NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Thursday, May 30th, 2019

Frontier Communications to leave Cascadia; PNW assets sold to WaveDivision Capital

Telecommunications firm Frontier Communications is saying adieu to Cascadia.

Nine years after taking on debt to buy Verizon’s assets in the region, Frontier Communications is offloading those same assets in a $1.35 billion sale to Kirkland-based WaveDivision Capital, which must be approved by regulators.

If the sale goes through, Frontier will exit the each of the Washington, Oregon, Idaho, and Montana markets where it currently operates.

Frontier Communications' Northwest operations

Frontier Communications’ Northwest operations (Image by DSLReports’ Darknessfall)

Frontier Northwest was formed in 2010 from the merger of Verizon Northwest (previously GTE Northwest) with Frontier’s rural Idaho operations.

“The sale of these properties reduces Frontier’s debt and strengthens liquidity,” said Dan McCarthy, Frontier President and Chief Executive Officer, in a news release.

“We are pleased to have a buyer with extensive experience building and operating advanced fiber-based communications assets in these regions,” McCarthy added. “We will be working very closely with the new owners to ensure a smooth, successful transition for our customers and the communities we serve.”

“We are excited to be partnering with Searchlight on this opportunity to acquire Frontier’s operations in the Northwest,” said Steve Weed, CEO of WDC, and Founder and former CEO of Wave Broadband. “We have a proven track record of customer satisfaction by providing fast, reliable internet connectivity combined with great service and support. Having grown up in the Northwest, I’m excited to be able to continue to serve my community through this new venture.”

“Searchlight” is Searchlight Capital Partners, which describes itself as a global private investment firm with offices in New York, London and Toronto. The company lists Electric Lightwave, Rackspace, and Cengage Learning as some of its investments. (Electric Lightwave was recently subsumed into Allstream.)

“Across the four states, Frontier’s network passes 1.7 million residential and business locations, of which approximately 500,000 are fiber-to-the-premises capable,” Frontier’s news release notes, not mentioning that many of those fiber-to-the-premises connections were created under Verizon’s ownership.

“As of March 31st, 2019, Frontier served approximately 150,000 fiber broadband, 150,000 copper broadband and 35,000 video connections in these states.”

WaveDivision and Searchlight have formed a new company to operate Frontier’s Northwest division. Weed says Frontier customers should not expect any changes.

“This announcement does not change anything for Frontier’s customers or the employees who support them,” Weed emphasized.

“All services [will] continue without disruption, all offices [will] remain open, and all contracts and rates will continue to be honored.”

Reaction on DSLReports, a popular forum for discussing ISPs, was mixed.

“Free at last!” cheered one commenter.

“I think it’s a shortsighted move,” wrote another commenter. “A quick billion for a desperate company. GTE/VZ/Frontier Northwest has been a producer for their respective companies for years. While there’s plenty of rural copper, they have a fully deployed fiber network where it counts – suburban Portland and northern and eastern Seattle. The demographically wealthier parts of both of those cities. Enough to subsidize the rural copper. These states are not like West Virginia or some of the Midwest lead weights which are pretty much a huge copper mess.”

“I also wouldn’t be surprised to see everything outside of Portland and Seattle get sold off again to small independents and cooperatives in the region,” wrote a third DSLReports commenter, responding to a remark characterizing the deal as a private equity play by “vultures picking at the scraps of a dying telco.”

“The fiber assets in the Portland and Seattle areas are much more valuable. This will probably look a lot like when GTE sold off Hawaii to the Carlyle Group back in 2000, who pretty much ran it into the ground before selling it off again. (I think there was even a bankruptcy filing back around 2008 or so.) I think Cincinnati Bell or some subsidiary thereof actually now owns Hawaiian Telcom now. Anyway, mark my words, they are going to sell off these rural areas, piece by piece.”

The companies did not offer much in the way of details of what Frontier customers can expect after the sale close — if it goes through.

Promises that everything will be just fine and dandy have been made before… when Frontier was the new owner to be and Verizon was bailing.

For instance, Frontier provides email to its residential customers and many people in the Pacific Northwest have and use email addresses that end in Presumably, the new company won’t be called Frontier. And will it even continue to offer an email service? Or will it do what Verizon did and exit the email business entirely a few years ago in the markets where it still operates?

Having to change over to a new email address is a big hassle. If current Frontier customers can’t continue to use their email addresses after the sale closes, that will be very disruptive. Perhaps an accommodation can be worked out. After all, this time, the proposed new owners are based here in Washington State and not on the other side of the country in Connecticut. That’s the silver lining.

We’ll keep you posted on what regulators have to say about this proposed sale. The FCC has to clear the deal and so does the Department of Justice and state regulators — a process that will take many months, if not longer.

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