News

Frontier Sale Could Favor Comcast

5/16/2009 2:00 AM Eastern

Comcast will have a clear competitive edge in at least three key markets where Verizon Communications is selling landline operations to Frontier Communications, according to a telecommunications industry analyst.

Frontier said there will be no changes in service for Verizon customers before the deal closes — expected within the next nine to 12 months — in the 14 states covered under the $5.3 billion deal.

But as the deal goes through regulatory approvals and other steps related to the closing, “Verizon has no real incentive to continue to invest more capital in these markets,” D.A. Davidson & Co. senior research analyst Donna Jaegers said.

“In that one-year window, the cable competitors have an easy sales pitch,” she said. “They can say, 'Hey look, Verizon is already neglecting you — and for the next year, they’ll have even more reason to neglect you.’”

Frontier is acquiring all of Verizon’s local wireline operations in 14 states. The deal encompasses 4.8 million access lines, 110,000 FiOS Internet customers, 69,000 FiOS TV subscribers and 164,000 DirecTV customers, according to the companies.

According to Frontier spokesman Steve Crosby, before the deal closes in the next nine to 12 months customers will see no changes to their services. “For the next year, the company will be run by Verizon personnel,” he said.

The “current thinking” is to continue offering FiOS TV after the integration with Frontier is complete, he said, but noted that the telco will evaluate its overall product offerings once that happens.

Verizon has a partnership with DirecTV, “clearly they also have FiOS, and we have a partnership with Dish [Network],” he said. “We’ll evaluate all three, and evaluate what’s best for the customers to make sure the customers get what they want.”

Another Wall Street analyst last week suggested that Dish Network may benefit from the deal, if Frontier were to market a “synthetic bundle” that includes that satellite operator’s TV service (see Finance, p. 23).

Comcast is the primary cable provider in the Indiana, Oregon and Washington markets where Verizon has deployed the FiOS fiber-to-the-premises network.

In December 2008, Comcast launched DOCSIS 3.0 “wideband” service in Fort Wayne, Ind., Portland, Ore., and Seattle.

“They should certainly emphasize that in comparison to Verizon,” Jaegers said. “They should be jumping all over this.”

Mark Apple, vice president of communications and public affairs for Comcast Indianapolis and Fort Wayne, said that “obviously we’ve always done competitive marketing, even prior to this announcement. It’s a very competitive market, and will continue to be so regardless of who the telco competitor is.”

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