<div class="entry-subhead">\r\n<div><\/div>\r\n<div class="entry-meta"><span class="byline">by <span class="author vcard"><a class="url fn n" href="https:\/\/mountainstatespotlight.org\/author\/lucasmanfield\/">Lucas Manfield<\/a> f<\/span><\/span><span class="posted-on">or Mountain State Spotlight<\/span><\/div>\r\n<\/div>\r\n<div>\r\n\r\n<em><span style="color: #222222"><span style="font-family: Times New Roman, serif"><span style="font-size: medium"><i>This story was originally published by Mountain State Spotlight. For more stories from Mountain State Spotlight, visit www.mountainstatespotlight.org. This story can also be found at<\/i><\/span><\/span><\/span><\/em> <a href="https:\/\/mountainstatespotlight.org\/2020\/09\/28\/frontier-pitched-crucial-new-funding-for-west-virginia-broadband-but-the-companys-history-of-scandals-killed-the-proposal\/"><span style="font-family: Times New Roman, serif"><span style="font-size: medium"><i>https:\/\/mountainstatespotlight.org\/2020\/09\/28\/frontier-pitched-crucial-new-funding-for-west-virginia-broadband-but-the-companys-history-of-scandals-killed-the-proposal\/<\/i><\/span><\/span><\/a>\r\n\r\n<\/div>\r\n<div class="main-content">\r\n\r\nStruggling under a mountain of debt that threatened to collapse its business, Frontier Communications turned to West Virginians for a bailout last year.\r\n\r\n<article id="post-1534" class="post-1534 post type-post status-publish format-standard has-post-thumbnail hentry category-news entry">\r\n<div class="entry-content">\r\n\r\nThe company shopped around to state legislators and potential lobbying allies a new surcharge on every internet, cellular and phone subscriber in the state, with the extra fees funnelled straight to Frontier to patch up the company\u2019s shaky finances as it labored to maintain its aging network of copper telephone wires.\r\n\r\nLawmakers, averse to a new tax and fed up with <a href="https:\/\/mountainstatespotlight.org\/2020\/09\/17\/bankruptcy-blackouts-and-broken-promises\/">the company\u2019s track record<\/a> of fraud, balked.\r\n\r\nBut the failed effort, unreported until now, has long-term repercussions. Such a tax, its proponents say, is badly needed in a state that has failed repeatedly to solve one of its most intractable problems: a lack of reliable high-speed internet in rural communities.\r\n\r\nBilly Jack Gregg, West Virginia\u2019s former chief consumer advocate turned Frontier lobbyist, put together the proposed legislation. He\u2019s now retired, but agreed to an interview with Mountain State Spotlight<em>.<\/em>\r\n\r\nThe legislation is long overdue, he said.\r\n\r\n<\/div>\r\n<\/article><\/div>\r\n\u201cIt\u2019s like most such problems: Until the house is on fire, people don\u2019t recognize that you need a fire department,\u201d Gregg said. \u201cIt\u2019ll have to happen sooner or later.\u201d\r\n\r\nImproving broadband internet access has long been a goal of West Virginia policymakers, who argue it would attract badly needed investment in rural areas of the state.\r\n\r\nBut blanketing the state in the fiber-optic cable necessary to deliver internet at streaming speeds is far easier said than done. Such projects cost far more than they will recoup in customer subscription revenue. As a result, they\u2019re dependent on government subsidies to make the economic math work.\r\n\r\nMany states run their own subsidy programs, according to a recent analysis by the National Regulatory Research Institute, but West Virginia does not.\r\n\r\nSo it continues to lag behind other states in national measures of broadband availability. The state\u2019s rural residents are left reliant on Frontier, whose copper telephone network has proved largely unable to deliver speeds high enough to qualify as broadband internet by federal standards.\r\n\r\nAround 18% of households in the state lack fixed high-speed internet connections, according to the Federal Communications Commission. That\u2019s significantly more than each of West Virginia\u2019s neighbors \u2013\u00a0Kentucky is 7% and Pennsylvania is 5%.\r\n\r\nThe problem is far worse than those numbers make it seem. Because the data is self-reported by the telecoms using an outdated methodology, it is considered flawed, even by the FCC, and the percentages are far lower than reality.\r\n\r\nIn recent years, Frontier customers, faced with prolonged outages and snail-paced internet,\u00a0 have flooded West Virginia\u2019s utility regulator with complaints.\r\n\r\nMeanwhile, Frontier\u2019s financial investment in the state has stagnated. Revenues have dried up as its customers fled to competitors with superior technology. The company declared bankruptcy earlier this year.\r\n\r\nThe proposed legislation, Gregg said, was a result of Frontier\u2019s financial difficulties.\r\n\r\n\u201cThey were looking for additional revenues to support maintaining the network in the rural areas of the state,\u201d he said. \u201cThe old traditional revenue streams coming from the urban areas had dried up.\u201d\r\n\r\nGregg\u2019s proposal would have generated $26 million in additional revenue for Frontier, a quarter of which would have been earmarked for broadband expansion.\r\n\r\nBut it didn\u2019t gain much traction.\r\n\r\n\u201cThe Legislature didn\u2019t think much of the idea,\u201d said Gaylene Miller, the director of AARP West Virginia and an influential lobbyist at the state Capitol.\r\n<div class="wp-block-image"><\/div>\r\nThe AARP received an early preview of the legislation.\r\n\r\n\u201cI think that was looked at as a tax increase,\u201d she said.\r\n\r\nMiller said that Frontier needed to be held accountable for fixing its existing problems before it could be trusted with additional government funding.\r\n\r\n\u201cWe\u2019ve seen their track record, frankly,\u201d she said.\r\n\r\nFrontier\u2019s financial difficulties were largely of its own making. The company made a series of devastating strategic mistakes over the last decade, taking on over $10 billion in new debt in a series of acquisitions. When it filed for bankruptcy earlier this year, the company admitted that the interest payments had crippled its ability to invest in new technologies.\r\n\r\nIt had also been at the center of a series of scandals involving its use of federal funding.\r\n\r\nIn 2010, the state steered $40 million in federal funds to Frontier to build out its fiber network. After the buildout was complete, a competitor filed suit alleging that Frontier had broken its promise to allow competitors open access to the network. Later, a Department of Justice investigation found that Frontier had wasted nearly $5 million of the grant and then attempted to cover it up.\r\n\r\nFrontier\u2019s legislative proposal was also reviewed by state auditors, who wrote that the annual infusion of cash could solve reliability issues with the company\u2019s telephone service \u201cin the long run.\u201d But, they noted, the likelihood of the proposal becoming law was \u201cunknown.\u201d\r\n\r\nFrontier\u2019 lobbying continued to be \u201cin progress,\u201d they wrote. The report was published earlier this year.\r\n\r\nBut it was extensively redacted, including a section on the \u201cMountain State Universal State Fund.\u201d An administrative judge ordered the <a href="http:\/\/www.psc.state.wv.us\/scripts\/WebDocket\/ViewDocument.cfm?CaseActivityID=551799&NotType=%27WebDocket%27">full text of the report<\/a> be made public in August.\r\n\r\nThe unredacted report details the legislation, which would have included a $1 surcharge on \u201call connections for voice service \u2013 wireline, mobile, and VoIP (including cable).\u201d\r\n\r\nThe concept of taxing phone and internet subscribers to fund service improvements in rural and hard-to-serve areas isn\u2019t new. The federal government runs a massive \u201cUniversal Service Fund\u201d that gives out grants to spur infrastructure development and subsidizes phone plans for low-income subscribers.\r\n\r\nThat program is gearing up to give out an additional $20 billion for broadband expansion, a process that will begin this November.\r\n\r\nAlthough it\u2019s a federal program, that hasn\u2019t stopped state lawmakers from attempting to take credit. \u201cGov. Justice leading the way on \u2018monumental\u2019 project,\u201d headlined a <a href="https:\/\/governor.wv.gov\/News\/press-releases\/2020\/Pages\/Gov.-Justice-leading-the-way-on-monumental-project-connecting-121,000-West-Virginia-homes-to-world-class-broadband.aspx">press release<\/a> from his office in early September after Justice signed an executive order that would assist local firms in their applications to bid for the funds.\r\n\r\nHe\u2019s also promised to allocate $50 million in federal CARES Act funds toward improving rural internet.\r\n\r\nBut the state is not leading the way when it comes to actually ponying up its own money.\r\n\r\nMost states supplement federal programs with some sort of universal service fund of their own. West Virginia is one of only eight states that don\u2019t, according to <a href="https:\/\/pubs.naruc.org\/pub\/3EA33142-00AE-EBB0-0F97-C5B0A24F755A">a 2019 analysis<\/a> by Sherry Lichtenberg, deputy director of the National Regulatory Research Institute.\r\n\r\nIt hasn\u2019t always been this way. In 2008, the state Legislature allocated $5 million to be given out by a new Broadband Deployment Council. It funded several projects, including a $713,000 grant to bring high-speed internet to the Snowshoe ski resort. But the council was eventually disbanded, and later replaced with volunteers who lack state funds to give out grants.\r\n\r\nThese grant programs \u2013 although generally small compared to federal efforts \u2013 do work. <a href="https:\/\/www.purdue.edu\/newsroom\/releases\/2020\/Q3\/broadband-grows-best-when-states-are-proactive,-take-down-barriers.html">Research published<\/a> earlier this month by professors at Ohio State University and Purdue University found that they increased broadband access rates by 1 to 2 percentage points.\r\n\r\nLichtenberg explained why: They give a powerful tool to local authorities who understand the problem best. \u201cThe state commission understands what its customers need,\u201d she said.\r\n\r\nThis was the logic behind Gregg\u2019s proposal, which was similar in many ways to what\u2019s been implemented in other states across the country.\r\n\r\nGregg knows something about creating a universal service fund. He was the founding director of the state\u2019s consumer advocacy office and served in that role for 25 years. During his tenure, he advised the FCC on the implementation of the 1996 Telecommunications Act, which established the national fund. Since, he\u2019s repeatedly been called to testify before Congress.\r\n\r\nThe $1 fee per connection he proposed for West Virginia is typical, according to Lichtenberg\u2019s analysis.\r\n\r\nBut distributing the bulk of the funds to a single telecommunications provider, she said, was not.\r\n\r\nThe legislation would have directed the funds toward West Virginia\u2019s \u201ccarriers of last resort,\u201d meaning companies required to provide telephone service if a customer requests it. There is only one such carrier in the state: Frontier.\r\n\r\nDuring their push to get the bill on last year\u2019s legislative agenda, Frontier representatives took the idea to Delegate Daniel Linville, R-Cabell, vice chairman of the House Technology and Infrastructure Committee. He wasn\u2019t impressed.\r\n\r\nThe proposal \u201ccould not possibly be a good use of public funds,\u201d he said, citing Frontier\u2019s history in the state. Other lawmakers evidently agreed. No one sponsored the legislation.\r\n\r\nThey did pass a bill last year that would allow the state to rent out space on its wireless towers and buildings, nearly a third of which will be used to fund broadband expansion. The law went into effect this summer, but the pandemic has delayed the hiring of a contractor to oversee the program, and it\u2019s unclear how much money it will raise.\r\n\r\nStill, Linville explained, it\u2019s a way forward.\r\n\r\n\u201cI am determined to do everything in my power to make sure that the failures of the past are not repeated,\u201d Linville said.