West Virginia moves on broadband, releases performance based reimbursements to Frontier

West Virginia is making progress on its broadband expansion project. As CivSource has reported, the project itself has been moving in fits and starts including an audit by a federal inspector general over misappropriation of funds. The state announced on last week that it will release some $29 million in escrow to reimburse Frontier Communications for build out costs after reviewing the company’s performance. Those funds were put into escrow in 2010 after Frontier acquired the West Virginia work as part of a larger rural broadband acquisition from Verizon Wireless.

Since then, Frontier has been working on expansion of both landline and broadband access in the state. So far, Frontier has increased access from 62% to 83% of its network area. Frontier will receive $23.7 million in reimbursement from one escrow account for landline network improvements. The other account will provide $5.4 million in reimbursement for broadband projects. The release accounts for the full amount requested by Frontier from the West Virginia Public Service Commission (PSC) which is managing the escrow accounts.

The West Virginia PSC established the two escrow accounts in 2010 as part of Frontier’s acquisition of Verizon markets in West Virginia. Verizon funded a service quality account at $72.4 million. Frontier pledged $48 million toward broadband deployment in a separate account. The Commission has discretion on whether to reimburse Frontier from those accounts.

West Virginia was recently ranked as the worst in the nation for broadband access. According to the FCC, 46% or approximately 845,000 people are without access to high speed broadband. However, the state’s original plan to expand access through anchor institutions was submitted to the federal government for funding support only to find later on that may of the anchor institutions listed already had broadband access. After several delays in the build out process, the state was investigated by federal funding administrators for potential misuse. State officials then submitted a revised plan that removed institutions with existing access and a revised timeline. Since then, the project has made some progress and continues to be relatively on track.

For its part, Frontier is only responsible for part of the project work. Other vendors are providing some fiber and middle mile connectivity. The Verizon acquisition expanded Frontier’s reach into several other states as well. The Company recently announced that it is moving forward on similar projects in Washington and Oregon. Since its 2010 acquisition of Verizon properties, Frontier Communications Corporation has invested more than $40 million to deploy and improve broadband services across Washington state. It has also invested some $37 million on the work in Oregon. The company has seen similar performance based reimbursements in both states.