Proposed sale of Verizon Northwest services not advised by Washington Public Counsel

Nick Rees Nov. 4, 2009, 4:31pm


SEATTLE (Legal Newsline) - The Public Counsel Section of the Washington Attorney General Rob McKenna's office has recommended that the sale of Verizon Northwest's local and long distance telephone services in Washington to Frontier Communications not be approved as the sale is not in the public interest.

More than 500,000 customers in Washington are provided local landline telephone service by Verizon Northwest. Verizon Communications announced plans in May to divest its local landline operations in 14 states through sales to Frontier, which does not currently operate in Washington. Frontier provides a total of 2.8 million voice and broadband connections through 24 states.

Review and analysis of extensive documents and data underlying the acquisition request by Public Counsel has concluded that the transaction should not be approved as structured as it would result in an unacceptable level of risk being shifted onto the ratepayers of Verizon Washington.

Public Counsel believes that the transaction, in its current proposed structure, could result in complications and system failures from integration of the two companies' systems, reduced broadband deployment, degradation of service quality and weak financial condition for Frontier as a result of debt that would be assumed by the company.

If the Utilities and Transportation Commission approves the transaction, Public Counsel has recommended that conditions be imposed to address the identified risks, including a monetary guarantee from Verizon regarding the condition and performance of its Washington network.

Other suggested conditions for the transaction include a commitment by Frontier to increase availability of high-speed broadband, notification to all consumers of the transaction with an option for changing contract terms for services without penalties, no increase in rates or decreases to services for two years following the close date and long-term reporting of the integration of operations and any cost savings.

Public Counsel has also recommended adding conditions to limit dividend payments tied to the post-merger company's bond rating. The Public Counsel called for independent analysis to determine necessary infrastructure investment as well as creation for a plan for such investment. Reasonable levels of service should also be maintained through a self-enforcing service quality index, Public Counsel has advised.

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