Apathy Isn't A Business Model: Major US Telcos Teeter Toward Bankruptcy

from the dysfunction-junction dept

For more than a decade we've noted how the US broadband industry's biggest problem is a lack of healthy competition. In countless markets consumers either have the choice of a terrible phone company or a cable giant. The nation's phone companies have spent the last decade refusing to upgrade (or in some cases even repair) their aging DSL lines, because they don't see residential broadband as worth their while. That in turn is giving giants like Comcast and Spectrum an ever greater monopoly in many markets, reducing the already muted incentive to compete on price or shore up comically terrible customer service.

Many US telcos now exist solely to milk subsidies while doing the absolute bare minimum. 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.

Frontier has also been facing investigations in states like Minnesota, where regulators have questioned why the company has received taxpayer subsidies for doing little to nothing. Unsurprisingly the company has been struggling with using apathy as a business model, and there's chatter that a long awaited bankruptcy may finally be imminent. Unlike AT&T and Verizon, telcos like Frontier, Windstream, and CenturyLink don't have wireless income to offset the losses:

"Some financial analysts have been predicting a Frontier bankruptcy for several years. According to these analysts, companies such as Frontier and Windstream continue to rely, in large part, on copper network infrastructure, which can’t support the speeds that cable infrastructure can support. As a result, these telcos will continue to have difficulty competing in both the residential and business market. And unlike companies such as AT&T and Verizon, the second-tier telcos don’t have a wireless business to fuel growth."

Much of Frontier's debt came courtesy of a massive 2015 deal to acquire Verizon's unwanted territories in states like Florida, Texas, and California for $10.5 billion. Frontier's focus at the time was growth for growth's sake, despite the obvious fact that many of these customers were on aging phone and DSL lines that needed to be upgraded lest they fall apart. Like many of its companions, Frontier chose the latter option, and now faces a bankruptcy protection proceeding that was already technically paid for by the American taxpayer.

Again, the inevitable outcome of these telco bankruptcies is a bigger, stronger cable broadband monopoly. Despite the predictions of many, wireless isn't going to be a magical panacea that fixes the problem. And while low-orbit satellites may help, that sector too has its own lengthy history of failed promises. With the government recently deciding that the sector needs neither competition nor meaningful regulatory oversight to function properly, there's not much in the way accountability or repercussion for the mass of US telecom giants that simply refuse to give a damn.

Filed Under: broadband, competition, finances, telcos
Companies: frontier