Frontier's challenging integration process of the Verizon (NYSE: VZ) wireline assets it purchased in California, Florida and Texas has had a negative effect on new broadband subscribers -- and cable operators like Charter Communications (NASDAQ: CHTR) are lining up to capture those customers.
Bright House Communications, which just last week officially became part of Charter, recently told a number of Florida news outlets that it is is offering up to $240 in credits to cover costs to switch to its service.
"We've put out an offer that's responding to the tremendous amount of calls we're receiving from Frontier customers," said Joe Durkin, a Bright House spokesman, in a New Port Richey Patch article.
Customers in these three markets have cited issues with their broadband, traditional POTS and FiOS video on demand service not functioning properly. FiOS customers who use the video on demand option still can't fully access their library of movies they purchased or rented when the service was run by Verizon.
Given all of the attention Frontier has had regarding its integration and repair processes, the telco admitted it wasn't able to fulfill a number of new broadband orders, which were initially logged in by Verizon before the deal was completed in April.
Dan McCarthy, CEO of Frontier, told investors during the recent JP Morgan event that it had a large amount of customers who decided to go somewhere else for service. It's likely that these customers were new to the area and decided to go with Frontier versus a local cable provider.
"Where we did probably lose some customers, who really weren't our customers yet, was as we came out of conversion we had 40,000 service orders in the backlog," McCarthy said.
Additionally, a number of other customers opted to end their contracts with Frontier. These customers opted to pay their early termination fees (ETFs). However, McCarthy did not divulge how many customers opted out of their contract early.
There are two potential scenarios that drove these initial defections. One is that these would be customers opted to cancel their installation after hearing about Frontier's problems in the media or Frontier couldn't fulfill the order on the promised installation date. While broadband has been a consistent seller for Frontier in its existing markets before the Verizon sale, the loss of potential new subscribers could have an impact on the telco's second quarter additions.
One FierceTelecom reader said that when it called Frontier on May 3, the telco told them the earliest they could hook up his FiOS broadband video connections was May 24 -- nearly three weeks after he ordered service. Like many other potential subscribers, this reader had recently just moved into one of the new markets where Frontier now offers service.
Getting these lost customers back won't be easy. Even Verizon, which is in the midst of a strike with its wireline workforce, said it takes up to two years to potentially regain customers whose orders it could not fulfill due to having to focus more on network repairs.
Frontier said it turned off its marketing engine when it began the integration process in fear that its competitors would use it as a way to target its customers. The service provider plans to begin marketing its service via online and direct marketing in June.
This is not the first time Frontier has been attacked by competitors following the integration of Verizon properties. In 2014, a number of customers reported issues with their TV service going down in Connecticut after completing its acquisition of AT&T's (NYSE: T) wireline assets. What's more, the telco's move to alter the existing AT&T pricing structure to be similar to Frontier's structure. The result was a second-quarter 2015 revenue decline of $5 million in the territory, a factor caused by broadband pricing migrations.
In order to avoid similar issues with the new Verizon properties, Frontier decided to maintain the same pricing and marketing structure for the FiOS and other copper-based services.
Consumers aren't the only ones who are been upset about the integration process. The service provider has found itself having to answer to state regulators and political leaders about what went wrong.
In California, Frontier executives were being grilled by the CPUC about service issues in the state. Likewise, Florida's Attorney General Pam Bondi met with company leadership to find a resolution and what went wrong.
During a recent hearing with a group of regulators at an Assembly Informational Hearing that was called by Mike Gatto (D - Los Angeles), California's Utilities and Commerce Committee chairman, the service provider said Verizon's computer records were filled with inconsistencies.
Melinda White, Frontier's West region president, said the Verizon's computer records in California consisted of incomplete or corrupt data. As a result network terminal boxes such as modems and network interface devices (NIDs) at customer homes and businesses did not recognize messages that Frontier was trying to send to those devices.
The company appears to want to make things right. Frontier has laid out resolution plans for California, Florida and Texas. Among the solutions are issuing bill credits to every customer who reported an outage, implementing a "SWAT Team" to coordinate a fast response to complaints, and establishing of a special phone number for residential customers.
In addition to resolving current issues, Frontier has pledged to upgrade existing remote terminal (RT) and central office (CO) sites with new generation DSLAMS and bonding technologies to deliver 100 to 300 Mbps broadband speeds.
Frontier may have set a resolution for these three states, but potential customers in these new markets will likely be wary about signing up for service, giving cable a near-term upper hand.--Sean