28 July, 2025
california-puc-challenges-verizon-s-acquisition-of-frontier-communications

Verizon’s proposed acquisition of Frontier Communications is facing scrutiny from the California Public Utilities Commission (CPUC) due to recent changes in the telecommunications giant’s diversity, equity, and inclusion (DEI) policies. This development follows Verizon’s successful bid for clearance from the Federal Communications Commission (FCC), which was contingent upon the company abandoning its DEI initiatives. The CPUC has not yet approved the deal, raising significant concerns regarding Verizon’s commitment to diversity and compliance with state regulations.

In May, the CPUC issued an updated scoping memo stating that the merger could be subject to a dozen state regulations. The commission expressed particular concern over Verizon’s decision to eliminate its DEI policies, a move that mirrors actions taken by other companies in the industry, such as T-Mobile and Paramount Global, as they navigate regulatory processes under the Trump administration’s influence on FCC policies. Verizon’s approach has prompted the CPUC to question whether their actions align with California law, particularly regarding supplier diversity mandates.

On July 23, the CPUC released a proposed procedural schedule that could delay the decision on the merger until the first quarter of 2026. According to Blair Levin, a former FCC official and current policy analyst at New Street Research, the process at the CPUC is likely to be the most challenging hurdle for Verizon to overcome. Despite this, Levin does not believe that the CPUC will ultimately block the deal, even if Verizon’s actions conflict with state law.

In response to the CPUC’s concerns, Verizon asserted its commitment to inclusion and opportunity. The company emphasized that it would continue to provide avenues for all qualified small businesses to collaborate with them. However, CPUC Commissioner John Reynolds has criticized Verizon’s responses, describing them as “temporally and substantively broad” and unsatisfactory in addressing specific inquiries. Reynolds pointed out that Verizon failed to identify any past commitments it no longer supports and highlighted potential conflicts with the Public Utilities Code Section 8283, which mandates annual plans for increasing procurement from women, minority, disabled veteran, and LGBT business enterprises.

The CPUC’s General Order 156 requires utilities to ensure that at least 21.5% of their contracts are awarded to these diverse groups. Verizon’s statement that it will not set “quantitative goals for diverse spend” raises alarms regarding its alignment with California’s regulatory framework. Reynolds has given Verizon a “final opportunity” to rectify what he termed “deficient testimony” regarding these issues.

Levin noted that the core issue lies in the ambiguity surrounding the definition of DEI. He pointed out that the FCC Chairman, Brendan Carr, has not clearly articulated what constitutes “invidious discrimination” or acceptable DEI practices. This vagueness leaves companies uncertain about which specific practices are permissible under FCC rules. While Verizon’s correspondence with Carr regarding its DEI policy changes may resonate with the FCC chairman, it does not necessarily address the expectations of other regulatory bodies.

Despite the challenges, Levin maintains that the CPUC is not inclined to block the merger outright. Instead, the commission appears focused on clarifying Verizon’s commitment to DEI, which may differ from Carr’s interpretation, while also upholding California’s history of promoting business opportunities for historically disadvantaged groups. Levin believes that Reynolds’s comments are intended to push Verizon to navigate the complex space between federal requirements and state obligations.

Verizon now faces the task of reconciling its DEI policies with both Carr’s demands and California law. Levin remains optimistic about Verizon’s ability to address the CPUC’s concerns without directly contradicting its previous commitments to the FCC. The exact adjustments Verizon may make to its DEI policies remain uncertain, but Levin suggests that Carr may lack the legal authority to rescind the FCC’s prior approval. This situation presents an opportunity for Verizon to find a viable path forward in its pursuit of the Frontier acquisition.