Major US ISP Frontier Files For Bankruptcy, Monopolistic Apathy Isn't A Business Model.

from the ma-bell-got-the-ill-communication dept

The nation's phone companies don't really want to be in the residential broadband business. They routinely refuse to upgrade their networks despite millions in taxpayer subsidies, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. US telcos have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable broadband monopolies like Comcast, assuming they even have the choice.

The poster child for this kind of dysfunction has long been Frontier Communications. Frontier, the third biggest telco in the U.S., has been repeatedly busted in a series of scandals involving substandard service and the misuse of taxpayer money. In States like West Virginia, leaders have buried reports exposing the depth of Frontier's grift, 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. The company has since been under investigations from New York to Minnesota for failing to upgrade or even repair its aging network.

This week, Frontier finally filed for bankruptcy, hoping to finally wipe the slate clean after several decades of bungled and ill-advised mergers, massive debt, and operating a business model where snide neglect was the centerpiece. Of course the company's announcement can't acknowledge any of these self-inflicted gunshot wounds, with Frontier insisting it has learned its lesson:

"With this agreement with our Bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Bernie Han, President and Chief Executive Officer. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment."

But nobody has learned any lessons here. Frontier engaged in mindless mergers and growth for growth's sake, refused to upgrade vast swaths of its network, and then ran to government (read: lobbying) shelter when the house of cards started to fall apart. And while it acknowledged in a report to investors that mindless M&A and under-investing in its network was a part of the problem, investors generally like network under-investment and mindless M&As because they're profitable on the short term.

There are a few simple reasons the U.S. has mediocre to terrible broadband, and contrary to conventional wisdom the problem isn't logistics, geography, financing (we've thrown billions upon billions the the problem) or the difficulty in deploying it. The problem is the entire U.S. system is built to reward short term thinking and punish long term vision, especially as it pertains to unsexy things like infrastructure. Well that, and powerful telecom monopolies that all but own state and federal legislatures and most regulators, ensuring that real disruption and competition rarely takes root.

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Filed Under: bankruptcy, broadband, competition
Companies: frontier, frontier communications


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  • icon
    ECA (profile), 15 Apr 2020 @ 1:00pm

    Time hates everything.

    I know a person who worked and invested in the phone service in the area. Over the time she owned the stocks, they hardly fluctuated. And she got a small amount of money each year as dividend.
    Why is it that companies or corps HAVE to raise the prices of Stocks? Wouldnt it be better to be Solid and stable, then to Inflate the stocks, make it look great, Investors Grab a bite, and then it falls BACK to what it was before? About what I see happening with most of Stocks since 2000.
    The Market structure in the USA and the World needs abit of a FIX.
    I dont know allot of the regulations that are SUPPOSED to work with stocks, but what I see is Stupid. Multiple stocks, with different wording to give, little to NO say about what the consumer/owner of the stocks can do. You Own something that isnt giving you anything except PENNIES.
    It seems more as a Long term Very low interest Loan. and you aint getting much out of it.
    Then we get the Pump and dump. Create an instant startup, get everyone to grab the investment, then Run like hell with all the money. It would be very interesting if this were created by the larger corps as a snatch and grab or even a bait and switch. Ways to take money from those that THINK they can get rich while they are poor. and loose all the money they had.
    This company, probably, Tried all the tricks to be A leader, and TRIED to get enough money to invest into itself, using every cent they had, and LOST it. OR the heads of the company Just TOOK the extra money they got and DIDNT care about anything.

    reply to this | link to this | view in chronology ]

    • icon
      Koby (profile), 16 Apr 2020 @ 11:11am

      Re: Time hates everything.

      Why is it that companies or corps HAVE to raise the prices of Stocks? Wouldnt it be better to be Solid and stable, then to Inflate the stocks, make it look great, Investors Grab a bite, and then it falls BACK to what it was before?

      Many corporate officers are compensated nowadays, in part, by stock or stock-options. In theory, the officers are personally motivated to ensure the wellbeing of the company. In practice, corporate officials have realized that with the advent of low interest rate bank loans, they can perform stock buybacks, increase the stock price by reducing stock availability, and then cash out their shares at a higher price. This is why they want the stock price to increase.

      reply to this | link to this | view in chronology ]

      • icon
        ECA (profile), 16 Apr 2020 @ 1:42pm

        Re: Re: Time hates everything.

        But if you look there are at least 3 types of Stock.
        1 internal to the corp thats for Owners and the boss's(private stocks)
        1 that generally employee based and has restriction.
        1 for Public that gives you Crap, and no ability or recourse if you think the corp is being stupid.

        Go look.
        AND a Stock cert. can say anything as legal bearing.

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Apr 2020 @ 1:08pm

    This bankruptcy needs to be DENIED. Frontier's plan all along was to buy out various other companies, load themselves with debt then go bankrupt to clear several billion dollars of assets of all debts. This will come out despite their frantically shredding records as we speak.

    Thats simple out and out fraud perpetrated by the CEO and board of directors and it's been their illegal plan all along to abuse bankruptcy protection.

    They need to become a state-owned ISP immediately, with no golden handshakes/parachutes etc for the execs.

    reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 16 Apr 2020 @ 8:21am

      Re:

      This bankruptcy needs to be DENIED.

      No to chapter 11 reorganization. Yes to chapter 7 liquidation, with Frontier's business being broken up and given to municipalities and counties to manage.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Apr 2020 @ 2:14pm

    What they're filing for is bankruptcy protection. Sure, people do use "bankruptcy" as a shorthand, but what's really happening is that they want to default on their debts—to continue operating their business while weaseling out of their obligations. The shorthand obscures that, while also obscuring important details.

    This is a chapter 11 bankruptcy (reorganization), not to be confused with chapter 7 which would mean they'd stop doing business and their creditors would pick up the scraps. At least then, their customers would have a chance of a slightly less shitty ISP buying the remains. As it stands, they've made no commitment to switch away from monopolistic apathy as a business model.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Apr 2020 @ 2:51pm

      Re:

      I have often thought that a great weakness of chapter 11 is that the board and C suite remain in control of the company undergoing chapter 11. A better arrangement would be if they were both turfed without compensation and banned for a significant period from management of that company. I'd say that period should be at least a decade, if not for life. This way the aim of preserving a potentially viable company could continue without a way for the board and upper management to profit from the bankruptcy protection.

      reply to this | link to this | view in chronology ]

      • icon
        Anonymous Anonymous Coward (profile), 15 Apr 2020 @ 3:12pm

        Re: Re:

        Agreed. But then think of the 'special masters' that will line up to 'take over'. What are the way's they will benefit from the 'restructuring'? I know, good, bad or indifferent someone has to be in charge, and there probably isn't another way to go about it, but (again) there should be some rules about the appointed person(s) (I have some experience in taking over companies in trouble and one cannot do it alone) and their friends and relatives and how they may or may not benefit from insider knowledge.

        We haven't solved that problem with our legislative representatives, and only partially with our corporate officers, so how do we solve this one, in advance?

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Apr 2020 @ 5:28pm

        Re: Re:

        the board and C suite remain in control of the company undergoing chapter 11. A better arrangement would be if they were both turfed without compensation and banned for a significant period from management of that company.

        I agree there does seem to be a major problem with incentives in the current system; but, without any attempt to figure out who was responsible, that would be excessively harsh. There have been plenty of instances in which CEOs fuck up the company and jump ship right before things start to go really bad. After selling their shares for cash, of course. It's then entirely possible the new CEO is acting in the best interest of the company.

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Apr 2020 @ 6:01pm

      Re:

      Pretty much. See: Perfect 10, who after wasting the courts' time with their shitty lawsuits, transferred all their assets to the guy in charge, Norman Zada, and filed for bankruptcy with their assets intact and claimed that they had no need to pay up.

      antidirt was busily gloating years ago that the Perfect 10 lawsuits gave copyright holders the "perfect language" and precedents to use in their cases - maybe he was talking about their immunity from any sort of meaningful punishment for fucking up.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Apr 2020 @ 3:50pm

    until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest.

    Well, come on now. State representatives are allowed to have a job outside government.

    reply to this | link to this | view in chronology ]

  • icon
    Narcissus (profile), 16 Apr 2020 @ 2:24am

    "...we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Bernie Han, President and Chief Executive Officer.

    This statement should get Bernie fired immediately. If he was not focusing on the key parts of his job before, what was he doing? Lining his pockets?

    If you are in sales and you went to your manager and said "If you increase my expense account I can finally focus on acquiring customers and increase turnover." How long would it take him to fire you? Those are the actual things you were hired to do in the first place!

    reply to this | link to this | view in chronology ]

  • icon
    Koby (profile), 16 Apr 2020 @ 10:56am

    Mindless Mergers

    I am of the opinion that the mergers and acquisitions weren't mindless. To the contrary, I believe that Frontier deliberately sought the mergers for the sake of eliminating competition. If you want to have a monopoly, then you must either do mergers and acquisitions, or else you must do such an excellent job of providing high quality service at a low price that the competition goes out of business. And I think we know how that turned out.

    reply to this | link to this | view in chronology ]

  • icon
    heymanj (profile), 17 Apr 2020 @ 11:55am

    Shareholder + subscriber

    Since moving to the area 20+ yrs ago, I've had the opportunity to sample the three (3) ISPs in the Raleigh/Durham/Chapel Hill area - AT&T, TWC (now Spectrum), and most recently Frontier. All three were contracted for Phone/TV/Internet, for the $$, I have found Frontier to be the best deal, albeit the DSL speeds don't compare to what currently being offered by AT&T and Spectrum. Frontier's service is at least as good as AT&T/Spectrum from a consumer end, enough so that I became a shareholder. Needless to say, the bankruptcy will probably zero out my investment and influence any decision I have to stay with them in the future.

    Google fiber is supposed to be coming to my area, and hopefully will be something that I consider in the future.

    reply to this | link to this | view in chronology ]


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