CUB Helps Notch Win for Frontier Oregon Customers in Proposed Acquisition

Editor’s note: The Oregon Public Utility Commission signed and approved this acquisition order on the morning of January 27, 2020.

As CUB reported in July 2019, Frontier Communications (Frontier) agreed in principle last summer to sell its Northwest (Idaho, Montana, Oregon, Washington) assets to a newly formed Seattle company called Northwest Fiber, LLC (NW Fiber). Portland metro-area and South Coast residents are familiar with Frontier because the company is one of two remaining large incumbent telephone companies (the other being CenturyLink) still offering both traditional voice (landline) and internet access services for residential and business customers in Oregon. Citizens Telecommunications Company (Citizens), a Frontier subsidiary, serves customers throughout a large section of Northeastern Oregon.

While Frontier and NW Fiber agreed on a sale price of $1.35 billion for Frontier’s Northwest assets (including Citizens), the sale faced a series of hurdles along the way toward final approval. In Oregon, the most important step is approval from the Oregon Public Utility Commission (PUC). CUB expects PUC approval of the proposed transaction later this winter because an unopposed, all-party stipulation was submitted to the Commission on December 4, 2019.

The reason for the PUC’s involvement is that landline telephone service, unlike internet access service, is still regulated (at least in part) as a basic utility service. This is good news for Frontier’s residential customers because it allowed for CUB’s intervention on their behalf in the proceeding.

As with past mergers and acquisitions, regarding both energy and telecommunications utilities, CUB’s role was to advocate for the public interest as opposed to that of company shareholders. For its part, the PUC can only approve a proposed telecommunications utility acquisition if it finds it to be in the public interest and that it results in “no harm” to the company’s existing customers.

After several weeks of negotiations, CUB supported NW Fiber’s acquisition of Frontier Oregon upon finding through our analysis that the “no harm” standard had been met, and that the summary of conditions in the stipulation benefit the public interest.

Throughout the negotiations, CUB worked diligently to secure NW Fiber’s commitment to invest in Oregon communities and customers outside of the Portland metro area (which, for the purpose of the agreement, participating parties agreed to define as Clackamas, Multnomah, and Washington counties.) The agreement now awaiting PUC approval ensures significant investments in fiber-based broadband infrastructure capable of supporting approximately 1 gigabit symmetrical service. NW Fiber will invest no less than $10 million in improving and expanding fiber-based broadband infrastructure outside of the Portland metro area within five years of the transaction’s closing, and $5 million of this must be spent within the first three years.

Additionally, NW Fiber must invest $40 million in fiber-based broadband infrastructure to locations and customers irrespective of state geography. Similarly, $20 million of this must be spent within three years of the close of the transaction.

Above and beyond financial commitments, and perhaps most importantly, the agreement requires NW Fiber to further ensure that no less than 60 percent of all service locations have access to fiber-based broadband infrastructure capable of at least 1 gigabit symmetrical service within five years of the transaction’s closing. This measure alone, particularly for residents outside of the Portland metro area, represents a significant step toward narrowing Oregon’s digital divide.

Finally, the agreement guarantees the provision of fair and reasonable standard voice service consistent with Frontier’s existing statutory and administrative commitments, and further prohibits NW Fiber from requesting authorization from the PUC to discontinue standalone voice service for a period of five years following the transaction’s closing. These two points, combined with the fiber-based infrastructure investments, ultimately buoyed CUB’s support for the transaction.

All told, the final agreement awaiting PUC approval represents a significant investment in Oregon communities and customers that would not have occurred but for NW Fiber’s purchase of Frontier Oregon. CUB sees the proposed transaction as a win for Frontier’s residential customers and was pleased to see all parties in this proceeding work collaboratively to reach an agreeable resolution.

To keep up with CUB, like us on Facebook and follow us on Twitter!

• Share this post on Facebook.
• Share this post on LinkedIn.
• Share this post with email.

« Back