Rural telecom provider Frontier Communications (NYSE: FTR) is in a bit of a bind, after the Metropolitan Area Communications Commission of Portland, Ore., raised questions about the intentions behind the company's extremely provocative 50% FiOS TV rate hike.
You're charging me 50% more for TV?
Today, Frontier finds itself in a bit of a Catch-22. It doesn't want to pay the high programming costs associated with FiOS TV from Verizon (NYSE: VZ), but it also can't offload the 100,000 FiOS customers which it acquired directly from Verizon in a prior strategic action. (At least, not immediately.) What is Frontier actually trying to do here, and why?
The confusion in which this $9 billion company (by market cap) currently finds itself seems representative of larger tactical confusion among the company's management.
Dirty pool, old man!
The communication body in Portland accused Frontier of pushing customers toward DIRECTV's (NYSE: DTV) service to save on programming costs and ease its way (albeit very slowly) out of the TV business altogether. At the same time, the company has also been accused of using ridiculous price hikes as a way to derive last-minute revenue out of these customers before transferring them to DIRECTV.
All of this presents a particularly unflattering portrait of a company whose stock has significantly underperformed the market over the past two years. Shoddy practices and unclear strategic initiatives may explain part of this underperformance.
Sunlight is an excellent disinfectant
But now, thanks to the regulatory investigation and what must be some negative PR, Frontier appears to be waffling; it's delayed the price hike "for the time being." This, of course, doesn't preclude the fact that the company may eventually bring it back once it feels media attention has lessened. While actual regulatory action is unlikely, this company clearly needs a game plan.
Although Frontier pretends that it's "still thinking" about exiting the larger TV business, it appears to be quite serious about doing so, having already offloaded a large number of its FiOS customers to other firms. So, what's the holdup?
The Foolish bottom line
If Frontier's ultimate strategy is to save on programming costs and get out of the business altogether, it should go ahead and get on with it. If the company intends to play some other move, now would be a good time to reveal it. Meanwhile, investors have nothing to do but wait.
