Some See Northwest Fiber’s Frontier Buy as Chance to Fix Rural Internet

Competitors and consumer advocates in interviews hoped Northwest Fiber’s buy of Frontier Communications wireline, video and long-distance operations in four states will lead to better rural broadband. Oregon and Montana intervenors listed grievances with Frontier. They haven’t formally supported or opposed the acquisitions, with regulatory reviews early on. State and federal review timelines stretch into early next year.

The acquisition could help fix customer service and rural access in Montana, state Rep. Steve Gunderson told us. He raised concerns at the FCC (see 1908090024). Unlike Frontier, Northwest Fiber is talking to MontanaSky Networks, a small local CLEC that wants to work with the incumbent to spread broadband. “They’re in a mode of at least communicating,” he said. “I hope they become working partners to better serve rural Montana.”

Northwest Fiber expects to get regulatory approval in 2020 and is likely to go to market under a different brand, its website said. An FCC spokesperson couldn't say whether review would be by the Wireline Bureau along with the chairman’s office, rather than a commissioners' vote. Internal guidance suggests the review should be complete by Jan. 21, but the deadline is informal, the spokesperson said. In late July, DOJ in docket 19-188 asked the FCC to defer action pending completion of a multi-agency review of any national security, law enforcement and public safety concerns related to Northwest Holdings' partial foreign ownership. Frontier and Northwest asked the FCC for a declaratory ruling approving the transfer (see 1907260044).

The companies need approvals from Montana, Oregon and Washington commissions. No OK is needed from the Idaho Public Utilities Commission, which doesn’t have authority to review the deal under state law, said a footnote in the companies' Sept. 17 FCC filing. The telcos also applied to local franchise authorities in Oregon and Washington.

Montana parties meet Monday at the Public Service Commission for a settlement conference, said a Sept. 16 notice in docket 2019.06.039. An Aug. 30 procedural order says intervenor testimony is due Oct. 10 and Nov. 21 is the final day for applicants’ rebuttal testimony; a hearing is scheduled Nov. 6; post-hearing briefs are due Jan. 6.

The Oregon PUC wants staff and intervenor testimony by Oct. 29, said a schedule in docket UM-2028. Applicants’ reply testimony is due Nov. 18 and staff/intervenor rebuttals are due Dec. 19. The agency set a Jan. 30 hearing, to be followed by opening briefs due Feb. 13 and response briefs due Feb. 27.

The Washington Utilities and Transportation Commission plans a Jan. 27-28 hearing, said a Sept. 13 notice in docket UT-190574.

Frontier and Northwest "are actively engaged in the process of securing approvals for the transfer of the Pacific Northwest properties, which is progressing as expected," a Frontier spokesperson emailed Friday.

Rural Hopes

Montana’s Gunderson is displeased with Frontier’s broadband deployment to rural areas. He said he wrote the FCC “to put Frontier on notice that we weren’t happy.” The Republican said he hasn’t raised concerns at the Montana PSC because he believes the FCC has more input.

The state rep expected upgrades from a multimillion dollar federal grant Frontier received about five years ago, but “nothing really came of that.” Frontier got a $6.8 million grant in 2015 for northwest Montana through the FCC Connect America Fund. “Frontier is laying fiber as we speak to meet the minimum requirements of the grant,” he emailed later. “The upgrades they are making won’t actually make a huge difference but will allow them to sell the network without paying any fines.”

That carrier isn't “meeting the basic requirements of internet delivery” in rural Montana, providing slow speeds and not doing enough plant maintenance, said Amber Holm, MontanaSky sales and marketing manager. The CLEC also wrote the FCC. “We have tried to work with Frontier in the past to help serve those areas, and they haven’t been open to working with us,” Holm said now. The companies together could provide better reliability for those customers than either can alone, she said.

MontanaSky hopes for a better relationship with Northwest Fiber, and thinks it will be an improvement, Holm said. The companies talked once when the transaction was announced, she said. “They reached out [and] were very willing to talk to us.” Northwest intends to operate and has “knowledgeable industry leaders on their team,” she said. The CLEC would welcome FCC conditions requiring the new company better serve rural areas, said Holm, saying that commission is more likely to act than the PSC. MontanaSky shared concerns with Montana commissioners but hasn’t heard back, she said.

The Montana Consumer Counsel intervened in the PSC review, as it does for most transactions, and it’s too soon to say what its position on the deal will be, said Montana Consumer Counsel attorney Jason Brown. The consumer office often suggests conditions on mergers; it looks at impact on service, making sure there are benefits and no harm to consumers, he said. “We’ll certainly pay attention to the speed of service, the quality of service and, of course, rural access.”

"Throughout our ownership of the properties, Frontier has invested in rural areas where other providers choose not to offer service," its spokesperson emailed. "Through these investments and participation in programs like the Connect America Fund, Frontier has expanded and upgraded broadband service to more than 62,000 Idaho, Montana, Oregon and Washington households, with over 2,600 of the upgrades benefitting Montana communities. ... Frontier has successfully surpassed the annual project completion obligations required by the CAF program. Northwest Fiber intends to continue investing to expand and upgrade services throughout the Pacific Northwest Properties."

Unknowns

Frontier hasn’t been an “ideal owner” but is a “known entity” with “a known set of risks and issues, whereas any new owner creates a whole new set of those,” said Oregon Citizens’ Utility Board Executive Director Bob Jenks.

Oregon CUB intervened at the PUC to ensure Northwest Fiber isn’t just out for Frontier’s urban Fios fiber system but invests in rural areas with copper-based internet with lower speeds, said Jenks. It’s too early for CUB to have a position on the deal, Jenks said. “I think we’ll sit down in settlement conferences and talk with them about … these issues and see if we can reach agreement.” The state commission may lack authority to require broadband investment, but it can count a “commitment to invest in broadband as a positive attribute of this merger that helps offset some of the risks,” he said.

Service quality has been a concern in Oregon with both Frontier and CenturyLink, the other large incumbent, said CUB Outreach Manager Samuel Pastrick. When Frontier bought Fios from Verizon, consumers complained to CUB when Frontier tried to move Fios TV customers to satellite TV, said Jenks. The carrier at first wasn’t investing much to bring rural parts of the network up to the same service level as the Fios areas, he said.

Charter Communications “has a substantial interest” in the deal in Oregon and Washington state because the cable company “relies on interconnection with, and related services obtained from, Frontier to offer and provide service to Charter’s customers in Frontier’s service territory.” Charter said that in a July 18 petition to intervene at the UTC and an Aug. 9 petition at the Oregon PUC. The deal mustn’t “adversely impact competition … or Charter’s rights and ability to obtain interconnection and related services it needs to provide its competitive voice services.” The cable company didn't comment now.