Proposed Calif. PUC Decision Recommends Verizon/Frontier Approval With DEI Conditions
California Public Utilities Commission Administrative Law Judge Elizabeth Fox is recommending that the CPUC approve Verizon's purchase of Frontier Communications, subject to an array of conditions, including state diversity, equity and inclusion requirements. The FCC signed off on the deal in May after Verizon committed to dropping DEI practices (see 505160024). FCC Chairman Brendan Carr has said the agency won't approve mergers at regulated entities that have "invidious" DEI practices (see 2502240073).
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The ALJ said Friday that Verizon's policy changes to satisfy the FCC represent "a repudiation" of the wireless carrier's past efforts to comply with California's supplier diversity requirements. "Without new commitments, it is unclear how the Applicants will be able to comply," Fox said in the 134-page proposed decision.
Though Verizon and Frontier committed to $500 million in contracting with small businesses in California, minority-owned businesses represent a small number of those businesses, the ALJ said. Without specific spending goals for woman- or minority-owned businesses, the Verizon/Frontier spending commitment "appears to be a step backward on the goals" of the state's supplier diversity requirements. Fox also criticized the agreement reached by Verizon/Frontier and the California Emerging Technology Fund (CETF) for lacking any commitments to workforce diversity.
Fox called for the CPUC to condition its approval on the newly combined company spending $10 million over five years to support a workforce development program administered by a state higher education institution and setting up a recruiting pipeline from state universities and community colleges that's focused on recruiting from underrepresented populations. The company should require the same of its suppliers, the ALJ noted.
Verizon/Frontier should also conduct quarterly employee satisfaction surveys for five years, including questions about employees' experiences and satisfaction regarding "belonging and inclusion," Fox said. The surveys should have questions that let employees self-identify "based on characteristics including gender, race, disability status, veteran status, or Lesbian, Gay, Bisexual, and Transgender identity."
In addition, Fox advised a condition that the merged Verizon report to the CPUC annually for five years about the effects on its suppliers and workforce of the changes detailed to the FCC.
The ALJ's proposed decision carries a number of conditions unrelated to DEI as well. It said Verizon/Frontier could hurt competition in the form of access to backhaul and recommended requiring that there be non-discriminatory access. It also proposed that the deal be conditioned on Verizon expanding its fiber network and on the cost of Verizon Forward and Frontier Fundamentals low-cost programs staying the same for five years.
The proposed decision "recommends a very good transaction that is in the public interest with unprecedented deployment and adoption commitments by an Internet Service Provider," CETF President Sunne Wright McPeak said in a statement. "It also forges a commitment to Inclusion, Diversity, and Equity that breaks new legal ground beyond reporting to actually achieving progress." CETF, which had also suggested a variety of conditions, urged the CPUC to adopt the proposed decision. Verizon didn't comment.
Regina Costa, telecom policy director for The Utility Reform Network (TURN), emailed us that the group's preliminary review of the proposed decision finds that the conditions, "if adopted, will improve the benefits to Californians resulting from the transfer of Frontier to Verizon." The proposed decision adopts TURN proposals "to improve affordable service for low income customers, address service quality problems, increase service reliability with backup power requirements, and improve broadband infrastructure deployment, comply with California diversity and equity requirements, and establish a compliance monitor to ensure these conditions are met."
The proposed decision also "demonstrates the importance of state authority over significant telecommunications transactions," Costa said. "Verizon's application included many statements about the benefits of the transaction, but little or no specific, enforceable commitments. The CPUC developed a record that improves the proposed transaction in key areas that should benefit California customers."