After Years Of Scandal And Incompetence, US Telco Frontier Files For Bankruptcy

from the ill-communication dept

We've long explored how the nation's phone companies don't really even want to be in the residential broadband business. They routinely refuse to upgrade their networks despite millions in taxpayer subsidies, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. US telcos have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable, assuming they even have a second broadband option.

This dynamic often results in some absurd dysfunction. Like in West Virginia, where incumbent telco Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. The graft and corruption in the state is so severe, state leaders have buried reports, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest. The company has since been under investigations from New York to Minnesota for failing to upgrade or even repair its aging network.

Not too surprisingly, this combination of apathy, incompetence, and corruption is not particularly sustainable. Last week, Frontier announced it would be exploring a bankruptcy sometime in March. That's thanks in no small part to $16.3 billion in debt it accumulated from buying Verizon's unwanted DSL networks in numerous states as part of a "growth for growth's sake" mindset that involved rampant expansion, and then neglecting the acquired territories. Shockingly, angry customers then fled to the exits, only compounding Frontier's problems:

"Frontier has been losing customers and reducing its staff. Its residential-customer base dropped from 4.15 million to 3.81 million in the 12-month period ending September 30, 2019, including a loss of 90,000 customers in the most recent quarter. Also in that 12-month period, Frontier's business-customer base declined from 422,000 to 381,000."

The bankruptcy comes on the heels of a similar bankruptcy filing by Windstream Communications. Windstream, too, engaged in a "growth for growth's sake" mindset that involved hoovering up government subsidies, acquiring network assets it refused to upgrade, then blaming everything but its own behavior as neglected customers fled for the exits. Once the debt is wiped from the books for both companies, the cycle will just start all over again thanks to US lawmakers that simply refuse to hold politically-powerful telecom giants accountable.

The failure of US telcos may not be great for residential broadband, but it's wonderful news for the nation's equally-despised cable companies, which have been quietly securing an even greater monopoly over broadband across countless US markets, meaning higher prices for everybody -- even if you've never paid a dollar to a US telco. The resulting climate of regulatory capture and muted competition is a major reason you all pay an arm and a leg for substandard service. And no, contrary to industry claims, 5G wireless isn't going to magically fix a corruption and competition problem few in tech or telecom want to seriously address.

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Filed Under: bankruptcy, broadband, competition, dsl

Companies: frontier communications