The WV PSC will hear arguments as to whether the sale of the lines to Frontier Communications. The main issues being debated are whether the sale would lead to service quality problems for Verizon’s current customers and whether Verizon will avoid paying taxes on the $3 billion profit on the sale by taking advantage of a tax loophole.
The proposal would affect Verizon’s landlines only, and would have no effect on Verizon’s wireless customers or equipment.
The Communications Workers of America (CWA), the union that represents about 3,900 workers affected by the sale, opposes the deal. The president of Local 2002, other union members, spoke to the Mingo County Commission (MCC) about the proposal and what it could mean for the state.
However, representatives from both Verizon and Frontier both say the information the CWA is presenting is erroneous, and that people in the state should hear both sides of the argument.
The union has launched a major advertising campaign presenting its points against the sale. CWA representatives told the MCC Frontier, a much smaller company than Verizon with limited resources, could not maintain the current level of support Verizon customers have, and that broadband internet access, which is lacking in West Virginia, will not be improved.
“Frontier plans to limit its broadband investing to DSL technology instead of fiber optic cable to the home,” Ross Lewis, CWA Local 2002 President told the commission. “Fiber optic cable is much faster and more dependable.”
The CWA cites the Federal Communications Commission as reporting that 60 percent of homes in West Virginia lack broadband access, ranking the state 33rd in the nation in real time internet access.
Steve Crosby, Senior Vice President in charge of Regulation, Legislation and Public Relations for Frontier, told the Daily News that being a smaller company, Frontier feels they can bring a greater emphasis to West Virginia customers.
“Right now, only 60 percent of Verizon customers have broadband,” Crosby said. “But 92 percent of Frontier customers do. We are investing capital in West Virginia, our focus is on remote, rural areas, whereas Verizon’s focus is on bigger markets and wireless.”
Crosby said Frontier makes a concentrated effort to bring broadband internet to its customers, and in fact recently launched a promotion in which it gave customers a free netbook computer when they signed an internet access contract with Frontier.
But the union says Frontier simply lacks the resources needed to expand service.
“While Frontier promises that it will somehow expand DLS coverage, it doesn’t’ explain how it will do that while also incurring steep integration costs,” the union says. “The transaction will not bring the impacted states any closer to the high speeds needed to take full advantage of the information superhighway.”
The details of the sale itself are also a point of contention.
The CWA says is increasingly used by corporations seeking to sell off unwanted assets without paying taxes on their gains. Frontier says the tax laws governing the transaction were enacted by Congress in 1997, and are consistent with existing law and have been used in deals made by companies such as Disney and Proctor and Gamble.
Those opposing the sale also report Frontier has a plan in place to reduce costs for $500 million per year until 2013.
“Frontier refuses to publicly state exactly where these cuts will be made, but based on past experience with such acquisitions we can assume that cuts will be made with jobs, service quality and broadband build out.”
But Frontier says cutting jobs is not part of its plan in West Virginia, that, in fact, the company plans to create a new southeast regional headquarters in Charleston. In addition, employees are being guaranteed their jobs for 18 months after the sale if the transaction goes through.
The union has also expressed concerns as to the future financial stability of Frontier after the sale.
“Verizon has a bad track record with similar sales,” Union Local President Ross Lewis told the MCC. “They sold their yellow pages to Idearc, and that company subsequently went bankrupt. The same thing happened when Verizon sold its New England properties to FairPoint, and when Hawaiian Telecom bought Verizon’s Hawaiian operations, those companies went bankrupt.”
If Frontier would go bankrupt after purchasing the West Virginia customers and lines, the company would then go to Verizon’s creditors.
“Who would you rather have running your phone company, Verizon or some bankers?” Lewis asked.
But Harry Mitchell, Director of Field Media Relations with Verizon, told the Daily News the companies who had failed after they were bought by Frontier insisted on building their own support systems, which led to problems.
“Frontier has done this [purchased companies] dozens of times,” Mitchell said. “We are experienced, we know what we are doing.”
In the end, it will be up to the PSC to decide whether the transaction would be a good one for West Virginia.
“It is a good fit for both companies,” Mitchell said. “Frontier wants to take West Virginia to the next level of communication.” Frontier Communications agrees.
“Frontier’s acquisition of Verizon properties in the state will expand broadband, protect jobs and improve service quality,” the company said.
But the CWA thinks differently.
“West Virginia is better off with Verizon than it will be with Frontier,” the union says. “There is no question that Verizon is much less susceptible to financial and operational problems than Frontier.”
The PSC hearings are set for Jan. 12 through 14 in Charleston.
Post a Comment
