Phone Company Frontier To Respond To Lengthy Audit By April 20

Apr 2, 2020

The long-awaited results of an investigation into Frontier Communications, the state’s primary landline provider, finds the company isn’t doing enough preventative maintenance work on its copper cable network for landline phones in West Virginia. 

Despite several redactions, the more than 160-page report reveals new details into the quality of Frontier’s infrastructure for landline and internet services in West Virginia.

Frontier is a U.S. telecommunications provider, operating two companies in West Virginia — Frontier West Virginia and Citizens Telecommunications Company. 

Both private companies’ landline services and rates are regulated by the West Virginia Public Service Commission. 

The PSC ordered Frontier to select a private firm to audit the company’s quality of service, the condition of its infrastructure and its financial capacity in August 2018, months after a union representing Frontier employees, the Communications Workers of America, AFL-CIO, filed a petition requesting it. 

In the last year, the PSC reportedly has received roughly 2,000 formal and informal complaints regarding Frontier's landline service. In the roughly two years leading up to the report,  more than 700 Frontier customers, local governments and businesses throughout the state who depend on Frontier’s service have submitted comments, supporting the investigation.

In West Virginia, where some communities still lack reliable access to broadband and wireless options, landline access also matters for emergency response

In a June 2019 order, the commission wrote it was “too familiar with the burdens, barriers and barricades that West Virginia geography and small population impose on public utilities rendering service in this state,” referring mostly to cases the commission had written dealing with water utilities. 

“The Commission continues to have concerns with the quality of landline service," the order stated. "Despite the movement to cell service, many state residents, because of economics, geography or terrain, rely on landline service."

Additionally, Frontier West Virginia agreed to extra reporting and investment requirements 10 years ago, when it volunteered to acquire thousands of miles of landline infrastructure from Verizon.

The audit, published last month, addresses characteristics of the network, like its age, its capacity versus the number of customers it actually serves, its worst performing areas and which spots are more susceptible to service interruptions. It explores staffing concerns, noting a number of engineers who maintain the network are nearing retirement and reporting there’s no company plan to fill their vacancies. 

These specifics are all redacted from the current report that’s publicly available online. Frontier submitted the report, conducted by third-party auditing firm Schumaker & Company, to the PSC on March 18. Frontier requested a protective order from the PSC, allowing it to file a redacted version for the public one week later. 

According to Frontier, the redactions were made to protect the company’s “trade secrets,” which competitors could use to take Frontier’s business. PSC staff recommended Tuesday night that the commission reject the redactions, saying the data is too specific to West Virginia to cause any harm. 

As of Wednesday, April 2, the commission had yet to address the redactions. Frontier is required to address the report’s findings by April 20.

Network Condition And Maintenance

The exact age of Frontier’s landline infrastructure remains redacted, but the report notes a spike in copper installation in 1974 and 1983, which if applied to the network would mean a significant portion is around 46 and 37 years old, respectively.

As the network ages, the report notes more “splices” must be made, to connect more lines to the network. Splices and other connection points are susceptible to moisture, corrosion, loose connections and more that may cause interruptions of service to customers. 

Frontier redacted the number of these connection points from the report, and the areas with the most and least connection points.

According to the report, the best thing Frontier can do for its network is offer more company-identified, preventative maintenance. 

“Our ride-arounds identified field conditions that needed to be corrected,” the report said. “However, at that time there was not a systematic process in place to assure these conditions are getting addressed.”

Frontier has recently begun implementing a process to address its lack of preventative work, the report said, but the company redacts the specifics of that process. 

Additionally, the company is slated to lose a noteworthy number of experienced field employees responsible for maintaining the copper network, who respond to customer complaints about service outages. The report recommended coming up with a plan to find and train new employees, although Frontier redacted the number of people set to leave.

The report also notes a discrepancy in the number of customers the network was built to serve, and how many customers Frontier actually has on it. That number, though, was redacted.

In 2018, Frontier told the PSC that the company lost 37 percent of its access lines between 2010 and 2017, from 613,443 to 385,832, which happens as customers drop their service. That was despite gaining Verizon’s extensive former network in 2010. 

According to the most recent audit, Frontier doesn’t track the kinds of the customers it’s losing. 

“Frontier has no information or analysis concerning the categories of customers that have dropped their service,” the report said. “Whether they were the most profitable customers (businesses, urban, high density) or the rural or least profitable customers.”

Murky Financials

Frontier’s financial health appears cloudy. In March, Bloomberg noted the company was skipping certain debt payments as it continued conversations with creditors about filing Chapter 11 bankruptcy.

On March 16, Bloomberg reported Frontier had $17.5 billion in debt. 

At one point in the audit, auditors for Schumaker & Company refer to Frontier’s earnings in West Virginia as “healthy.” 

Senior Vice President of Regulatory Affairs Allison Ellis at Frontier disputed this in a written statement to WVPB last week, saying the audit is “flatly wrong” and that both Frontier companies in WV have lost money since 2012.

“The auditors did not properly account for pensions, post-employment healthcare, and other benefits paid by Frontier nor for interest costs on the money Frontier borrowed to invest in West Virginia,” she stated in writing on Thursday, March 26. “When those expenses are taken into account, it is clear that Frontier has invested more in the state than it has recouped.”

Dennis Schumaker, executive vice president for Schumaker & Company, noted the analysis in the audit only considered the financial information that Frontier made available to his firm. 

“Significant financial transactions applicable to Frontier West Virginia and CTC of West Virginia but paid at the corporate level were not included in the financial statements and annual reports of either company and resulted in an incomplete presentation of net income and cash flows,” the report said. 

Frontier doesn’t budget its corporate overhead costs on a state level, the report states, and Frontier doesn’t create capital on a state level either, according to the report.

Schumaker said auditors mostly used data that Frontier already has been reporting to the PSC, as part of the reporting requirements the company agreed to in 2010.

When Frontier acquired Verizon’s network that year, it agreed to meet certain investment requirements the PSC had previously set for Verizon. 

The company agreed to spend $30 million that year, $75 million in 2011, $63 million in 2012, and $63 million in 2013. 

Verizon also left behind $72.4 million in escrow, for maintenance.

According to the report, operation expenses including maintenance of the network have declined since 2012. 

From 2010 through 2018, what Frontier spends on those operations has averaged $131.5 million, but from 2014 to 2018 those expenses have averaged only $123.6 million and are trending downward. 

Landline and other aging telecommunications methods are hardly lucrative any longer. In 2017, the National Center for Health Statistics found in a wireless substitution study that roughly 53 percent of all West Virginia adults use wireless services exclusively, while another 10 percent use wireless services most of the time. 

The same study reports approximately 22 percent of West Virginia adults use landline services exclusively or most of the time. 

Related To Broadband Service 

Frontier also redacted most mentions of its broadband operations. The audit points out broadband is not regulated by the PSC, but the revenues generated from broadband services can help support landline operations, and many of the complaints the PSC received described broadband woes. 

Out of roughly 100 comments analyzed before the report’s publication, the audit details roughly half deal solely with broadband, mostly related to slow speeds and lengthy service-response times. 

The report states that Frontier’s desire to extend broadband offerings was a justification for acquiring the copper network a decade ago.

However, pages upon pages of the report are blacked out that discuss the quality of Frontier’s broadband operations, its number of customers, how much money it generates, and its speeds. 

Broadband is not a regulated utility like landline phone service. Yet, in a Tuesday recommendation to the commission, PSC staff asked this information also be made public, noting a “large amount of comments from impacted customers throughout the state of West Virginia” involved  “Frontier’s provisioning of internet services throughout the state and the speeds of internet service provided.”

This article was updated at 10 a.m., on Friday, April 3, to add the Public Service Commission has received roughly 2,000 informal and formal complaints in the last year regarding Frontier's landline service. 

Emily Allen is a Report for America corps member.