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Charting new territory

Frontier’s embrace of change has shaped the telecom landscape

Frontier Communications Corp. has grown into a company with more than 3 million customers in 27 states, thriving in a telecommunications industry it helped shape in the early 1990s.
Frontier’s role as a leader in the telecom industry emerged after the industry was cracked open in 1982 with the breakup of AT&T Corp. and its divestiture of AT&T’s local service providers, the Baby Bells.
Rochester Telephone Corp., an incumbent local exchange carrier or local telephone company, and its successor Frontier Corp. were among the firms that embraced deregulation. Two months after Ronald Bittner became CEO in 1992, he launched an effort to create the open market plan that ultimately introduced competition to the local telephone market in 1995.
In doing so, Bittner, during his six-year tenure, sparked the company’s evolution into the nation’s No. 5 long-distance company and 12th-largest local service provider. He expanded it into a $2.5 billion national business.
The moves also helped make Rochester a place where the new telecom industry could thrive, industry experts say. And the region saw the start of rival telecom firms.
Bittner’s untimely death in 1997 at age 55, eight months after undergoing emergency surgery to remove a brain tumor, cut short his plan for Frontier. His successor, Joseph Clayton, ultimately would steer the company into a merger, and later the local telephone business would be sold.
During the late-1990s boom in the telecom industry, Frontier was acquired by Global Crossing Ltd., a Bermuda-based company eyeing global growth and focusing on fiber-optic networks and data. Global Crossing saw Frontier’s nationwide fiber-optic network as critical to its business plan.
In 2000, Global Crossing sold Frontier’s local telephone business to Connecticut-based Citizens Communications Co., which focused more on local phone service, particularly in rural areas. Citizens in 2008 changed its name to Frontier Communications Corp., reflecting in part Frontier’s position as the company’s largest operating unit.
By 2001, the telecom market had crashed locally and nationally. Companies here and around the country would file for Chapter 11 bankruptcy, including Global Crossing in 2002.
Ann Burr, president for Frontier’s northeast region, said the company’s success has been due to its commitment to customer service and an aggressive approach to new technology.
"I think that the customers have driven the changes we’ve made over the years," Burr said. "We see every day how they’re using our products and services and what their needs are. That, combined with the upgrades we continue to make, are why customers tend to stay with us."
Rochester’s technological environment gave Frontier a strong talent pool, Burr said.
"There were a lot of talented folks who were here to introduce a lot of new and innovative products in the industry," she said. "I think Frontier was a great environment that created an entrepreneurial vibe to be innovative and be the first to get new products out there."
Burr said Frontier has made advances over the years that have helped it survive. The company invested in high-speed Internet for residential customers and offering more bandwidth for its business clients. She also pointed to its bundled packages, like its partnership with Dish Network to offer customers a package of high-speed Internet, voice and video services, as keys to growth.
In 2010, Frontier spent $8.6 billion to acquire Verizon Communications’ 4.8 million landlines leased to residential and small-business customers.
"That was huge for Frontier," national telecom industry analyst Jeff Kagan said. "The acquisition tripled their size, and it drove several quarters of strong revenue growth."
Frontier reported revenues of $5.2 billion for 2011, up from $3.8 billion in 2010. The company posted net income of $158 million, up from $156 million the previous year.
Still, like many other telecoms, Frontier will have to combat the loss of residential and business customers.
"It’s an industry problem faced by all the local phone companies," Kagan said. "They are facing a changing industry, new technology and new competition. There’s pressure."
Burr said Frontier, which today employs more than 1,350 people locally, has proved it is up to the challenge.
"We’ve been very aggressively upgrading our networks and our facilities," she said. "We have always maintained the ability to offer new products to our customers as new technology has become more and more prominent in their homes and businesses."
The scope of Frontier’s impact on the industry can be seen in the number of the company’s veterans who went on to launch innovative startups.
Richard Aab started long-distance company ACC Corp., recruiting fellow Frontier veterans such as Steven Dubnik and Arunas Chesonis.
After ACC was acquired in 1998, Aab went on to start North Carolina-based US LEC Corp. Dubnik founded Choice One Communications, which became One Communications Inc. Chesonis launched Paetec Communications Inc., which later acquired US LEC and then was acquired itself by Windstream Corp.
Another former Frontier executive, Rolla Huff, became CEO of Las Vegas-based MGC Corp., which moved its headquarters to Rochester and became Mpower Communications Inc. Huff now is CEO of EarthLink Inc., which last year acquired the assets of One Communications.
Also among the Frontier alumni are David Rusin, who started American Fiber Systems Inc., and John Purcell, who teamed with founder Frank Chiaino to grow Fibertech Networks LLC. In 2010, AFS was sold to Colorado-based Zayo Group-a source acquainted with the deal put the price at $185 million to $190 million-and a majority stake in Fibertech went for $535 million later that year.
10/12/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.



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