- Verizon struck a partial settlement with California to get its Frontier deal approved
- The state is mandating Verizon offer $20/month broadband for 10 years
- But they still haven’t reached a compromise on DEI
Verizon is one step closer to sealing the deal on its Frontier acquisition in California, but not without a few caveats.
State regulators, who have been reviewing the merger to see if it meets the public interest threshold, struck a partial settlement with Verizon that would require the operator to expand its fiber build plan in California as well as offer $20/month broadband to low-income consumers.
Assuming the state approves the deal, Verizon will have six months after the transaction closes to start offering at least two affordable broadband options to eligible customers – one for Fios fiber and another for fixed wireless access (FWA).
Both plans will have minimum speed requirements attached, according to a joint motion filed by Verizon and the California Public Utilities Commission (CPUC). The fiber plan must offer speeds of at least 300/300 Mbps symmetrical, while the FWA product is required to provide “approximately 100/20 Mbps or greater, with certain exceptions.”
Ernesto Falcon, program manager of CPUC’s Communications and Broadband Policy Branch, said on LinkedIn the agency required these options to comply with the state’s Lifeline program, “which effectively makes it free for low-income Californians throughout the state.”
With Frontier’s footprint in its arsenal, Verizon expects to build at least 1 million new fiber passings annually. The California settlement requires the operator to construct an additional 75,000 passings along with 250 new fixed wireless towers in the state.
Verizon will have to abide by California’s affordable broadband requirement for 10 years after it closes the Frontier deal, which is expected to happen in early 2026. Furthermore, the operator after three years must make “commercially reasonable efforts” to increase speeds for its low-income Fios and FWA customers.
The affordable broadband debacle
California through the deal appears to be imposing a form of broadband rate regulation, which has been a contentious topic in the telecom industry. Trade groups such as ACA Connects, NTCA–The Rural Broadband Association and USTelecom have opposed legislation such as New York’s Affordable Broadband Act, claiming that price regulation would “undermine” broadband investment.
The California ruling also seems to be at odds with the revised rules of the Broadband Equity, Access and Deployment (BEAD) program. NTIA’s June 6 notice said providers that received BEAD funds must offer at least one low-cost service option to eligible subscribers, however NTIA “hereby prohibits Eligible Entities from explicitly or implicitly setting the LCSO rate a subgrantee must offer.”
Verizon thus far is slated to get about $183 million in BEAD money to cover approximately 26,000 locations across six states, per New Street Research’s analysis. It’s unclear whether Verizon or Frontier will have any BEAD-funded locations in California, as the state has until November 21 to submit its final proposal to the NTIA.
Separately, Verizon this month received merger approval from Pennsylvania, which attached its own terms and conditions. The operator will have to provide low-cost broadband to the Frontier service footprint for at least four years as well conduct a “detailed audit” of Frontier’s copper and fiber networks within 10 months of closing.
Unlike California, Pennsylvania isn’t requiring a minimum broadband price for the low-income plans.
Verizon’s DEI issues remain
What CPUC’s settlement doesn’t resolve is the state’s issues with Verizon’s diversity, equity and inclusion (DEI) stance.
The operator earlier this year ended its DEI programs to get the Frontier deal across the finish line with the Federal Communications Commission’s (FCC). The move came after FCC Chair Brendan Carr said he would block M&A deals that promote “invidious” forms of discrimination.
“We still have more work to do to resolve the DEI problems the FCC created that conflict with California laws,” Falcon stated.
CPUC’s main concern is that Verizon told the FCC it will no longer have any workforce diversity goals, which conflicts with state law requiring operators and utilities to submit annual reports that describe their employment of “women, minority, disabled veteran and LGBT individuals at all levels.”
Despite the friction between the state and operator, NSR Policy Analyst Blair Levin has said he doesn’t think CPUC intends to block the deal. Nevertheless, Verizon must tread carefully to comply with both state and federal regulatory agencies.
“We have a lot of faith in the ability of Verizon’s lawyers to figure out the best way how to address California’s concerns without clearly and directly contradicting the terms of letter to Carr,” Levin wrote to investors in July.