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CHARLESTON -- The West Virginia Public Service Commission could approve Frontier Communication's bankruptcy reorganization plan next month, though Frontier plans to use its winning bid of federal rural broadband dollars to sweeten the deal, raising concerns.
Last Friday, the PSC made available the joint stipulation and settlement agreement between Frontier, PSC staff, and PSC Consumer Advocate Division, and the Communication Workers of America union. If approved by the full commission on Tuesday, Jan. 19, West Virginia would be the 11th state to accept Frontier's bankruptcy reorganization plan.
According to the proposed 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 in West Virginia by Dec. 31, 2027.
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 they emerge from bankruptcy, which is expected in early 2021.
"Frontier is pleased to have worked collaboratively with West Virginia Public Service Commission staff, the Consumer Advocate Division, and the Communications Workers of America to create a settlement agreement that affirms our commitment to serve West Virginia and brings significant benefits to our customers and the state," said Allison Ellis, senior vice president of regulatory and government affairs for Frontier Communications.
On page four of the proposed settlement, Frontier said projects part of the Federal Communication Commission's Rural Digital Opportunity Fund auction would count towards their FTTP goal. Frontier was one of nine companies selected earlier this month to expand high-speed internet to unserved parts of West Virginia.
Combined, these companies will receive $362.1 million through the auction for projects in 119,267 Census tracts. Frontier was the largest recipient of RDOF dollars, winning $247.6 million.
"The FTTP locations to fulfill this commitment may include any locations awarded to Frontier pursuant to the Federal Communication's Rural Digital Opportunity Fund," according to the proposed settlement. "As soon as practicable after February 1, 2021, but subject to Federal Communications Commission disclosure limitations, Frontier agrees to provide its West Virginia RDOF bidding information to the parties on a confidential basis."
State and federal lawmakers have raised concerns about Frontier's winning bid in the RDOF auction based on previous experience with the phone and internet provider. Members of the West Virginia Senate and the House of Delegate's Technology and Infrastructure Committee -- a bipartisan group of Republicans and Democrats -- wrote separate letters to the FCC last week asking for the federal agencies to closely scrutinize the Frontier RDOF bid. The letters are similar to a letter to the FCC sent two weeks ago by U.S. Sen. Shelley Moore Capito, R-W.Va.
Del. Daniel Linville, R-Cabell, is the new chairman of the House Technology and Infrastructure Committee and a member of the West Virginia Broadband Enhancement Council. He said he is concerned about Frontier repeating the mistakes of the past.
"It is tremendously important that all West Virginians have access to reliable high-speed broadband internet service.," Linville said. "As Frontier works to emerge from bankruptcy, it is of the utmost importance that any settlements include accountability measures to ensure performance.
"Fiber to the premises for tens of thousands more West Virginians -- beyond those included in the Rural Digital Opportunity Fund --is something we all would favor," Linville continued. "If any settlement is approved by the Public Service Commission, I hope they will include the measures necessary to make sure Frontier keeps its promises."
In 2009, the state applied for a $126 million stimulus grant through the Broadband Technology Opportunities Program for broadband expansion in West Virginia. Frontier, the sub-recipient of the grant, was supposed to build middle-mile fiber connections and allow competitors to also access these lines at lower rates.
Frontier was accused by the Inspector General's Office for the U.S. Department of Commerce for marking up invoices to the state by as much as 35 percent and charging the state millions in indirect costs that were not allowable. The West Virginia Legislature passed Senate Bill 1026 last year to move $4.6 million from the West Virginia Treasurer's Office unclaimed property line item to the state general fund to repay the federal government.
A lawsuit was brought in 2014 by Bridgeport-based Citynet -- also a winning bidder in the RDOF Phase I auction -- accusing Frontier of allegedly misusing $40.5 million in federal grant funding to build a statewide broadband network only benefiting Frontier. That lawsuit is ongoing.
Frontier filed for Chapter 11 bankruptcy in April in an effort to reorganize $10 billion in debt and $1 billion in interest expenses. In a PSC order dated Aug. 30, 2018, Frontier was required to undergo an audit after the CWA filed a complaint seeking a review of Frontier's copper network and infrastructure, as well as revenue since acquiring Verizon Inc. in 2010. A order in the case will be released in the near future.
"We look forward to a prompt approval of our application by the PSC so that Frontier can move forward in successfully completing its Chapter 11 restructuring and get to work on delivering services and creating benefits for West Virginia and our customers," Ellis said.
A spokesperson for the PSC said there would be no comment until after the commission meets Jan. 19 and makes a decision to accept the proposed settlement or not, issuing an order on the case.