During Labor Day week, Verizon (Verizon Communications Inc.) announced that it entered into a “definitive agreement” to acquire Frontier (Frontier Communications Parent, Inc. in $20 billion all-cash transaction. In calling this move “strategic,” the acquisition will enhance the footprint for Verizon’s fiber network primarily into the southwestern United States. According to Verizon’s press release, Frontier has spent $41 billion over the past four years to both upgrade and expand its fiber network, and Verizon expects to be able to capitalize on this investment to benefit its customers. Currently, Frontier has 2.2 million fiber subscribers across 25 states, while Verizon has 74 million FiOS connections in 9 states and the District of Columbia. Again, according to its press release, Verizon remains committed to existing plans to build out an addition 2.8 million fiber locations by the end of 2026. It’s important to note that while Verizon is certainly one of the most well-known players in the overarching fiber and wireless spaces, the fiber footprint will still only cover 17% of the country.
The deal makes sense as Verizon pushes to expand its nationwide coverage, and in one regard, the shareholders of Frontier are clear winners. Additionally, the expansion of Verizon’s network and its capabilities may well be good for Verizon shareholders as well. However, Verizon’s expansion into these markets may change the dynamics of broadband deployment in underserved areas where strong shareholder return is not, by definition, likely, if even possible.
Although this acquisition is far from a dealbreaker for municipal broadband deployment, this deal may jeopardize—at a minimum—the timeliness of such projects, let alone their completion. The Broadband Equity, Access, and Deployment (BEAD) program, has—and will provide--$42.45 billion to expand high-speed internet access by funding planning, infrastructure deployment and adoption programs in all 50 states, Washington D.C., Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. It was funded by the Bipartisan Infrastructure Law, and is a “federal grant program whose goal to get all Americans online by funding partnerships between states or territories, communities, and stakeholders to build infrastructure where we need it to and increase adoption of high-speed internet. BEAD prioritizes unserved locations that have no internet access or that only have access under 25/3 Mbps and underserved locations.
Certainly the deals that make the big boys in the marketplace even bigger create some additional challenges for those who are working feverishly to bring fiber-based broadband to underserved communities. With only 17% of the country covered by the newly larger Verizon, it’s difficult to gauge how much disruption, if any, this acquisition will create. But it’s an issue that needs to be considered.
Finally, in an interesting twist, according to Bloomberg, “In 2015, Verizon sold parts of its landline phone business in California, Florida and Texas to Frontier for $10.54 billion in cash. Frontier later declared bankruptcy, emerging in 2021 with about $11 billion less debt.” (while this is a somewhat labored corollary, queue up the classic Peter Allen song “Everything Old is New Again.”)
The horsetrading in telecom continues…
