Verizon’s proposed acquisition of Frontier Communications has hit a significant hurdle as the California Public Utilities Commission (CPUC) scrutinizes the company’s recent changes to its diversity, equity, and inclusion (DEI) policies. The CPUC has expressed concerns over Verizon’s decision to eliminate DEI initiatives, a move the company undertook to secure approval from the Federal Communications Commission (FCC).
In the initial stages of its acquisition plan, Verizon received clearance from the FCC after announcing it would abandon its DEI policies. This strategy mirrors similar adjustments made by other telecom and media companies, such as T-Mobile and Paramount Global, in response to regulatory pressures from the Trump administration and FCC Chairman Brendan Carr. The California PUC’s reluctance to approve the Verizon-Frontier merger intensifies the scrutiny surrounding this policy shift.
The CPUC has not yet approved the deal and issued an updated scoping memo in May, indicating that the merger could be subject to numerous state regulations. Among these regulations is a critical evaluation of Verizon’s abandonment of DEI policies. On July 23, the CPUC released a new procedural schedule that could push a decision on the merger to the first quarter of 2026.
Blair Levin, a former FCC official and current policy analyst at New Street Research, commented in June that the CPUC’s review process is likely to be the toughest challenge the transaction will face. While Levin does not foresee the CPUC blocking the deal outright, he acknowledges the complexities introduced by Verizon’s policy changes, particularly in relation to California law.
In response to the CPUC’s inquiries, Verizon stated that it maintains a broad perspective on inclusion and opportunity, pledging to continue engaging with qualified small businesses. Yet, this response has not satisfied CPUC Commissioner John Reynolds, who criticized Verizon for providing vague answers to specific questions regarding its DEI commitment. Reynolds described Verizon’s statements as “temporally and substantively broad,” which he deemed unacceptable.
Reynolds also highlighted a potential conflict with Public Utilities Code Section 8283. This code mandates public utilities to submit annual plans aimed at increasing procurement from women, minority, disabled veteran, and LGBT business enterprises. Verizon’s recent declaration, stating it will not set “quantitative goals for diverse spend,” contradicts these requirements. The CPUC’s General Order 156 stipulates that utilities should procure at least 21.5% of their contracts from these historically disadvantaged groups.
Levin emphasizes that the core issue lies in the ambiguity surrounding the definition of DEI, particularly in the context of FCC Chairman Carr’s stance on “invidious discrimination.” This lack of clarity leaves companies uncertain about what practices are permissible under FCC regulations. While Verizon’s communication to Carr may align with the chairman’s views, it does not necessarily resonate with the broader regulatory landscape.
Despite the challenges, Levin remains optimistic that the CPUC is not inclined to block the merger. Instead, he believes the commission aims to clarify Verizon’s commitment to DEI, which may differ from Carr’s interpretation, while upholding California’s historical commitment to supporting disadvantaged groups. Levin notes that Reynolds’ approach appears focused on navigating the complexities between the FCC’s demands and state requirements.
Verizon now faces the pressing task of reconciling its DEI policies with California’s legal framework. Levin expresses confidence in Verizon’s legal team to find a solution that addresses the CPUC’s concerns without overtly contradicting the commitments made to the FCC. The future of this acquisition will largely depend on how effectively Verizon can navigate this challenging regulatory environment, as the path forward remains uncertain.