Frontier Communications' 'Virtual Separation' Alarms Groups

A labor union and consumer advocacy group have raised concerns about Frontier Communications‘ proposed “virtual separation” plan that could split the company between areas.

The Communications Workers of America (CWA) and The Utility Reform Network (TURN) filed comments with the Federal Communications Commission (FCC) regarding Frontier’s bankruptcy. It raises concerns about whether the company’s proposed reorganization plan is in the public interest.

It also questions whether the reorganized Frontier will invest in improved customer service. That includes service quality commitments, and broadband deployment under state and federal programs.

Frontier couldn’t be reached for comment.

In April, Frontier filed chapter 11 bankruptcy as part of its restructuring support agreement to cut its debt by more than $10 billion. Frontier filed in the U.S. Bankruptcy Court for the Southern District of New York. The court considered a fourth amended restructuring plan on Friday.

Potential Implications

The CWA and TURN say the “virtual separation” plan in the fourth amended plan appears to refer to a separation of Frontier’s fiber deployment from its non-fiber operations.

Frontier could “seek to capture the revenues from fiber deployments for investors,” the groups said. That could potentially deprive retail operations of necessary cash flows, personnel and other resources, they added.

The groups want the FCC to require Frontier to commit to investing in its network for all of its customers. They also want assurances of no job reductions post-restructuring.

“Frontier’s application asserts that there will be no change in control of the company,” the filing said.

However, a group of shareholders owning nearly one-half of Frontier’s bonds has been closely coordinating in negotiations, the groups said. And they share legal representation in the bankruptcy process.

This group includes Elliott Management and Franklin Resources. It may continue to coordinate post-bankruptcy and exert control over the decisions of the company, the groups said.

“CWA members will be engaged in every step of the bankruptcy process to make sure that good union jobs are protected and Frontier invests in quality service for all customers,” said Chris Shelton, CWA president.