Oregon’s Metropolitan Area Communications Commission has been tenacious in its opposition to Frontier’s efforts to exit the business of providing FiOS advanced video services in Oregon markets acquired from Verizon.  The latest salvo is a report by Fred Christ, MACC policy and regulatory affairs manager to the commission, which suggests that the MACC may not allow Frontier to terminate cable franchises with certain municipalities under MACC’s jurisdiction.

Frontier argues that it cannot afford to offer FiOS video because its programming costs are much higher than Verizon’s were. As a result, Frontier earlier this year announced plans to raise FiOS video prices by as much as 46%.  After receiving a considerable amount of negative press in response to that announcement, Frontier delayed those plans indefinitely but instead announced an even larger increase in the FiOS video installation price—from $79 to $500—and said it would cancel its video franchise agreements in four Oregon cities.

The MACC, however, may not let Frontier out of those franchise agreements. “MACC believes Frontier’s market share is more than adequate and as of today, the company could not reasonably invoke the termination clause,” writes Christ in the new report.

According to a report in The Oregonian, a local news outlet, the four cities in question could face a significant revenue shortfall if Frontier were to cancel its video franchise. The reason is that those cities collect fees from Frontier on a per-customer basis for both video and voice services. If Frontier were to cancel service to FiOS video customers, those customers might shift both video and voice to Comcast, which only pays fees on video, not voice, subscriptions. Alternatively FiOS video and voice customers might take Frontier up on its offer for discounted DirecTV service. But DirecTV does not pay video franchises to the Oregon cities, The Oregonian reports.

Nevertheless, the new MACC report advises new customers not to sign up for FiOS video because of the high installation fee, but instead to consider Comcast, which, according to Christ, “provides a locally franchised service in many ways superior compared to satellite providers.”

Christ also argues in the report that the high FiOS video installation fee is unwarranted. “This fee does not apply to other Frontier customers—those taking phone or Internet service—even though we believe there is only marginal extra effort involved in adding video during an installation,” the report says.

The MACC, however, does not have authority over pricing and therefore is unable to do anything to prevent the installation price increase. But that hasn’t stopped the commission from trying.

In the new report, Christ noted that Frontier has not responded to a series of accusatory questions posed by the MACC such as whether it was Frontier’s intent all along to capture Verizon’s customer base and migrate them to DirecTV.

Frontier has argued that the MACC does not have the authority to require Frontier to answer those questions.

Christ’s report, dated April 15, apparently was shared with The Oregonian in advance of its submission to the MACC.

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4 thoughts on “War of Words Intensifies in Frontier FiOS – Oregon Dispute

  1. Is this just another step towards Frontier's path to bankruptcy? Will it suffer the same fate as FairPoint Communications or HawaiiTel after they bought out Verizon assets (northern New England and Hawaii, respectively)?

    My guess is yes.

    1. I see it as another way that the government is perpetuating its existance at Frontier's expense. The gov't is again endeavoring to pick winners and losers, and trying to make Frontier lose, just so they can collect their franchise fees, which are revenue based, not profit based. Seems to me that if a business wants to cancel a product or service, gov't should have no say. Citizens don't "need" this product…

  2. It’s different when you are talking about utilities that require tearing up streets and laying miles of cables and installing boxes everywhere. The government HAS to be involved in companies like this, and they have to be picky about who gets the contracts for a certain city. You cant have 20 different providers fighting for customers, laying 20 different sets of lines and tearing up the streets 20 times in the same area. It just wouldn’t make sense! And if this was going on, I’m sure we would be here saying how sick of it we are. Anyways, clearly a bait and switch tactic on frontiers part. They made it to obvious by trying to switch so soon.

  3. Actually Matt, that would not likely happen. I think the MACC and others would love to see something like that but the costs of even just five providers installing cabling would be too costly and would not get the return on investment they would need to survive. This is the reason why most areas do not have multiple cable companies (or even phone providers), its just too expensive, and probably would not get enough subs to justify it. Before Verizon starting putting in FiOS, the only areas that had multiple cable providers were areas that had poor or non-existent over the air TV reception (and had enough households go around). Most cities that have cable, only about 65 to 75% subscribe to cable, the rest live on OTA TV. But in areas where OTA is poor, then the cable penetration is closer to 95% or higher. The FCC wanted phone companies to compete in Video but most didn't due to the costs. It was probably those costs that forced Verizon to sell off some of their assets. Satellite has done better since they don't have those cabling costs, just the costs of building, launching, and operating satellites.

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