- Verizon faces California scrutiny over its DEI reversal
- California could block the Frontier deal if it finds the merger at odds with state law
- Frontier also happens to be California’s second-largest carrier of last resort (COLR)
Verizon may have scored federal approval of its $20 billion Frontier acquisition, but the coast is far from clear stateside. California is scrutinizing the operator for ending its diversity, equity and inclusion (DEI) programs.
The California Public Utilities Commission (CPUC) this week began conducting hearings to seek input on whether the Verizon/Frontier deal serves the public interest. Further, it’s asking Verizon to clarify which DEI policies and practices “could be associated with discrimination,” referencing the letter Verizon wrote to the Federal Communications Commission (FCC) on May 15.
And given Verizon said it will no longer maintain any workforce diversity goals, CPUC wants to know how the company plans to comply with California’s DEI laws.
The state requires telecommunications providers and utilities to submit annual reports that describe their employment of “women, minority, disabled veteran, and LGBT individuals at all levels” as well as the policies that promote “equitable recruitment and hiring.”
California’s probe places Verizon in a sticky situation, as CPUC could block the Frontier deal if it finds the merger at odds with state law. But New Street Research policy analyst Blair Levin thinks CPUC just wants Verizon to clarify its commitment to DEI, rather than outright reject the merger.
“Verizon must figure out how to thread the needle between what Carr demanded and what California law requires,” Levin said in a note to investors Monday.
FCC chief Brendan Carr has cracked down on telecom and media companies for allegedly promoting “invidious discrimination,” probing Verizon, Comcast and T-Mobile, among others.
But because Carr hasn’t been clear on what exactly he means by that, companies don’t really know which DEI rules the FCC does and doesn’t allow, Levin added. So, Verizon’s lawyers have some leeway in figuring out how to address California’s concerns without contradicting the company’s letter to Carr.
For instance, Verizon could articulate “while it no longer is setting diversity employment goals, it will comply with California law and report on the demographics of its employment patterns,” he explained.
Verizon/Frontier and the COLR conundrum
Apart from the DEI debacle, Verizon may encounter conflict between its acquisition and California’s Carrier of Last Resort (COLR) requirements.
A COLR is a telco that’s required to offer basic telephone service to anyone who requests it in a certain area. Frontier is the second largest COLR in California, after AT&T.
AT&T previously requested relief from its COLR duties in the state, but CPUC denied the request. The agency argued AT&T “failed to demonstrate” the availability of replacement providers willing to serve as COLR.
Verizon could perhaps try the same to accelerate its copper retirement post-Frontier. The operator’s new fiber deployments “will enable the retirement of old copper networks,” said the FCC in May, “ensuring that more communities benefit from advanced technologies.”