Frontier Communications filed for Chapter 11 bankruptcy yesterday, but the struggling telecom said its service to customers won't be affected by the financial restructuring.

"Frontier expects to continue providing quality service to its customers without interruption and work with its business partners as usual throughout the court-supervised process. The Company has sufficient liquidity to meet its ongoing obligations," Frontier said in last night's bankruptcy announcement. Frontier filed in the US Bankruptcy Court for the Southern District of New York.

Frontier offers Internet service in 29 states but expects to complete a $1.4 billion sale of operations in Washington, Oregon, Idaho, and Montana to Northwest Fiber by April 30. In the 25 remaining states where it will keep offering service, Frontier has 2.6 million Internet subscribers, with 1.4 million on DSL and 1.2 million on fiber.

"The bankruptcy filing marks the end of an era during which Frontier Communications racked up roughly $17.5 billion in debt as part of an aggressive expansion campaign that turned it into one of the nation's largest telecom companies," The Wall Street Journal wrote today. Frontier expanded over the years in part by buying former Verizon and AT&T wireline operations.

As part of its bankruptcy, Frontier said it will "reduce our debt by more than $10 billion" in an agreement that gives bondholders more equity in the company. Frontier also obtained $460 million in new financing and said it will have "significant financial flexibility to support continued investment in its long-term growth."

Widespread network problems

Frontier is widely reviled for its bad customer service, and it has done a poor job maintaining its copper phone and broadband network, leading to investigations and complaints of chronic outages in New York, Minnesota, Ohio, and West Virginia. Frontier's failure to properly redact an audit also helped reveal the poor condition of its network.

Frontier acknowledged to investors in recent weeks that its "significant under-investment in fiber deployment" contributed greatly to the company's decline. Frontier said a "large portion" of its revenue is from "declining legacy products" like copper-landline phone service and that DSL-customer losses are expected to increase. Frontier told investors that it intends to "transform the business from a provider of legacy telecom services over a primarily copper-based network to a next-generation broadband-service provider with long-lived fiber-based infrastructure."

Between the new $460 million in financing, $700 million cash on hand, expected revenue from the pending sale to Northwest Fiber, and revenue from continued operations, Frontier said yesterday it expects to have enough money to cover "operational and restructuring needs."

The Federal Communications Commission issued a statement today saying that it "will be vigilant in ensuring both that Frontier's customers stay connected to vital 911, voice, and broadband services and that Frontier continues to put the federal funds it receives through the Connect America Fund and other universal service programs to work for the American people." Frontier recently missed one of its deadlines for deploying FCC-funded broadband.