Verizon Prepares For Uncertainty Regarding Potential FCC Rules

Following the recent FCC auction for the AWS-3 spectrum bands meant for use in wireless telecommunications, Verizon is selling off large parts of its business.

During the auction, Verizon was the third largest bidder, only losing out to AT&T and Dish Network, and the company paid out a total of $10.4 billion for AWS-3 frequencies. It now seems Verizon is heading in a new direction. To help pay down the auction debt, Verizon has agreed to sell its wired Internet services in California, Florida and Texas to Frontier Communications Corporation for a total of $10.54 billion.

The Verizon staff who worked in areas being sold to Frontier are expected to be able to continue work under employment from Frontier. The transaction should be completed during the first half of 2016.

In addition to the wired Internet sales, Verizon is also leasing a majority of its wireless towers (11,300) to American Tower Corporation for $5 billion. The deal will also give complete ownership of some towers over to American Tower Corporation. The lease will last for approximately 28 years, at which time American Tower will have the option to purchase the towers.

Given that Verizon is selling and leasing off its current services, and situating itself entirely on the east coast, it seems clear that Verizon must have plans for major change in the near future. Given the purchase of several AWS-3 frequencies and the recent policies the FCC is pushing to enact, Verizon might be wanting to rebuild parts of its network from scratch.

Come the end of the month, if the FCC passes the recent proposal from FCC Chairman Wheeler, cities that feel unsatisfied with the Internet cost and performance in their area will be allowed to build municipal broadband networks to compete with large private sector telecommunication companies such as Verizon.

To avoid the risk of being replaced, Verizon might be taking this opportunity to centralize its networks and upgrade. Selling off the older towers would give significant capital for this upgrade and potentially result in Verizon being able to offer faster and lower-cost services than any of its competition.

After contacting Verizon, we were presented with information from the investors meeting held yesterday when Verizon's CEO and CFO spoke about the company's future plans.

"The intended use of cash on hand and the expected proceeds from these transactions are consistent with our stated priorities following the Vodafone transaction, invest in our network and spectrum, deliver the balance sheet and return value to shareholders," said Verizon CEO Lowell McAdam. "An important consideration was the current regulatory uncertainty and the potential impacts of future investments of a reclassification of broadband under Title II."

"Post closing, the remaining landline footprint will include approximately 23 million households. We expect to ultimately pass more than 17 million of these homes with FiOS and have more than 75% FiOS coverage," said Verizon's CFO Fran Shammo.

From these statements, it is evident that Verizon is taking action to deal with the upcoming FCC regulations in a different way than other major ISPs. While most companies like AT&T are ready for legal battles and a potential lawsuit against the FCC, Verizon is working to innovate and overcome challenges placed on it by the potential regulations.

By upgrading its network to give a majority of customers access to FiOS (Verizon's fiber-optic network), Verizon likely hopes to give its users fast and affordable broadband Internet that will satisfy users, and potentially prevent the development of municipal broadband networks in areas currently served by Verizon. This strategy could invoke fierce reactions from other ISPs who would rather fight the FCC's ability to place regulations on broadband Internet than adapt.

Follow us @tomshardware, on Facebook and on Google+.

  • wiyosaya
    As I see this, this is probably more about Verizon thinking they will no longer have maintenance charges for what they are selling off, and that they can pay the companies that they are selling to a price to maintain them that is far less than what it costs them now.
  • Osmin
    If we had true competition then most of us would have fiber to the door by now. The employees that run the backbone of the internet already stated that they have the bandwidth available for a speedy internet in the USA but the local ISP's were not upgrading their equipment and were causing a traffic jam that hurt everyone. The lack of regulation on these monopolies is what hurt the consumers with high prices and poor services. Cities are not going to run multiple Telephone, Cable, Fiber, Water, Power, or Gas lines to remove the inherent monopolies. If you have a monopoly then some sort of "Quality of Service" regulation must be in place to protect the consumer. These new proposed regulations requiring quality of service is long overdue. In a monopoly situation, a Public Utility controlled by your local government will always be better than a Private company with only a profit incentive. If the city were to own all the utility lines, then they could have a competition among private businesses for a contract to repair and maintain those lines. Then many private companies could compete with each other to provide the services to the public. Why can't each household choose between Google Fiber, Verizon FIOS, or AT&T GigaPower utilizing the cities fiber to the door connection? How about an energy exchange program that we could buy power from any power generating company that has a better price? When you create competition then the consumer wins. With natural gas so cheap in California and Nuclear power so efficient, any private company could have provided cheaper power to Californians than the conserve power or we will triple charge you if you use too much mentality. People in Florida run their central air-conditioner 24/7 and have a way lower electric bill than Californians with access to abundant natural resources. In the end real completion is good and monopolies bad.
  • rayden54
    Feel sorry those of you who're now stuck with Frontier. Hope you have other options.
  • rawoysters
    It's sad that this is what it takes to get them to upgrade their networks if this is true.
  • 06yfz450ridr
    frontier sucks support wise or even ordering wise.

    they took over the at&t service in ct unfortunately

    I called when I moved into my apartment for internet and tv they some how lost my order twice. I asked about the diy internet bundle since I am IT and plenty capable of setting up my network. they said fine they would send me me my router etc since it is an option listed.

    My router never arrived, they said a tech would need to come there to install, of course they bring the wrong router but whatever made it work and "bridged" it(really only a modified dmz) and added my own router for vpns etc

    even before that we were supposed to get out tv service from them, the day before i was confirming everything they said ohh wait we cant give you our service for tv since youa re limited to 12mbps into your house. great so now its double the price for a 12mbps plan and dish for tv.

    I should have went dish since it has been great, cant believe i am actually saying that.

    all in all if you get frontier watch out.

    their dns over here sucks as well, it drops out and has huge latency issues which you cannot change on their routers.

  • skit75
    "From these statements, it is evident that Verizon is taking action to deal with the upcoming FCC regulations in a different way than other major ISPs."

    I will believe that when I see their name absent from the lawsuit and if it is..... Good on them!

    If Frontier is as bad as you say, that might be a good thing for you in long run, as your city just might do something about it.
  • MarkW
    Verizon took the FCC to court the last time the FCC attempted to regulate them, and won. HOWEVER, in the process of "winning", that court told the FCC they needed to put the internet providers under Title II, and that is what the FCC is going to do later this month. Verizon knows that the FCC, by following what the last court said to do, is very likely to win any challenges this time around. They also know that if they want to keep any new municipal networks out of the areas that they service, they need to provide far better service and better bandwidth packages than most of the ones they are offering now. And that means they need more fiber. So it appears that they are accepting what the FCC is going to do, and in fact, preparing for it.
    AT&T on the other hand is going to take the FCC to court and try to upset the apple cart. In the mean time, it is very likely that a number of municipalities will develop their own "municipal networks" in AT&T serviced areas, and in the end, AT&T will lose the challenge against the FCC, and a large portion of the customers to the municipal networks that are created.
    It appears that Verizon has a win-win going, and AT&T has a lose-lose going.
  • Neog2
    My problem with this article is this,
    "I was entirely too fed up with Microsoft at the time to even consider looking at any more of its software."

    He never really explains what got him fed up?
  • f-14
    kind of funny. think verizion had this as plan b all along, kick the hornets nest at the FCC if they win great, expand, if they lose, kick the nest harder, and run all the way to a wall street sell off of 'NET services and let the competition deal with the consequences and further damning regulations under the appropriate classifications.

    now verizon can set to work on the most profitable sector of america the east coast that has current up-to-date everything every single time. the most people, the most roads, the most telecommunications, the most electric grid, the most money.
    set your base camp in the east coast and expand as profitability allows into areas that are almost as profitable.
    trickle down.

    and at any time verizon can add internet back into it's services but most likely when their competition is weakest or when verizon can buy out one of them for a clear profitability gain.
  • agentnathan009
    VZW is utilizing the acquired AWS spectrum to expand it's LTE capacity. Current low band 700 LTE (original 4G LTE install for Verizon) moves about 10-20Mbps. Their new "XLTE" is basically high band LTE. Their current network consists of low (cellular 850 spectrum) and high (PCS 1900 spectrum) band running the CDMA protocol. XLTE is using the recently purchased AWS spectrum. XLTE moves between 25-40Mbps. The addition of AWS spectrum gives them low band high band LTE setup just as they have low band high band CDMA. This added bandwidth effectively gives customers triple the current low band LTE bandwidth. When Verizon shuts down CDMA in the next few years they will have open and unused spectrum for 5G when it comes out, or for adding greater LTE capacity with more carriers. VZW has a good, robust system that they are upgrading with that will handle future data traffic needs for awhile.