PURA: PURA Approves Frontier/AT&T Settlement Agreement

October 15, 2014
 
PURA Approves Frontier/AT&T Settlement Agreement
 
The Connecticut Public Utilities Regulatory Authority (PURA) today issued a final decision approving a settlement agreement that will allow Connecticut-based Frontier Communications to purchase for $2 billion from AT&T Inc. all of the issued and outstanding capital stock of The Southern New England Telephone Company, along with related assets.
 
As a result of today's decision, Frontier will acquire AT&T's Connecticut wireline business and related fiber network including U-verse video and satellite television customers.
 
Frontier, along with the Office of Consumer Counsel and the Office of the Attorney General, jointly presented a proposed settlement offer to PURA in early August in which Frontier made specific commitments to secure regulatory approval. Among the commitments made in that offer was a pledge to expend $63 million in incremental capital investment over the next three years to improve broadband capabilities in Connecticut; a residential rate freeze for no less than 36 months, including basic broadband services; introduction of discount services to eligible veterans; and a commitment to conduct a comprehensive review of all outside plant, including poles, wires and appurtenances.
 
On August 28, 2014, PURA denied the proposed settlement agreement, finding that the proposal offered insufficient public benefit to warrant approval, lacked reliable enforcement mechanisms to ensure commitments were ultimately fulfilled, and lacked flexibility to modify or impose further conditions upon the agreement.
 
Following a PURA technical meeting held September 10, 2014, Frontier presented additional terms and commitments, supplementing the original settlement proposal. Among the additional agreements offered by Frontier were commitments to:
  • provide status updates on planned network modernization efforts, including a comprehensive network modernization strategy plan;
  • honor all of SNETís contractual, regulatory and other obligations;
  • participate in certain cyber security-related initiatives;
  • submit for PURA's review and approval a plan of reorganization, including details that leadership, capital investment and other decision making by Frontier regarding Connecticut will be made in Connecticut by regional and local management located in the state; and
  • meet with and seek to enter into collaborative agreements with interested parties pertaining to the ongoing operation of cable television service including public, educational and governmental access.
Once the transaction is closed, Frontier will own SNET's local exchange carrier business, including retail broadband and video, which represents approximately 900,000 access lines, approximately 415,000 broadband customers, and approximately 180,000 video customers.
 
AT&T will retain certain Connecticut assets including its wireless operations and certain wireline business customers. Thus, post-transaction Frontier and AT&T will compete with each other in the wireless, enterprise, local exchange markets, thereby enhancing the competitive landscape.
 
PURA Vice-Chairman John W. Betkoski, III, who was the lead commissioner assigned to this proceeding lauded the efforts of Frontier and AT&T, and other participants, in bringing this matter to a successful conclusion. He stated that "the combination of a motivated Connecticut-based company, and the commitments embedded in the Settlement Agreement should yield a substantial dividend for Connecticut residents and businesses for many years to come."
 
Arthur H. House, Chairman of the PURA, stated that today's decision represents a fair and balanced outcome and concurred that the Settlement Agreement "resolved many complex regulatory issues in a manner that is beneficial to ratepayers in the state."
 
PURA Commissioner Michael A. Caron noted that the Settlement Agreement and PURA Decision "give Frontier the autonomy to compete in the local marketplace while ensuring that Connecticut residents and businesses are protected by adequate regulatory safeguards."