Frontier fears CenturyLink/Level 3 merger could hurt rural providers

Frontier Communications (Frontier Communications)
Frontier is concerned that CenturyLink’s proposed acquisition of Level 3 could hinder rural broadband investment by putting more power into the hands of an even larger carrier.

Frontier is concerned that CenturyLink’s proposed acquisition of Level 3 could hinder rural broadband investment by putting more power into the hands of an even larger carrier.

In an FCC filing (PDF), Frontier, which mainly serves rural areas, said the key concern is that Level 3 has not been paying its network interconnection fees in a timely manner.

As a result, Frontier contends that the "transaction will hurt rural broadband deployment and affordability both for its own customers and for other smaller providers who may not have the resources to actively comment in this proceeding.”

RELATED: CenturyLink confirms it will acquire Level 3 for $34B

“With the proposed transaction threatening to make the combined entity’s payment practices even worse, Frontier is concerned that costs of deploying services to rural America will unnecessarily be driven up and the burden of these unreasonable practices will be unfairly borne by rural communities,” Frontier said.

While CenturyLink and Level 3 filed a response to a similar opposition to their merger from industry organization Incompas, the two service providers have not appeared to respond to Frontier’s request yet on the FCC’s ECFS filings page.  

Resolving payment issues

While Level 3 and CenturyLink have broad fiber networks to serve their growing sets of business customers, these carriers still has to rent facilities from other local providers like Frontier outside of their footprints.

The telco has developed agreements with Level 3 and CenturyLink for high-capacity data services, including internet backbone transmission and long-haul services.

Frontier claims that Level 3 and CenturyLink have either been refusing to pay or delaying payment for wholesale services.

“Frontier sells services to Level 3 and CenturyLink, particularly where the Applicants are serving enterprise customers in Frontier’s service area,” Frontier said. “Rather than timely paying amounts due, however, Level 3 in particular disputes a significant number of charges and is often delayed in remitting payments.”

Level 3 often disputes the amount it owes Frontier, prompting the telco to dedicate resources to the review the claims.

In cases where there’s a merit to the dispute, Frontier will issue a credit. If there is no merit, Frontier denies the dispute and expects Level 3 to make a timely payment.

Frontier said during this process “Level 3’s practice is to always drag its feet in responding, or disagree with the denial, keeping money owed to Frontier in its accounts and earning interest on it.”

According to Frontier's records, Level 3 is over 90 days behind in payment for what it says is millions of dollars in rendered services.

In order to continue funding its rural broadband expansion efforts, Frontier said it needs to be able to get paid on time from larger wholesale carrier customers.

“It is not possible to plan for, and ultimately pay for, further broadband deployments, if larger carrier customers, such as Level 3, are leveraging their size to avoid paying for services rendered,” Frontier said. “With the proposed transaction threatening to make the combined entity’s payment practices even worse, Frontier is concerned that costs of deploying services to rural America will unnecessarily be driven up and the burden of these unreasonable practices will be unfairly borne by rural communities.”

Additional action needed

After CenturyLink and Level 3 filed their applications at the FCC for their proposed merger, Frontier said Level 3 has made some efforts to settle what it owes the telco.

Despite seeing what Frontier says is “marginal progress” from Level 3 to resolve billing disputes, the telco said the company still owes it too much for it not to call for further action on the issue.

Further, Frontier is worried if the FCC approves the deal, the increased scale of the new company could exacerbate the payment problems.

“Frontier is concerned that these problems will only get worse if the transaction is approved and, certainly if it is approved without conditions,” Frontier said. “The combined company will be able to use its substantially increased scale and control over critical core network and long-haul facilities to further delay and refuse to pay amounts duly owed and otherwise leverage its market power.”