The Tri-Counties are about to feel the effects of consolidation in the cable and telecom industries.

On April 1, Frontier Communications will begin operating broadband, television and landline services formerly owned by Verizon Communications. Even as Frontier acquires Verizon customers and employees, Charter Communications and Time Warner Cable hope to complete a merger that could give two-thirds of the Tri-Counties the same cable company for the first time.

In February 2015, Frontier agreed to pay Verizon $10.5 billion for all Internet, TV and phone subscribers in California, Texas and Florida. The Federal Communications Commission approved the deal in September. Regulators in Florida and Texas also OK’d the deal in the fall.

When the California Public Utilities Commission approved the deal on Dec. 7, it cleared the final regulatory barrier. The deal will close March 31 and Frontier will acquire 3.7 million landline phone subscribers, 2.2 million broadband Internet subscribers, and 1.2 million Verizon Fios TV customers.

By adding Verizon’s Southern California assets, Frontier complements its Northern California operations in San Francisco and Sacramento. Verizon, meanwhile, will shed its burdensome broadband, landline and TV businesses, which require costly upkeep to Internet infrastructure, so it can focus on wireless service.

A map provided by Frontier shows small portions of southern and eastern Ventura County being affected. Most of Santa Barbara County will also be impacted.

Customers to see small changes

Changes for Frontier customers will not be immediate, but slowly be phased in. Frontier spokesman Steve Crosby said the quality of service customers receive will not change.

To exit the landline phone market in the three states, Verizon sacrificed a large chunk of Fios subscribers on the network it spent $23 billion building. The company spent $7 billion to develop Fios connections in the three states.

Roughly 24 percent of Verizon’s Fios Internet customers and 21 percent of its Fios video customers will be acquired by Frontier. Meanwhile, the percentage of homes in Frontier’s footprint enabled for fiber optics or other high-speed Internet will rise to 31 percent from 14 percent.

With a market cap of $6.2 billion, Frontier tripled in size following a deal in 2010 that gave it Verizon’s rural phone lines in 13 states. Since the latest deal was announced last February, Frontier’s stock has dropped from $7.93 to $5.27 on March 23.

Frontier plans to spend at least $475 million obtained through FCC grants upgrading rural broadband infrastructure nationwide, including in parts of the Tri-Counties. Crosby said the company plans to invest its own money making upgrades as well.

Still, it’s unclear how much Frontier will be able to invest in upgrades. It took on $600 million in debt as part of the deal with Verizon, posted a fourth quarter loss of $103 million and an annual loss of $196 million because of acquisition-related costs.

Same office but new bosses

An employee at Verizon’s Newbury Park office told the Business Times that when he comes to work April 1, he will work in the same office with the same desk but with new bosses. Crosby confirmed that Frontier management will acquire 10,000 Verizon employees, including Verizon’s Pacific region headquarters in Newbury Park and call centers in Camarillo and Oxnard.

“Everyone is excited,” Crosby said. “There’s always going to be a little trepidation.”

Crosby confirmed new management will work at the Newbury Park office. Other than management, though, staff will be eased into the transition. Employees will get Frontier name badges, shirts and hats. Thousands of Verizon trucks will eventually be painted with Frontier colors.

“The key thing is to make sure our new employees know who they are,” Crosby said. “This is something that we’ve been working on and planning (for months).”
charter, time warner merger up next

On May 12, the utilities commission will also hold another meeting to discuss a proposed $67.1 billion merger between Charter Communications, Brighthouse Networks and Time Warner Cable.

The FCC is circulating a draft memo that would approve the merger with certain restrictions, according to the Wall Street Journal.

Charter and Time Warner Cable shareholders have already approved the merger, while Brighthouse Networks is private. So, the May 12 meeting could also be the final hurdle to approving the merger.

Comcast is the nation’s largest cable provider with about 27 million subscribers and Time Warner Cable is the second largest with about 15 million subscribers in 29 states. Charter is the fourth-largest cable company with 5.9 million subscribers in 25 states.

Controlling the Internet

Charter dominates San Luis Obispo and Paso Robles while Comcast operates in Santa Maria and southern San Luis Obispo County. Time Warner Cable operates in Santa Paula, Oxnard and parts of Ventura.

“The new Charter will be a smaller company than Comcast is today,” said Justin Venech, Charter vice president of external communications.

Venech said in a recent interview that Charter has worked to show the FCC the merger is in the public interest. Critics say letting just two cable companies control the Internet is dangerous.

Venech said Charter will add at least 25,000 broadband connections for homes and businesses within four years and create a program to offer high-speed Internet to seniors for $14.99 per month.

• Contact Philip Joens at pjoens@pacbiztimes.com.