunity Fund auction in 2020. Frontier was one of nine companies awarded winning rights to expand high-speed broadband internet service to 119,267 unserved Census tracts in West Virginia, a $362.1 million investment in the state over the next 10 years. Frontier was the largest recipient of RDOF dollars, winning $247.6 million.

Seven groups have written letters to the FCC concerned about Frontier’s RDOF Phase I winning bid, including members of the West Virginia Senate and the House of Delegates Technology and Infrastructure Committee. These groups are joined in their concerns by U.S. Sen. Shelley Moore Capito, R-W.Va.

“I’ve made it clear that if, during the review of Frontier’s RDOF long-form application for the West Virginia locations there are any questions or concerns about their ability to deliver on the commitment made in their short form application, that the FCC should reject their long-form application,” Capito said in a statement last week. “The stakes are simply too high to provide nearly $250 million to a company that does not have the capability to deliver on the commitments made to the FCC.”

Frontier also was supposed to finish projects as part of phase II of the FCC’s Connect American Fund. Frontier accepted CAF funds in 2015 to expand broadband to 89,190 locations in West Virginia by the end of 2020. According to the most recently available data, Frontier had expanded broadband to 70,269 locations by 2019 — 79 percent of the locations included in the original agreement. Frontier has until March 1 to certify it has completed the requirements of the agreement.

“If Frontier misses its 100 percent milestone, it has additional time to come back into compliance after which the Universal Service Administrative Co., which manages the universal service fund for the FCC, will recover a portion of support depending on the size of the final gap,” said FCC spokesperson Ann Veigle.

According to the proposed settlement, Frontier said projects part of the RDOF auction would count towards its FTTP goal. That claim concerned lawmakers who worry about whether Frontier can meet the goals it has set. The PSC believes its order will help ensure Frontier carries through with its promises.

“Frontier’s successful RDOF bid will benefit Frontier, its customers, and the State of West Virginia. However, based on news reports Frontier faces criticism from elected officials as to whether Frontier is financially and operationally prepared to use those funds to the best advantage of this state,” the PSC stated in its order.

“The reporting requirements … should help to restore public confidence in Frontier and put in place appropriate checks and balances to assure that Frontier is proceeding in a manner that will benefit Frontier, its customers, and the State of West Virginia.”

Also last Friday, Frontier was able to receive approval of its bankruptcy reorganization plan from the FCC, which joins 14 states including West Virginia. Frontier’s reorganization plans will reduce its debt load by $10 billion when it emerges from bankruptcy later this year.

“We continue to make important progress in our constructive engagement with regulators across our service territories, and this approval from the FCC marks a major milestone,” said Bernie Han, president and CEO of Frontier. “Our team remains focused on our transformative strategy to strengthen our financial foundation, improve our operations and enhance our customer experience throughout the U.S.”

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