While the channel waits to see what’s next in the cable-telco M&A world, it appears that one deal that was considered closed may not be.

The Federal Communications Commission (FCC) approved Verizon’s $20 billion acquisition of Frontier Communications in May after Verizon agreed to eliminate its diversity, equity and inclusion (DEI) programs. FCC approval was considered the last hurdle to the deal but instead the merger has become another issue where California disagrees with the federal government.

California is among several states that must greenlight the deal despite FCC approval, and Frontier is California’s second largest carrier of last resort (COLR). On Monday, the California Public Utilities Commission (CPUC) held the first of several planned hearings on the merger. Issues raised at the meeting could foreshadow those that may arise with Charter’s proposed $34.5 billion acquisition of Cox that awaits regulatory approval.

The CPUC’s Verizon hearing raised concerns over Verizon’s DEI stance as well as Frontier's status as a carrier of last resort. A carrier of last resort telco is required to offer basic telephone service to anyone who asks for it in a certain area — no matter where they live or what their income is.

To gain FCC approval, Verizon chief legal officer Vandana Venkatesh earlier this year wrote a letter stating that some of its D&I initiatives "could be associated with discrimination."

Channel Futures' James Anderson reported that CPUC commissioner John Reynold pressed Verizon on its DEI stance at the Monday hearing, asking which policies it referenced in that May letter and if Frontier also views its DEI practices as discriminatory.

"DEI programs are not a bargaining chip to be bartered away in exchange for merger approval. They are critical tools that help ensure equity for environmental and social justice communities and safeguard against continued historical discrimination," said Paul Goodman, legal counsel for the Center for Accessible Technology.

A decrease in copper lines is another issue. Verizon others have been pulling back from copper-based facilities under guidance from the FCC. AT&T failed in its attempt to drop its responsibilities as a carrier of last resort in California. Jeannette Simons, who oversees voice and data network for Riverside County, Frontier's status as carrier of last resort is important in rural areas, high-rise buildings and hospitals.

"The continuity of landlines and critical infrastructure services is especially vital in rural and unserviced communities. This is a big deal to a lot of high-rise buildings throughout the state of California. Most high-rise buildings have landline copper lines that power the emergency notification on the elevator," said Simons, who added that hospitals also use copper lines from Frontier for emergency services.

The Center for Accessible Technology filed a protest against Verizon’s Frontier acquisition, partially because it may harm customers with disabilities and medical needs.

Telco Mergers Impact Channel, Consumers

At the CPUC hearing, consumer Kristal Meade expressed concerns with rising prices because the deal could produce a monopoly. She also said she was concerned the deal could impact emergency services in rural areas if Verizon gets rid of its landlines.

Reduced competition because of recent M&A between telco and cable companies has brought greater regulatory scrutiny and worry from channel partners. Besides Verizon-Frontier and Charter-Cox, other recent mergers include T-Mobile and US Cellular in 2024 and AT&Ts acquisitions of Lumen Technologies’ fibre-to-home business in May – which has yet to close. As Canalys analyst Devan Adams wrote in a recent note on the Charter-Cox deal, these mergers can increase prices by reducing competition.

“Unfortunately, M&As in the US telco/cableco industry are par for the course,” Adams wrote. “In 2016, there were just under 20 major national brands, and in 2024 that number shrank to fewer than 10. During that time, telco services revenue from the major US brands rose from $272.3 billion to $302.9 billion (a 1.2% nine-year CAGR), resulting in average telco services revenue per company rising from US$12.9 billion to US$37.8 billion (a 12.6% nine-year CAGR).”