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What changed in Frontier Communications Parent, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Frontier Communications Parent, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+331 added−311 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in Frontier Communications Parent, Inc.'s 2023 10-K

331 paragraphs added · 311 removed · 228 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

70 edited+25 added−19 removed36 unchanged
Biggest changeFiber broadband customer net additions continued to outpace copper broadband customer net losses, resulting in 40,000 total broadband customer net additions in 2022. ‎ 3 These record fiber broadband net additions resulted in rising fiber broadband customer penetration across our footprint. o In our Base Fiber footprint, which consists of the 3.2 million locations that we passed with fiber at the end of 2019, penetration increased to 43.2% at the end of 2022, up from 41.9% from the end of 2021. o In our Expansion Fiber footprint, our target penetration is 15% - 20% after 12 months, 25% - 30% penetration after 24 months, and a terminal penetration of at least 45%.
Biggest changeFiber broadband customer net additions continued to outpace copper broadband customer net losses, resulting in 75,000 total broadband customer net additions in 2023. ‎ 3 These record fiber broadband net additions resulted in rising fiber broadband customer penetration across our footprint. o In our base fiber footprint, which consists of the 3.2 million locations that we passed with fiber at the end of 2019, penetration increased to 44.5% at the end of 2023, up from 43.2% at the end of 2022. o In our Expansion Fiber footprint, which consists of the new locations that we passed with fiber since the beginning of 2020, our target penetration is 15% - 20% after 12 months, 25% - 30% after 24 months, and at least 45% at terminal state. o We have met or exceeded our targets for fiber locations constructed in 2020, 2021 and 2022. For 2020, our 12-, 24-, and 36-month expansion fiber penetration were 22%, 31%, and 35%, respectively. For 2021, our 12- and 24-month expansion fiber penetration were 18% and 25%, respectively. For 2022, our 12-month expansion fiber penetration was 18%. Customer Experience: In 2023, we continued to focus on improving our customer service by systematically removing reasons why customers needed to call us and introducing new digital self-service tools.
In March 2021, Congress passed the American Rescue Plan Act (“ARPA”) of 2021, which created a new $10 billion Coronavirus Capital Projects Fund that is available to the states for critical capital projects, including broadband infrastructure products, that directly enable work, education, and health monitoring.
In March 2021, Congress passed the American Rescue Plan Act of 2021 (“ARPA”), which created a new $10 billion Coronavirus Capital Projects Fund that is available to the states for critical capital projects, including broadband infrastructure products, that directly enable work, education, and health monitoring.
Some of these plans have limited terms and, as they expire, we may need to renegotiate with various states. These negotiations could impact rates, service quality, and/or infrastructure requirements, which could also impact our earnings and capital expenditures. In other states, we are subject to regulation that limits levels of earnings and returns on investments.
Some of these plans have limited terms 6 and, as they expire, we may need to renegotiate with various states. These negotiations could impact rates, service quality, and/or infrastructure requirements, which could also impact our earnings and capital expenditures. In other states, we are subject to regulation that limits levels of earnings and returns on investments.
Our investment strategy is underpinned by the rapid growth in demand for high-speed broadband, with data usage per household expected to grow significantly through higher, over-the-top video consumption, more connected devices per household, and increased demand for upstream data (e.g., videoconferencing and gaming).
Our investment strategy is underpinned by the rapid growth in demand for high-speed broadband, with data usage per household expected to grow significantly through over-the-top video consumption, more connected devices per household, and increased demand for upstream data (e.g., videoconferencing and gaming).
Solely for convenience, we refer to trademarks, service marks and trade names in this report without the ™, SM and ® symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks, service marks and trade names.
Solely for convenience, we refer to certain trademarks, service marks and trade names in this report without the ™, SM and ® symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks, service marks and trade names.
In addition to the focus on our broadband capabilities, we continue to evolve our other product offerings to meet the changing needs of the market, provide strong customer service and support, invest in our network to enable satisfactory capacity and capabilities, and package our offerings at attractive prices.
In addition to the focus on our broadband capabilities, we continue to evolve our other product offerings to meet the changing needs of the market, provide strong customer service and support, invest in our network to enable capacity and capabilities, and package our offerings at attractive prices.
Each state will receive a minimum of $100 million, with the remainder of program funding distributed based on the extent of high-cost areas and the number of unserved locations in each state relative to the total number of unserved locations in the country.
Each state will receive a 7 minimum of $100 million, with the remainder of program funding distributed based on the extent of high-cost areas and the number of unserved locations in each state relative to the total number of unserved locations in the country.
These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance and contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “may,” “will,” “would,” or “target.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain.
These statements are made based on management’s views and assumptions, as of the time the statements are made, regarding future events and performance and contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “may,” “will,” “would,” or “target.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain.
Forward-looking statements address our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to implement strategic initiatives, such as our fiber build and fiber penetration and our ability to realize cost savings initiatives, our ability to comply with the covenants in the agreements governing our indebtedness and other matters.
Forward-looking statements address our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to implement strategic initiatives, such as our fiber build and fiber penetration and our ability to realize cost savings initiatives, our ability to comply with the covenants in the agreements governing our indebtedness, our capital expenditures, and other matters.
Among other things, these privacy-related rules obligate carriers to implement procedures to: protect specified customer information from inappropriate disclosure; obtain customer permission to use specified information in marketing; authenticate customers before disclosing account information; and annually certify compliance with certain rules.
Among other things, these privacy-related rules obligate carriers to implement procedures to: protect specified customer information from inappropriate disclosure; obtain customer permission to use specified information in marketing; authenticate customers before disclosing account information; and periodically certify compliance with certain rules.
You should consider these important factors, as well as the risks set forth under Item 1A. “Risk Factors,” in evaluating any statement in this report or otherwise made by us or on our behalf. ‎ 13
You should consider these important factors, as well as the risks set forth under Item 1A. “Risk Factors,” in evaluating any statement in this report or otherwise made by us or on our behalf. ‎ 12
These documents may be accessed through our website at www.frontier.com under “Investor Relations.” The information posted or linked on our website is not part of, or incorporated by reference into, this report. We also make our Annual Report available in printed form upon request at no charge.
These documents may be accessed through our website at www.frontier.com under “Investors.” The information posted or linked on our website is not part of, or incorporated by reference into, this report. We also make our Annual Report available in printed form upon request at no charge.
A wide range of factors could materially affect future developments and performance, including but not limited to: our significant indebtedness, our ability to incur substantially more debt in the future, and covenants in the agreements governing our current indebtedness that may reduce our operating and financial flexibility; declines in Adjusted EBITDA relative to historical levels that we are unable to offset; economic uncertainty, volatility in financial markets, and rising interest rates could limit our ability to access capital or increase the cost of capital needed to fund business operations, including our fiber expansion plans; our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements; our ability to secure necessary construction resources, materials and permits for our fiber buildout initiative in a timely and cost-effective manner; inflationary pressures on costs and potential disruptions in our supply chain resulting from the global microchip shortage, the COVID-19 pandemic, or otherwise, which could adversely impact our financial condition or results of operations and hinder our fiber expansion plans; our ability to effectively manage our operations, operating expenses, capital expenditures, debt service requirements and cash paid for income taxes and liquidity; the impact of potential information technology or data security breaches or other cyber-attacks or other disruptions; competition from cable, wireless and wireline carriers, satellite, fiber “overbuilders” and over the top companies, and the risk that we will not respond on a timely or profitable basis; our ability to successfully adjust to changes in the communications industry, including the effects of technological changes and competition on our capital expenditures, products, and service offerings; our ability to retain or attract new customers and to maintain relationships with existing customers, including wholesale customers; our reliance on a limited number of key supplies and vendors; declines in revenue from our voice services, switched and nonswitched access and video and data services that we cannot stabilize or offset with increases in revenue from other products and services; our ability to secure, continue to use or renew intellectual property and other licenses used in our business; our ability to hire or retain key personnel; our ability to dispose of certain assets or asset groups or to make acquisition of certain assets on terms that are attractive to us, or at all; the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors and our ability to obtain future subsidies; our ability to comply with the applicable CAF II and RDOF requirements and the risk of penalties or obligations to return certain CAF II and RDOF funds; our ability to defend against litigation or government investigations and potentially unfavorable results from current pending and future litigation or investigations; 12 our ability to comply with applicable federal and state consumer protection requirements; the effects of governmental legislation and regulation on our business, including costs, disruptions, possible limitations on operating flexibility and changes to the competitive landscape resulting from such legislation or regulation; the impact of regulatory, investigative, and legal proceedings and legal compliance risks; our ability to effectively manage service quality in the states in which we operate and meet mandated service quality metrics or regulatory requirements; the effects of changes in income tax rates, tax laws, regulations, or rulings, or federal or state tax assessments, including the risk that such changes may benefit our competitors more than us, as well as potential future decreases in the value of our deferred tax assets; the effects of changes in accounting policies or practices; our ability to successfully renegotiate union contracts; the effects of increased medical expenses and pension and postemployment expenses; changes in pension plan assumptions, interest rates, discount rates, regulatory rules, and/or the value of our pension plan assets; the likelihood that our historical financial information may no longer be indicative of our future performance; the impact of adverse changes in economic, political and market conditions in the areas that we serve, the U.S. and globally, including but not limited to, disruption in our supply chain, inflation in pricing for key materials or labor, or other adverse changes resulting from epidemics, pandemics, and outbreaks of contagious diseases, including the COVID-19 pandemic, natural disasters, economic or political instability, terrorist attacks and wars, or other adverse widespread developments; potential adverse impacts of climate change and increasingly stringent environmental laws, rules and regulations, and customer expectations; market overhang due to substantial common stock holdings by our former creditors; certain provisions of Delaware law and our certificate of incorporation that may prevent efforts by our stockholders to change the direction or management of our company; and certain other factors set forth in our other filings with the SEC.
A wide range of factors could materially affect future developments and performance, including but not limited to: our significant indebtedness, our ability to incur substantially more debt in the future, and covenants in the agreements governing our current indebtedness that may reduce our operating and financial flexibility; declines in Adjusted EBITDA and revenue relative to historical levels that we are unable to offset; economic uncertainty, volatility in financial markets, and rising interest rates could limit our ability to access capital or increase the cost of capital needed to fund business operations, including our fiber expansion plans; our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements; our ability to secure necessary construction resources, materials and permits for our fiber buildout initiative in a timely and cost-effective manner; inflationary pressures on costs, including tight labor markets, increased fuel and electricity costs, and potential disruptions in our supply chain, which could adversely impact our financial condition or results of operations and hinder our fiber expansion plans; our ability to effectively manage our operations, operating expenses, capital expenditures, debt service requirements and cash paid for income taxes and liquidity; the impact of potential information technology or data security breaches or other cyber-attacks or other disruptions; the impact of laws and regulations relating to the handling of privacy and data protection; competition from cable, wireless carriers, satellite providers, wireline carriers, fiber “overbuilders” and Over-the-Top video providers, and the risk that we will not respond on a timely or profitable basis; our ability to successfully adjust to changes in the communications industry, including the effects of technological changes and competition on our capital expenditures, products, and service offerings; our ability to retain or attract new customers and to maintain relationships with existing customers, including wholesale customers; our reliance on a limited number of key supplies and vendors; declines in revenue from our voice services, switched and nonswitched access and video and data services that we cannot stabilize or offset with increases in revenue from other products and services; our ability to secure, continue to use or renew intellectual property and other licenses used in our business; our ability to hire or retain key personnel; our ability to dispose of certain assets or asset groups or to make acquisition of certain assets on terms that are attractive to us, or at all; the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors and our ability to obtain future subsidies; our ability to comply with the applicable CAF II and RDOF requirements and the risk of penalties or obligations to return certain CAF II and RDOF funds; 11 our ability to defend against litigation or government investigations and potentially unfavorable results from current pending and future litigation or investigations; our ability to comply with applicable federal and state consumer protection requirements; the effects of governmental legislation and regulation on our business, including costs, disruptions, possible limitations on operating flexibility and changes to the competitive landscape resulting from such legislation or regulation; the impact of regulatory, investigative, and legal proceedings and legal compliance risks; our ability to effectively manage service quality in the states in which we operate and meet mandated service quality metrics or regulatory requirements; the effects of changes in income tax rates, tax laws, regulations, or rulings, or federal or state tax assessments, including the risk that such changes may benefit our competitors more than us, as well as potential future decreases in the value of our deferred tax assets; the effects of changes in accounting policies or practices; our ability to successfully renegotiate union contracts; the effects of increased medical expenses and pension and postemployment expenses; changes in pension plan assumptions, interest rates, discount rates, regulatory rules, and/or the value of our pension plan assets; the impact of adverse changes in economic, political and market conditions in the areas that we serve, the U.S. and globally, including but not limited to, disruption in our supply chain, inflation in pricing for key materials or labor, or other adverse changes resulting from epidemics, pandemics, and outbreaks of contagious diseases, natural disasters, economic or political instability, terrorist attacks and wars, including the ongoing war in Ukraine and the Israel-Hamas war, or other adverse widespread developments; potential adverse impacts of climate change and increasingly stringent environmental laws, rules and regulations, and customer expectations and other environmental liabilities; market overhang due to substantial common stock holdings by our former creditors; certain provisions of Delaware law and our certificate of incorporation that may prevent efforts by our stockholders to change the direction or management of our company; and certain other factors set forth in our other filings with the SEC.
Our Board of Directors and executive leadership team oversee the execution of our fiber-first strategy: build fiber, sell fiber, improve the customer experience, and streamline operations.
Our Board of Directors and executive leadership team oversee the execution of our fiber-first strategy: build fiber, sell fiber, improve the customer experience, and simplify operations.
Advanced Hardware and Network Solutions: We offer our SMB and larger enterprise customers various hardware and network solutions utilizing cloud functionality, including end-to-end solutions like cloud managed services and Managed Wireless LAN. We offer third-party communications equipment tailored to their specific business needs through partnering with other providers.
Advanced Hardware and Network Solutions: We offer our SMB and larger enterprise customers various hardware and network solutions utilizing cloud functionality, including end-to-end solutions like cloud managed services and Managed Wireless LAN. We offer third-party communications equipment tailored to their specific business needs through partnering with other providers. Bundles: We also provide packages of services.
The IIJA also directed the FCC to require broadband service providers to display labels containing certain information regarding their broadband internet access plans. The rules adopted by the FCC require covered broadband providers to display these labels at the point of sale.
The IIJA also directed the FCC to require broadband service providers to display labels containing certain information regarding their broadband internet access plans starting in April 2024. The rules adopted by the FCC require covered broadband providers to display these labels at the point of sale.
As our expansion grows over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber.
Over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber as we implement our expansion plan.
For example, privacy-related legislation has been adopted in a number of states in which we operate.
Privacy-related legislation has been adopted in a number of states in which we operate.
Rallied around our purpose of Building Gigabit America TM , we are focused on supporting a digital society, closing the digital divide, and working toward a more sustainable environment.
Driven by our purpose of Building Gigabit America TM , we are focused on supporting a digital society, closing the digital divide, and working toward a more sustainable environment.
Item 1. Business Overview Frontier is a leading communications and technology provider offering gigabit speeds that empower and connect 2.8 million broadband subscribers in 25 states as of December 31, 2022. We are building critical infrastructure across the country with our fiber-optic network and cloud-based solutions, enabling secure high-speed connections.
Item 1. Business Overview Frontier is a leading communications and technology provider offering gigabit speeds to 2.9 million broadband subscribers in 25 states as of December 31, 2023. We are building critical infrastructure across the country with our fiber-optic network and cloud-based solutions, enabling secure high-speed connections.
Competition comes from other communications providers, cable operators, CLECs, and other enterprises. As compared to our consumer customers, business customers often require more sophisticated and more data-centered solutions (e.g., IP PBX, ethernet and SIP trunking). To differentiate ourselves from other service providers, Frontier delivers end-to-end solutions such as cloud managed services and managed wireless LAN.
As compared to our consumer customers, business customers often require more sophisticated and more data-centered solutions (e.g., IP PBX, ethernet and SIP trunking). To differentiate ourselves from other service providers, Frontier delivers end-to-end solutions such as cloud managed services and managed wireless LAN.
We also offer satellite TV video service to our customers under various agency relationships with satellite providers. Access Services: We offer a range of access services. Our switched access services allow other carriers to use our facilities to originate and terminate their local and long-distance voice traffic.
We also offer satellite TV video service to our customers under various agency relationships with satellite providers and Over the Top (“OTT”) video through partnerships with OTT video providers. Access Services: We offer a range of access services. Our switched access services allow other carriers to use our facilities to originate and terminate their local and long-distance voice traffic.
Other trademarks, trade names or service marks appearing in this report are the property of their respective owners. Human Capital Management We are building a high-performing and diverse workforce committed to our singular purpose, Building Gigabit America. As of December 31, 2022, we had approximately 14,700 employees.
Other trademarks, trade names or service marks appearing in this report are the property of their respective owners. 8 Human Capital Management We are building a high-performing and diverse workforce committed to our purpose, Building Gigabit America TM . As of December 31, 2023, we had approximately 13,300 employees.
The IIJA includes certain changes for the ACP including, it reduces the maximum available subsidy per household from $50 to $30 (while keeping it at $75 on tribal lands), expands the eligibility pool for the subsidy, and requires that customers be able to apply the credit to any Internet service offering, among other things.
The IIJA includes certain changes for the ACP, such as reducing the maximum available subsidy per household from $50 to $30 (while keeping it at $75 on tribal lands), expanding the eligibility pool for the subsidy, and requiring that customers be able to apply the credit to any Internet service offering, among other things.
Many franchises establish facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. We believe that we are meeting all material standards and requirements. Franchises are generally granted for fixed terms and must be periodically renewed.
Many franchises establish facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. Franchises are generally granted for fixed terms and must be periodically renewed.
The FCC announced the results of its RDOF Phase I auction on December 7, 2020. Frontier was awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia).
Under the FCC’s RDOF Phase I auction, Frontier was awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia).
We believe that our ability to provide symmetrical high-speed connectivity through our fiber-optic technology provides competitive advantages, and that we are well positioned to meet this growing demand with faster upload and download speeds, and lower latency than our competition.
We believe that our ability to provide symmetrical high-speed connectivity through our fiber-optic technology provides competitive advantages, and that we are well positioned to meet this growing demand with faster upload and download speeds, and lower latency than our competition. In August 2021, we announced our plan to pass 10 million total locations with fiber.
We are targeting terminal penetration of 45% or higher in markets we have passed with fiber. In 2022, we added a record 250,000 fiber broadband customer net additions, resulting in fiber broadband customer growth of 17% as compared to the fourth quarter of 2021.
We are targeting terminal penetration of 45% or higher in markets we have passed with fiber. In 2023, we added a record 318,000 fiber broadband customer net additions, resulting in fiber broadband customer growth of 19% as compared to 2022.
These companies need to access locations within Frontier’s footprint to offer local services, wireless carriers, and integrated carriers that offer a variety of services across all these categories. Wholesale customers buy both voice and data services to supplement their own network infrastructure. Services We offer a broad portfolio of communications and technology services for consumer and business customers.
Our wholesale customers include local, long distance, wireless, cable and other carriers. These companies need to access locations within Frontier’s footprint to offer their services. Wholesale customers buy both voice and data services to supplement their own network infrastructure. Services We offer a broad portfolio of communications and technology services for consumer and business customers.
In this report, references to “Successor” relate to our financial position and results of operations after the Effective Date and references to “Predecessor” refer to the financial position and results of operations of Old Frontier and its subsidiaries on or before the Effective Date. 10 Available Information We make available, free of charge on our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as practicable after we electronically file these documents with, or furnish them to, the SEC.
Available Information We make available, free of charge on our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as practicable after we electronically file these documents with, or furnish them to, the SEC.
Many of our competitors are larger, have stronger brand recognition, have more service offerings, and have greater financial resources than we currently do. All of these factors create potential downward pressure on the demand for and pricing of our services.
Additionally, we have developed partnerships with leading OTT providers to offer their services to our customers. 5 Many of our competitors are larger, have stronger brand recognition, have more service offerings, and have greater financial resources than we currently do. All these factors create potential downward pressure on the demand for and pricing of our services.
Complying with such laws, as well as other legislative and regulatory action related to privacy, could result in increased costs of compliance, claims against broadband Internet access service providers and others, and increased uncertainty in the value and availability of data. 8 Video Programming Federal, state, and local governments extensively regulate the video services industry.
Complying with such laws, as well as other legislative and regulatory action related to privacy, could result in increased costs of compliance, claims against the Company or investigations related to compliance, and increased uncertainty in the use and availability of certain consumer data. Video Programming Federal, state, and local governments extensively regulate the video services industry.
Stockholders may request printed copies of these materials by writing to: 401 Merritt 7, Norwalk, Connecticut 06851 Attention: Corporate Secretary. ‎ 11 Forward-Looking Statements This Annual Report on Form 10-K contains "forward-looking statements," related to future events.
Stockholders may request printed copies of these materials by writing to: 1919 McKinney Avenue, Dallas, Texas 75201 Attention: Corporate Secretary. ‎ 10 Forward-Looking Statements This Annual Report on Form 10-K contains "forward-looking statements," related to future events.
We believe this will improve overall service quality and encourage migration to higher speed Internet services. Some consumer customers prefer the convenience and discounts available when voice, data, Internet and/or video services are bundled by a single provider. Competition for business customers is also based on price, bandwidth, quality, and speed of service, including pricing and promotions and bundled offerings.
We believe this will improve overall service quality and encourage migration to higher speed Internet services. Competition for business customers is also based on price, bandwidth, quality, and speed of service, including pricing and promotions and bundled offerings.
We achieved our annualized gross run rate cost savings target of approximately $250 million more than one year ahead of plan. As of December 31, 2022, we had realized $336 million of gross annualized cost savings. Customers We deliver communications and technology services to consumer and business customers.
We achieved our annualized gross run rate cost savings target of $500 million in 2023 – double our initial target of $250 million. As of December 31, 2023, we had realized $527 million of gross annualized cost savings. Customers We deliver communications and technology services to consumer and business customers.
In addition, our workforce is currently supplemented by approximately 380 contract workers, primarily supporting the technology and field operations groups. We are a federal contractor and follow the rules set forth by the Department of Labor, Office of Federal Contract Compliance Programs (OFCCP), including those applicable to recruiting, hiring and diversity.
We are a federal contractor and follow the rules set forth by the Department of Labor, Office of Federal Contract Compliance Programs (OFCCP), including those applicable to recruiting, hiring and diversity.
Competition includes the following: - Cable Operators : In a majority of our markets, cable operators offer high speed Internet, video, and voice services, and compete with us aggressively for consumer and business customers on speed and price, primarily by marketing with significant promotional period pricing. - Wireless Carriers : Wireless operators offer broadband, video and voice services and compete with us for consumer and business customers by offering increasingly larger data packages that utilize the latest 5G technology to mobile customers.
We face competition from cable operators, wireless carriers, satellite providers, wireline carriers, fiber “overbuilders,” and OTT video providers: - Cable Operators : Cable operators offer high speed internet, video, and voice services, and compete with us aggressively for consumer and business customers on speed and price, primarily by marketing with significant promotional period pricing. - Wireless Carriers : Wireless carriers offer broadband, video and voice services and compete with us for consumer and business customers by offering increasingly larger data packages that utilize the latest 5G technology to mobile customers. - Satellite Providers : Satellite providers offer broadband and video services and compete with us for consumer and business customers. - Wireline Carriers / Fiber Overbuilders : The demand for high-speed data is continuing to attract new entrants into markets, including Frontier’s markets.
These systems support advanced services such as ethernet, dedicated Internet, VoIP, and SDWAN. 5 We connect to households and business locations in our service territory using fiber-optic, copper, or wireless technologies. In some cases, we provide direct fiber into a residence (fiber-to-the-home) or on business premises. In other cases, a location is served with a combination of fiber and copper.
We connect to households and business locations in our service territory using fiber-optic, copper, or wireless technologies. In some cases, we provide direct fiber into a residence (fiber-to-the-home) or business premise. In other cases, a location is served with a combination of fiber and copper. We provide data, video, and voice services to customers over both architectures.
The FCC is reviewing carriers’ CAF II program completion data, and if the FCC determines that the Company did not satisfy certain applicable CAF Phase II requirements, Frontier could be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations. 7 On January 30, 2020, the FCC adopted an order establishing the RDOF competitive reverse auction to provide support to serve high-cost areas.
Thereafter, the FCC has been reviewing carriers’ CAF II program completion data, and if the FCC determines that the Company did not satisfy certain applicable CAF Phase II requirements, Frontier could be required to return a portion of the funds previously received and may be subject to certain other fines, requirements and obligations.
These services are billed monthly in advance. Long-distance service to and from points outside our operating properties are provided by interconnection with the facilities of inter-exchange carriers. Our long-distance services are billed in advance for unlimited use service and billed in arrears for services on a per minute-of-use basis. We also offer packages of communications services.
These services are billed monthly in advance. Long-distance service to and from points outside our operating properties are provided by interconnection with the facilities of other carriers.
We provide broadband, video, voice and other services and products to our consumer customers over both fiber and copper-based networks. ‎ 4 Business Our business customers include larger enterprise customers, small and medium businesses (“SMB”), and wholesale customers. o Larger Enterprise : These customers consist of Fortune 1000, multi-location companies, large government entities, large educational institutions, and non-profits. o Small and Medium Business : These customers consist of single or multi-location companies and mid-sized government entities, educational institutions, and non-profits. o Wholesale : These customers are often referred to as carriers or service providers and include national operators, cellular companies, and local exchange companies.
Business Our business customers include larger enterprise customers, small and medium businesses (“SMB”), and wholesale customers. o Larger Enterprise: These customers consist of Fortune 1000 companies, companies with multiple locations, large government entities, educational institutions, and non-profits. o Small and Medium Business: These customers consist of single location and smaller multi-location companies, as well as mid-sized government entities, educational institutions, and non-profits. o Wholesale : These customers are often referred to as carriers or service providers and use our network facilities to provide services to their customers.
We are continuing to execute on our initiatives to build out and invest in our fiber network, drive operational performance, increasingly win more customers in our footprint, deliver an exceptional customer journey, and simplify our operations. 6 Regulatory Environment Some of our operations are subject to regulation by the FCC and various state regulatory agencies, often called public service or utility commissions.
We are continuing to execute on our initiatives to build out and invest in our fiber network, drive operational performance, increasingly win more customers in our footprint, deliver an exceptional customer journey, and simplify our operations.
At the federal level, the FCC generally exercises jurisdiction over information services, interstate, or international telecommunications services and over facilities to the extent they are used to provide, originate, or terminate interstate or international services. State regulatory commissions generally exercise jurisdiction over intrastate telecommunications services and the facilities used to provide, originate, or terminate those services.
Regulation of Our Business We are subject to federal, state, and local regulation and we have various regulatory authorizations for our regulated service offerings. At the federal level, the FCC generally exercises jurisdiction over information services, interstate, or international telecommunications services and over facilities to the extent they are used to provide, originate, or terminate interstate or international services.
We continued Building Gigabit America at a record pace, with substantial progress in executing on our four key strategic priorities: build fiber, sell fiber, improve the customer experience, and simplify operations. 2 Key milestone accomplishments against these four levels of value creation in 2022 include: Fiber Deployment: We exceeded our initial 2022 plan, building fiber to approximately 1.2 million locations.
Revenue by Product Revenue by Customer Revenue by Technology In 2023, we advanced our purpose of Building Gigabit America and made substantial progress in executing on our four key strategic priorities: build fiber, sell fiber, improve the customer experience, and simplify operations. 2 Key milestone accomplishments against these four strategic priorities in 2023 include: Fiber Deployment: We met our 2023 build plan, adding approximately 1.3 million new fiber locations.
As of December 31, 2022, we had approximately 5.2 million total locations passed with fiber, surpassing the halfway mark to our goal of 10 million total locations. Our build plan is solidified by multi-year agreements with key labor and equipment partners.
As of December 31, 2023, we had approximately 6.5 million total locations passed with fiber, and more than doubled our fiber footprint since we started our build in 2020. Our build plan is solidified by multi-year agreements with key labor and equipment partners.
For the year ended December 31, 2022, approximately 48% of our total revenue was attributable to activities related to our fiber-optic products with 51% of revenue related to our copper products. We generated revenue of approximately $5.8 billion for the year ended December 31, 2022.
We are prioritizing our activities to locations that we believe will provide the highest investment returns. We generated revenue of approximately $5.8 billion for the year ended December 31, 2023 with approximately 52% of our total revenue attributable to activities related to our fiber-optic products with 47% of revenue related to our copper products.
We own fiber optic and copper cable, which have been deployed in our networks and are the primary transport technologies between our host and remote central offices, and interconnection points with other communication carriers. We have expanded and enhanced our fiber-optic and copper transport systems to support increasing demand for high bandwidth transport services.
The outside plant consists of transport and distribution delivery networks connecting our host central office with remote central offices, and ultimately, with our customers. We own fiber optic and copper cable, which have been deployed in our networks and are the primary transport technologies between our host and remote central offices, and interconnection points with other communication carriers.
Competition for consumer customers is based on price, bandwidth, quality, and speed of service, including promotions as well as bundling of service offerings. Competition comes from other communications providers, cable operators, Competitive Local Exchange Companies (CLECs), and other enterprises. Our focus is to improve our customer experience by efficiently responding to their specific needs.
Given our footprint, we believe we are well positioned to capitalize on attractive demographic trends. Competition for consumer customers is based on price, bandwidth, quality, and speed of service, including promotions as well as bundling of service offerings. Our focus is to improve our customer experience by efficiently responding to their specific needs.
We expect federal and state lawmakers, the FCC, and the state regulatory agencies to continue to revise the statutes and regulations governing communications services. Regulation of Our Business We are subject to federal, state, and local regulation and we have various regulatory authorizations for our regulated service offerings.
Regulatory Environment Some of our operations are subject to regulation by the FCC and various state regulatory agencies, often called public service or utility commissions. We expect federal and state lawmakers, the FCC, and the state regulatory agencies to continue to revise and enforce the statutes and regulations governing communications services.
Some state regulatory agencies have substantial oversight over incumbent telephone companies, and their interconnection with competitive providers and provision of non-discriminatory network access to certain network elements to them.
Municipalities and other local government agencies also may regulate other aspects of our business, by requiring us to obtain licenses and construction permits and to abide by applicable regulations and requirements. Some state regulatory agencies have substantial oversight over incumbent telephone companies, and their interconnection with competitive providers and provision of non-discriminatory network access to certain network elements to them.
The term of our collective bargaining agreements is typically three years and at any point in time we generally have several agreements under negotiation and on extension. Approximately 27% of our unionized employees are covered by collective agreements that are scheduled to expire in 2023. We consider our relations with our employees to be good.
During 2023, restructuring initiatives and organizational realignment resulted in the separation of approximately 1,400 employees. Approximately 68% of our total employees are represented by unions and are subject to collective bargaining agreements. The term of our collective bargaining agreements is typically three years and at any point in time we generally have several agreements under negotiation and on extension.
Most of our local exchange companies operate as incumbent carriers in the states in which they operate and are certified in those states to provide local telecommunications services. Certain federal and state agencies, including attorneys general, monitor and exercise oversight related to consumer protection issues, including marketing, sales, provision of services, and service charges.
Certain federal and state agencies, including attorneys general, monitor and exercise oversight related to consumer protection issues, including marketing, sales, provision of services, and service charges.
We face competition from cable, wireless and wireline carriers, satellite, fiber “overbuilders” and Over-the-Top (“OTT”) companies. Many of these service providers are not subject to the same regulations as traditional communications providers and have lower cost structures than we do. The industry has also experienced substantial consolidation in recent years.
Further, many of our competitors are not subject to the same regulations as traditional communications providers and have lower cost structures than we do. The industry has also experienced substantial consolidation in recent years, leading to competitors with significant scale. However, for the majority of our locations passed, we currently face competition from no more than one wireline competitor.
These services are all supported by 24/7 technical support and an advanced network operations center. We also offer wireless broadband services (through unlicensed Spectrum) in select markets utilizing networks that we own or operate. Voice Services: We offer voice services, including data-based VoIP and UCaaS, long-distance and voice messaging services, to consumer and business customers in all our markets.
We also provide wireless broadband services (via unlicensed spectrum) in select markets utilizing networks that we own or operate . Voice Services: We offer voice services, including data-based voice over internet protocol (“VoIP”) and unified communications as a service (“UCaaS”), long-distance and voice messaging services, to consumer and business customers in all our markets.
As an example, we have a strong presence in Texas and Florida, the two states in the U.S. with the highest population gains from 2010 to 2021. Given our footprint, we believe we are well positioned to capitalize on attractive demographic trends.
In addition, we operate in many dense, urban markets with favorable demographic characteristics that correlate to higher broadband usage. As an example, we have a strong presence in Texas and Florida, the two states in the U.S. with the highest population gains from 2010 to 2021.
The current status of material regulatory initiatives is as follows: Connect America Fund (“CAF”)/ Rural Digital Opportunity Fund (“RDOF”): In 2015, Frontier accepted the FCC’s CAF Phase II offer in 29 states, which provided $332 million in annual support and in return the Company committed to make broadband with at least 10 Mbps downstream/1 Mbps upstream speeds available to approximately 774,000 high-cost unserved or underserved locations within its footprint.
The current status of material regulatory initiatives is as follows: Connect America Fund (“CAF”)/ Rural Digital Opportunity Fund (“RDOF”): In 2015, Frontier accepted the FCC’s CAF Phase II offer, which provided $313 million in annual support through 2021 in return for the Company’s commitment to make broadband available to households within the CAF II areas in our then-existing 25 states.
Our core fiber network is currently capable of 10 Gpbs and requires limited capital investment to enable faster speeds. We routinely enhance our networks and upgrade with the Internet protocol transport and routing equipment, reconfigurable optical add/drop multiplexers transport systems, passive optical network, ultra-high speed digital subscriber line broadband equipment, and VoIP switches.
We routinely enhance our networks and upgrade with Internet protocol transport and routing equipment, reconfigurable optical add/drop multiplexer transport systems, passive optical networks, ultra-high speed digital subscriber line broadband equipment, and VoIP switches. These systems support advanced services such as ethernet, dedicated Internet, VoIP, and SDWAN.
The following table shows the number of consumer fiber passings as of December 31, 2022: (1) Consumer and business locations with fewer than 5 units per location. Fiber Penetration: We strive to deliver new best-in-market products to meet customer demands and increase penetration across our fiber footprint.
The following table shows our fiber passings as of December 31, 2023, 2022, 2021 and 2020: (1) Fiber passings represent our estimate of the number of locations, such as single-family units, apartment and condominium units, and small and medium businesses passed by our fiber distribution network in areas where we offer service and that are open to Frontier sales efforts. Fiber Penetration: We strive to deliver new best-in-market products to meet customer demands and increase penetration across our fiber footprint.
These packages permit customers to bundle their products and services, including voice service, video and Internet services, and other product offerings. Video Services: We provide video services under the Frontier TV brand in portions of California, Indiana, Texas, and Florida and under the Vantage brand in portions of Connecticut, North Carolina, South Carolina, Illinois, New York, and Ohio.
Our long-distance services are billed in advance for unlimited use service and billed in arrears for usage-based services. 4 Video Services: We provide video services under the Frontier TV brand in portions of California, Indiana, Texas, Florida, Connecticut, North Carolina, South Carolina, Illinois, New York, and Ohio.
Specifically, as part of the Consolidated Appropriations Act of 2021 passed in December 2020, Congress provided $3.2 billion nationally to help support access to broadband services. In furtherance of this objective, the FCC created the Emergency Broadband Benefit to provide an up to $50 (up to $75 on tribal lands) monthly benefit for qualifying low-income consumers to purchase broadband.
In furtherance of this objective, the FCC created the Emergency Broadband Benefit to provide an up to $50 (up to $75 on tribal lands) monthly benefit for qualifying low-income consumers to purchase broadband. Frontier participated in the program and is now participating in the successor Affordable Connectivity Program (“ACP”) that commenced December 31, 2021.
As these large amounts of federal funding flow through the broadband ecosystem, we will evaluate and pursue funding opportunities that make sense for our business. Frontier does not know what funding it may receive or the impact these programs may have, if any, in the future.
Federal Funding Initiatives: The Federal government has undertaken several measures to facilitate enhanced access to high-speed broadband, including through several new funding programs. As these large amounts of federal funding flow through the broadband ecosystem, we will evaluate and pursue funding opportunities that make sense for our business.
However, technological advances as well as regulatory and legislative changes have enabled a wide range of historically non-traditional communications service providers to compete with traditional providers, including Frontier. More market participants are now competing to meet the communications needs of the same customer base, thus increasing competitive pressures.
More market participants are now competing to meet the communications needs of the same customer base, thus increasing competitive pressures.
These services are offered on either a standalone basis or in a bundled package, per individual customer needs.
These services are offered on either a standalone basis or in a bundled package based on individual customer needs. Data and Internet Services: We offer a comprehensive range of broadband and networking services. The principal consumer and SMB services we provide are broadband internet and related value-added services.
Network Architecture and Technology Our local exchange carrier networks consist of host central office and remote sites, primarily equipped with digital and Internet Protocol switches. The outside plant consists of transport and distribution delivery networks connecting our host central office with remote central offices, and ultimately, with our customers.
These packages permit customers to bundle their products and services, including voice service, video, and broadband services, as well as other value-added services and product offerings. Network Architecture and Technology Our local exchange carrier networks consist of host central office and remote sites, primarily equipped with digital and Internet Protocol switches.
However, it remains uncertain whether any such follow-on auction will occur given the recent passage of significant federal funding for broadband infrastructure. Federal Funding Initiatives: The Federal government has undertaken several measures to facilitate enhanced access to high-speed broadband, including through several new funding programs.
As part of its RDOF order, the FCC indicated it would hold a follow-on auction for the unawarded funding following the Phase I auction. However, it remains uncertain whether any such follow-on auction will occur given the recent passage of significant federal funding for broadband infrastructure.
In response, we have made investments in our network to deliver OTT video content to consumers who might not opt for traditional video services. Additionally, we have developed partnerships with leading OTT providers to offer their services to our customers. The percentage of premises with a traditional, multi-channel video product has declined, a trend we expect will continue.
These new entrants offer broadband, video and voice services and compete directly for Frontier’s customers. - OTT Video Providers : Many consumers are opting for OTT video services rather than traditional, multi-channel video services. We have made investments in our network to deliver OTT video content to consumers who might not opt for traditional video services.
NTIA established initial requirements for this program in May 2022 and is expected to announce the state grant allocations in 2023. States will award funding they receive through competitive grant processes. In the IIJA, Congress also provides $14.2 billion for the ACP.
NTIA established initial requirements for this program in May 2022 and announced its state funding allocations in 2023. States are receiving required approvals of their Initials Proposals from NTIA on a rolling basis. As a result, the timing of each state’s location challenge process and grant program will vary. States will award funding they receive through competitive grant processes.
In 2022, significant progress included: o Fiber Net Promoter Score (NPS) increased 10 points, from +9 points at the end of 2021 to +19 points at the end of 2022. o Fiber broadband churn improved 7 basis points from 1.45% in 2021 to 1.38% in 2022. o We launched our reinvented brand in April 2022. o We introduced our new customer app in November 2022. o We launched our 2 Gbps (Gigabits per second) fiber product offering in February 2022, and our 5 Gbps fiber product offering in January 2023. Operational Efficiency: Across the entire company, we have identified opportunities to simplify and digitize our operations.
Among other results: o We Introduced new digital self-service tools including our conversational AI-chat bot and newly redesigned app. o Fiber broadband churn improved 6 basis points from 1.38% in 2022 to 1.32% in 2023. o We reduced calls into call centers by 2 million from 2022 to 2023. Operational Efficiency: Across the company, we have identified opportunities to simplify and digitize our operations.
This starts at the top, with monthly executive reviews designed to monitor existing and emerging health and safety risks associated with our business and identify opportunities for training and other mitigation programs. As a standard practice, we maintain environmental, health, and safety compliance programs, including ongoing safety training for our field technicians.
Together, they provide a framework for identifying, controlling and reducing risks. As a standard practice , we maintain environmental, health, and safety compliance programs, including ongoing safety training for our field technicians. New Headquarters We relocated our headquarters from Norwalk, Connecticut to Dallas, Texas in August 2023.
We provide data, video, and voice services to customers over both architectures. Additionally, fixed wireless broadband (FWB) is part of our broadband strategy and is deployed for some business ethernet services. FWB is delivered by the use of an antenna at a Frontier base location and another antenna at the customer location. Competition Competition within the communications industry is intense.
Additionally, we also provide service using fixed wireless broadband and which is deployed for some business ethernet services. Competition Competition within the wireline communications industry is intense. Technological advances as well as regulatory and legislative changes have enabled a wide range of historically non-traditional communications service providers to compete with traditional providers such as Frontier.
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Revenue by Product Revenue by Customer Revenue by Technology 2022 was a pivotal year for Frontier.
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Consumer Our consumer customers are residential customers in single or multi-family units. We provide broadband, video, voice and other value-added services and products to our consumer customers over both fiber and copper-based networks.
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We have met or exceeded our targets for fiber locations constructed in 2020 and 2021: o Fiber locations constructed in 2020 reached broadband penetration of 22% and 31% after 12 and 24 months, respectively. o Fiber locations constructed in 2021 reached broadband penetration of 18% after 12 months.
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Larger enterprise business services include a complete portfolio of ethernet services, dedicated Internet, software defined wide area network (“SDWAN”), managed Wi-Fi, traditional circuit-based data services, and optical transport services. These services are all supported by 24/7 technical support and an advanced network operations center.
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Expansion fiber penetration meeting or exceeding targets  Customer Experience: We are focused on delivering an exceptional experience for our customers.
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We have expanded and enhanced our fiber-optic and copper transport systems to support increasing demand for high bandwidth transport services. Our core fiber network is currently being upgraded to support up to 400 Gbps and in the future we believe will be capable of 800 Gbps and higher with limited additional investment.
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Consumer Our consumer customers are residential customers in single or multiple dwelling units.
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State regulatory commissions generally exercise jurisdiction over intrastate telecommunications services and the facilities used to provide, originate, or terminate those services. Most of our local exchange companies operate as incumbent carriers in the states in which they operate and are certified in those states to provide local telecommunications services.
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Services that we offer to our SMB and larger enterprise customers include broadband, ethernet, traditional circuit-based services, software defined wide area network (“SDWAN”), managed Wi-Fi and cloud IT solutions, voice, and Unified Communications as a Service (“UCaaS”), and Voice over Internet Protocol (“VoIP”). We also offer these customers advanced hardware and network solutions and services.
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The Company was required to complete the CAF II deployment by December 31, 2021.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs of December 31, 2022, approximately 69% of our total employees were represented by unions and were subject to collective bargaining agreements. The term of our collective bargaining agreements is typically three years and at any point in time we generally have several agreements under negotiation and extension.
Biggest changeThe term of our collective bargaining agreements is typically three years and at any point in time we generally have several agreements under negotiation and extension. Approximately 28% of our unionized employees are covered by collective bargaining agreements that are scheduled to expire in 2024. We cannot predict the outcome of negotiations of the collective bargaining agreements covering our employees.
The potential significant negative consequences on our financial condition and results of operations that could result from our substantial debt include: limitations on our ability to obtain additional debt or equity financing on favorable terms or at all; instances in which we are unable to comply with the covenants contained in our indentures and credit agreements or to generate cash sufficient to make required debt payments, which circumstances have the potential of accelerating the maturity of some or all of our outstanding indebtedness; the allocation of a substantial portion of our cash flow from operations to service our debt, thus reducing the amount of our cash flows available for other purposes, including capital expenditures that would otherwise improve our competitive position, results of operations or stock price; requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; compromising our flexibility to plan for, or react to, competitive challenges in our business and the telecommunications and industries; increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates, particularly given a portion of our indebtedness bears interest at variable rates, as well as to catastrophic events; and the possibility of being put at a competitive disadvantage with competitors who, relative to their size, do not have as much debt as we do, and competitors who may be in a more favorable position to access additional capital resources.
The potential significant negative consequences on our financial condition and results of operations that could result from our substantial debt include: limitations on our ability to obtain additional debt or equity financing on favorable terms or at all; instances in which we are unable to comply with the covenants contained in our indentures and credit agreements or to generate cash sufficient to make required debt payments, which circumstances have the potential of accelerating the maturity of some or all of our outstanding indebtedness; the allocation of a substantial portion of our cash flow from operations to service our debt, thus reducing the amount of our cash flows available for other purposes, including capital expenditures that would otherwise improve our competitive position, results of operations or stock price; requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; compromising our flexibility to plan for, or react to, competitive challenges in our business and the telecommunications industries; increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates, particularly given a portion of our indebtedness bears interest at variable rates, as well as to catastrophic events; and the possibility of being put at a competitive disadvantage with competitors who, relative to their size, do not have as much debt as we do, and competitors who may be in a more favorable position to access additional capital resources.
Additionally, the greater brand name recognition of some competitors may require us to price our services at lower levels in order to retain or obtain customers. Finally, the cost advantages and greater financial resources of some of these competitors may give them the ability to reduce their prices for an extended period of time if they so choose.
Additionally, the greater brand name recognition of some competitors may require 15 us to price our services at lower levels in order to retain or obtain customers. Finally, the cost advantages and greater financial resources of some of these competitors may give them the ability to reduce their prices for an extended period of time if they so choose.
We rely on network and information systems and other technology, and a disruption or failure of such networks, systems or technology as a result of cyber-attacks, malware, misappropriation of data or other malfeasance, as well as outages, accidental releases of information or similar events, may disrupt our business and materially impact our results of operations, financial condition and cash flows.
We rely on network and information systems and other technology, and a breach, disruption or failure of such networks, systems or technology as a result of cyber-attacks, malware, misappropriation of data or other malfeasance, as well as outages, accidental releases of information or similar events, may disrupt our business and materially impact our results of operations, financial condition and cash flows.
At this time, it is unknown how these regulations, regulatory oversight, or changes to these regulations will affect our operations or ability to compete in the future. FCC rulemakings and state regulatory proceedings, including those relating to Internet access offerings, could have a substantial adverse impact on our operations.
At this time, it is unknown how these regulations, regulatory oversight, or changes to these regulations will affect our operations or ability to compete in the future. 19 FCC rulemakings and state regulatory proceedings, including those relating to Internet access offerings, could have a substantial adverse impact on our operations.
As an owner and former owner of property, we are subject to environmental laws that could impose liability for the entire cost of cleanup at contaminated sites, including sites formerly owned by us or our predecessors, regardless of fault or the lawfulness of the activity that resulted in contamination.
As an owner and former owner of property, we are subject to environmental laws that could impose liability for the entire cost of cleanup at contaminated sites, including sites formerly owned or operated by us or our predecessors, regardless of fault or the lawfulness of the activity that resulted in contamination.
In the event it were to become necessary to seek alternative suppliers and vendors, we may be unable to obtain satisfactory replacement supplies, services, or utilities on economically-attractive terms, on a timely basis, or at all, which could increase costs or cause disruptions in our services.
In the event it were to become necessary to seek alternative suppliers and vendors, we may be unable to 18 obtain satisfactory replacement supplies, services, or utilities on economically-attractive terms, on a timely basis, or at all, which could increase costs or cause disruptions in our services.
Our information technology, networks, and infrastructure may be subject to damage, disruptions, or shutdowns due to cyber-attacks, malware, including ransomware or other information security breaches, employee or third-party error or malfeasance, power outages, communication or utility failures, systems failures, natural disasters, or other catastrophic events.
Likewise, our information technology, networks, and infrastructure may be subject to damage, disruptions, or shutdowns due to cyber-attacks, malware, including ransomware or other information security breaches, employee or third-party error or malfeasance, power outages, communication or utility failures, systems failures, natural disasters, or other catastrophic events.
Further, our network and information systems are subject to various risks related to third parties and other parties we may not fully control. We use encryption and authentication technology licensed from third parties to provide secure transmission of confidential information, including our business data and customer information.
Further, our network and information systems are subject to various risks related to our vendors, third parties and other parties we may not fully control. We use encryption and authentication technology licensed from third parties to provide secure transmission of confidential information, including our business data and customer information.
In addition, governmental initiatives to address climate change could, if adopted, restrict our operations, require us to make capital expenditures to comply with these initiatives, and increase our costs, all of which could impact our ability to compete.
In addition, governmental initiatives to address climate change could, if adopted, restrict our operations, require us to make capital expenditures to comply 17 with these initiatives, and increase our costs, all of which could impact our ability to compete.
Such volatility may affect our ability to access capital markets, which could lead to higher borrowing costs or other unattractive financing terms or, in some cases, the inability to fund ongoing operations.
Such volatility may affect our ability to access capital markets, which could lead to higher borrowing 13 costs or other unattractive financing terms or, in some cases, the inability to fund ongoing operations.
Many factors, which may be outside our control, may cause the market price of our common stock to fluctuate significantly, including those described elsewhere in the “Risk Factors” section, as well as the following: variations in our operating and financial performance and prospects from period to period; our quarterly or annual earnings or those of other companies in our industry compared to market expectations; the public’s reaction to our press releases, other public announcements, and filings with the SEC; market overhang due to substantial holdings by former creditors that may wish to dispose of our common stock; coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; market and industry perception of our success, or lack thereof, in pursuing our fiber expansion strategy; strategic actions by us or our competitors, such as acquisitions or restructurings; changes in laws or regulations which adversely affect our industry or us; changes in accounting standards, policies, guidance, interpretations, or principles; changes in senior management or key personnel; issuances, exchanges, or sales, or expected issuances, exchanges, or sales of our capital stock; adverse resolution of new or pending litigation against us; and changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
Many factors, which may be outside our control, may cause the market price of our common stock to fluctuate significantly, including those described elsewhere in the “Risk Factors” section, as well as the following: variations in our operating and financial performance and prospects from period to period; our quarterly or annual earnings or those of other companies in our industry compared to market expectations; the public’s reaction to our press releases, other public announcements, and filings with the SEC; market overhang due to substantial holdings by former creditors that may wish to dispose of our common stock; coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; market and industry perception of our success, or lack thereof, in pursuing our fiber expansion strategy; strategic actions by us or our competitors, such as acquisitions or restructurings; changes in laws or regulations which adversely affect our industry or us; changes in accounting standards, policies, guidance, interpretations, or principles; changes in senior management or key personnel; issuances, exchanges, or sales, or expected issuances, exchanges, or sales of our capital stock; adverse resolution of new or pending litigation against us; and changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events. 20 These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.
New labor agreements or the renewal of existing agreements may impose significant additional costs on us, which could adversely affect our financial condition and results of operations in the future. Climate change and increasingly stringent environmental laws, rules and regulations, and customer expectations, could adversely affect our business.
New labor agreements or the renewal of existing agreements may impose significant additional costs on us, which could adversely affect our financial condition and results of operations in the future. Climate change and increasingly stringent environmental laws, rules and regulations, and customer expectations and other environmental liabilities, could adversely affect our business.
Regulators will monitor and may launch compliance inquiries or investigations and if the Company is found to have failed to comply with its obligations it could result in reputational harm, enforcement actions, litigation, penalties, fines, settlements and/or operational and financial conditions being placed on the Company, any of which could materially and adversely affect our business. 20 Tax legislation may adversely affect our business and financial condition.
Regulators will monitor and may launch compliance inquiries or investigations and if the Company is found to have failed to comply with its obligations it could result in reputational harm, enforcement actions, litigation, penalties, fines, settlements and/or operational and financial conditions being placed on the Company, any of which could materially and adversely affect our business.
As the significance of the Internet expands, federal, state, and local governments may pass laws and adopt rules and regulations, including those directed at privacy, service quality or service rates, or apply existing laws and regulations to the Internet (including Internet access services), and related matters are under consideration in both federal and state legislative and regulatory bodies.
As the significance of the internet continues to expand and evolve, federal, state, and local governments may pass laws and adopt rules and regulations, including those directed at privacy, service quality or service rates, or apply existing laws and regulations to the internet (including internet access services), and related matters are under consideration in both federal and state legislative and regulatory bodies.
Under Internal Revenue Service (“IRS”) regulations, we are required to make minimum contributions to our pension plan annually, based upon, among other factors, the value of plan assets relative to the funding target. We made contributions of $176 million and $42 million to our pension plan in 2022 and 2021, respectively.
Under Internal Revenue Service (“IRS”) regulations, we are required to make minimum contributions to our pension plan annually, based upon, among other factors, the value of plan assets relative to the funding target. We made contributions of $134 million and $176 million to our pension plan in 2023 and 2022, respectively.
Our competitors include cable companies, wireless and wireline carriers, satellite, fiber “overbuilders” and OTT companies, many of which are subject to less regulation than we are. These entities may provide services that are competitive with the services that we offer or intend to introduce.
Our competitors include cable operators, wireless carriers, satellite providers, wireline carriers, fiber “overbuilders” and OTT video providers, many of which are subject to less regulation than we are. These entities may provide services that are competitive with the services that we offer or intend to introduce.
While we maintain security measures, disaster recovery plans and business continuity plans for our business and work to upgrade our existing technology systems and provide employee training around the cyber risks we face, these risks are constantly evolving and are challenging to mitigate. Like many companies, we are the subject of increasingly frequent cyber-attacks.
While we maintain security measures, disaster recovery plans and business continuity plans and work to upgrade our existing technology systems and provide employee training around the cyber risks we face, these risks are constantly evolving and are challenging to mitigate. Like many companies, we and our third party service providers are the subject of increasingly frequent cyber-attacks.
The RDOF program is less favorable to us than the CAF Phase II program was and results in a material reduction in our annual FCC funding, from approximately $313 million in annual support under CAF II in 2021 to approximately $37 million in annual support under RDOF beginning in early 2022.
We began receiving RDOF funding early in 2022. The RDOF program is less favorable to us than the CAF Phase II program was and resulted in a material reduction in our annual FCC funding, from approximately $313 million in annual support under CAF II in 2021 to approximately $37 million in annual support under RDOF beginning in early 2022.
Increasing frequency and intensity of rainfall and severe storms, flooding, wildfires, mudslides, sustained high wind events and freezing conditions, including related power outages, could impair our ability to build and maintain our network and lead to disruptions in our services, workforce, and supply chain. These changes could be severe and could negatively impact our operations.
Increasing frequency and intensity of rainfall and severe storms, flooding, wildfires, mudslides, sustained high wind events and freezing conditions, including related power outages, could impair our ability to build and maintain our network and lead to disruptions in our services, workforce, and supply chain.
General Risk Factors The ability to attract and retain key personnel is critical to the success of our business and may be affected by our emergence from bankruptcy. Our success depends in part upon key personnel. Qualified individuals are in high demand, and we may incur significant costs to attract them.
General Risk Factors The ability to attract and retain key personnel is critical to the success of our business. Our success depends in part upon key personnel. Qualified individuals are in high demand, and we may incur significant costs to attract them.
Our required contributions for plan years 2022 and 2021, calculated as of January 1 of the relevant year, were approximately $134 million and $172 million, respectively.
Our required contributions for plan years 2023 and 2022, calculated as of January 1 of the relevant year, were approximately $126 million and $134 million, respectively.
We cannot predict the outcome of negotiations of the collective bargaining agreements covering our employees. If we are unable to reach new agreements or renew existing agreements, employees subject to collective bargaining agreements may engage in strikes, work slowdowns or other labor actions, which could materially disrupt our ability to provide services.
If we are unable to reach new agreements or renew existing agreements, employees subject to collective bargaining agreements may engage in strikes, work slowdowns or other labor actions, which could materially disrupt our ability to provide services.
In addition, the FCC is reviewing CAF II carriers’ completion data and if the FCC determines that we did not satisfy our CAF II requirements we could be required to return a portion of the funds received and may be subject to certain other requirements and obligations.
In addition, the FCC is reviewing CAF II carriers’ completion data and if the FCC determines that we did not satisfy our CAF II requirements we could be required to return a portion of the funds received and may be subject to certain other fines, requirements and obligations, which could have an adverse impact on our financial condition.
As of December 31, 2022, we had indebtedness of approximately $9 billion of which approximately $8 billion was secured. We may also be able to incur substantial additional indebtedness in the future.
As of December 31, 2023, we had indebtedness of approximately $11 billion of which approximately $10 billion was secured. We may also be able to incur substantial additional indebtedness in the future.
The determination of the benefit from (or provision for) income taxes requires complex estimations and significant judgments concerning the applicable tax laws. If in the future any element of tax legislation changes the tax code for income taxes, it could affect our income tax position and we may need to adjust the benefit from (or provision for) income taxes accordingly.
If in the future any element of tax legislation changes the tax code for income taxes, it could affect our income tax position and we may need to adjust the benefit from (or provision for) income taxes accordingly.
As of December 31, 2022, economic uncertainty, inflationary pressures, the ongoing COVID-19 pandemic in the U.S. and globally, the ongoing war in Ukraine, rising interest rates and the expectations around the terminal target rate of the Federal Reserve continue to produce volatility in the debt and equity markets.
As of December 31, 2023, economic uncertainty, inflationary pressures, the ongoing war in Ukraine, the Israel-Hamas war, rising interest rates and the expectations around the terminal target rate of the Federal Reserve continue to produce volatility in the debt and equity markets.
If securities or industry analysts do not publish or cease publishing research or reports, or publish unfavorable research or reports, about us, our business, or our industry, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline. 21 The trading market for our common stock is influenced by the research and reports that industry or securities analysts may publish about us, our business, our industry, or our competitors.
If securities or industry analysts do not publish or cease publishing research or reports, or publish unfavorable research or reports, about us, our business, or our industry, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline.
We participated in the FCC’s RDOF Phase I auction and were awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia). We began receiving RDOF funding early in 2022.
The CAF II program and associated support ended as of December 31, 2021. We participated in the FCC’s RDOF Phase I auction and were awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia).
Through December 31, 2022, we had not experienced any significant disruptions in our supply chain; however, some of our business partners, have been impacted by COVID-related workforce absences and other disruptions which have affected our service levels and distribution of work. In particular, network electronics that require microchip processors have experienced supply chain constraints due to the global microchip shortage.
Through December 31, 2023, we had not experienced any significant disruptions in our supply chain; however, some of our business partners have been impacted by COVID-related workforce absences and other disruptions which have affected our service levels and distribution of work.
With this waiver, we are spreading the 2020 minimum required contribution over the five subsequent plan years, in addition to the minimum contributions owed for those plan years.
With this waiver, we are spreading the 2020 minimum required contribution over the five subsequent plan years, in addition to the minimum contributions owed for those plan years. We expect to make contributions to our pension plan in future years and the amount of required contributions for future years could be significant.
While we may seek to recoup or offset increased costs in whole or in part through customer price increases or by implementing offsetting cost reductions, we may be unable to do so.
We continue to monitor these impacts closely. If our costs continue to rise, we may experience losses and diminished margins. While we may seek to recoup or offset increased costs in whole or in part through customer price increases or by implementing offsetting cost reductions, we may be unable to do so.
While we select our employees and third-party business partners carefully, we do not control their actions, which could expose us to cyber-security and other risks.
While we select our employees and third-party business partners carefully, our ability to monitor these third parties is limited, which could expose us to cyber-security and other risks.
In addition, some of these competitors have less debt and are able to raise capital at a lower cost than we are able to.
Some of our competitors have market presence, engineering, technical, marketing, and financial capabilities which are substantially greater than ours. In addition, some of these competitors have less debt and are able to raise capital at a lower cost than we are able to.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. As a result, you may suffer a loss on your investment.
In addition, price volatility may be greater if the public float and trading volume of our common stock is low. As a result, you may suffer a loss on your investment. If there are substantial sales of shares of our common stock, the price of our common stock could decline.
We are actively pursuing awards of these stimulus funds, however, we continue to evaluate our opportunities as the process is complex and any awards that we ultimately receive under the IIJA may require significant up-front capital expenditures or other costs. 19 A portion of our total revenues are derived from switched access charges paid by other carriers for services we provide in originating intrastate and interstate long-distance traffic.
We are actively pursuing awards of these stimulus funds, however, we continue to evaluate our opportunities as the process is complex and any awards that we ultimately receive under the IIJA may require significant up-front capital expenditures or other costs.
Similarly, we rely on employees in our network operations centers, data centers and call centers to follow our procedures when handling sensitive information. Use of third-party technologies could also expose us to supply chain cybersecurity risks.
Similarly, we rely on employees in our network operations centers, data centers and call centers to follow our procedures when handling sensitive information.
Our negotiations with vendors, customers and business partners could also be negatively impacted if they deem us a credit risk as a result of our credit rating. 14 Economic uncertainty and volatility in the U.S. and global financial markets could limit our ability to access capital or increase the cost of capital needed to fund business operations, including our fiber expansion plans.
Economic uncertainty and volatility in the U.S. and global financial markets could limit our ability to access capital or increase the cost of capital needed to fund business operations, including our fiber expansion plans.
In addition, new capacity services for broadband technologies may permit our competitors to offer broadband data services to our customers throughout most or all of our service areas.
We may be unable to attract new or retain existing customers from cable companies due to their deployment of enhanced broadband and VoIP technology. In addition, new capacity services for broadband technologies may permit our competitors to offer broadband data services to our customers throughout most or all of our service areas.
Some of our competitors have materially larger scale than we do, and may, as a result, be better positioned than we are in such negotiations.
Some of our competitors have materially larger scale than we do, and may, as a result, be better positioned than we are in such negotiations. As a result of these factors, the cost of content acquisition may continue to increase faster than corresponding revenues which could result in lower profitability.
We also believe that wireless, cable, and other providers have increased their penetration of various services in our markets. We expect that competition will remain robust.
We also believe that wireless, cable, and other providers have increased their penetration of various services in our markets. We expect that competition will remain robust. Our revenue and cash flow will be adversely impacted if we cannot reverse our customer losses or continue to provide high-quality services.
In addition, our First Lien Notes and Second Lien Notes, as well as our subsidiary indebtedness, are rated below “investment grade” by independent rating agencies. This has resulted in higher borrowing costs for us. These rating agencies may lower our debt ratings further, if in the rating agencies’ judgment such an action is appropriate.
In addition, our First Lien Notes and Second Lien Notes, as well as a portion of our subsidiary indebtedness (other than a portion of the securitized Class A and Class B notes), are rated below “investment grade” by independent rating agencies. This has resulted in higher borrowing costs for us.
Volatility in our asset values, liability calculations, or returns may impact the costs of maintaining our pension plan and our future funding requirements. Any future contribution to our pension plan could be material and could have a material adverse effect on our liquidity by reducing cash flows.
Volatility in our asset values, liability calculations, or returns may impact the costs of maintaining our pension plan and our future funding requirements.
While we seek to maintain and grow our business with these customers, we face significant competition for this wholesale business. If we fail to maintain our grow this business, our revenues and results of operations could be materially and adversely affected. A significant portion of our workforce is represented by labor unions.
If we fail to maintain our grow this business, our revenues and results of operations could be materially and adversely affected. A significant portion of our workforce is represented by labor unions. As of December 31, 2023, approximately 68% of our total employees were represented by unions and were subject to collective bargaining agreements.
The most critical assumptions are the discount rate, the long-term expected return on assets and mortality tables. Other assumptions include salary increases, lump sum payments, and retirement age.
Pension costs and obligations are determined using actual results as well as actuarial valuations that involve several assumptions. The most critical assumptions are the discount rate, the long-term expected return on assets and lump sum conversion interest rates. Other assumptions include salary increases, mortality, and retirement age.
We cannot predict when or how these matters will be decided or the effect on our subsidy or switched access revenues. However, future reductions in our subsidy or switched access revenues may directly affect our profitability and cash flows as those regulatory revenues do not have an equal level of associated variable expenses.
However, future reductions in our subsidy or switched access revenues may directly affect our profitability and cash flows as those regulatory revenues do not have an equal level of associated variable expenses. We are also required to contribute to the Universal Service Fund (“USF”) and the FCC allows us to recover these contributions through a USF surcharge on customers’ bills.
A further lowering of a rating would likely increase our future borrowing costs and reduce our access to capital.
These rating agencies may lower our debt ratings further, if in the rating agencies’ judgment such an action is appropriate. A further lowering of a rating would likely increase our future borrowing costs and reduce our access to capital.
The loss, incapacity, or unavailability for any reason of key members of our management team could have a material adverse impact on our business. ‎ 22 Item 1B. Unresolved Staff Comments None.
The loss, incapacity, or unavailability for any reason of key members of our management team could have a material adverse impact on our business. The risks to attracting and retaining key personnel may be exacerbated by inflationary pressures on employee wages and benefits.
During fiscal 2022, we began to experience the impact of inflation, including upward pressure on the cost of materials, labor, fuel and electricity, and other items that are critical to our business. We continue to monitor these impacts closely. If our costs continue to rise, we may experience losses and diminished margins.
Inflationary pressures on costs and disruptions in our supply chain, may adversely impact our financial condition or results of operations, including our fiber expansion plans. During fiscal 2023, we continued to experience the impact of inflation, including upward pressure on the cost of materials, labor, fuel and electricity, and other items that are critical to our business.
The rates we can charge for switched access are regulated by the FCC and state regulatory agencies and could be further reduced in the future. Certain states also have their own open proceedings to address reform to originating intrastate access charges, other intercarrier compensation, and state universal service funds.
Certain states also have their own open proceedings to address reform to originating intrastate access charges, other intercarrier compensation, and state universal service funds. We cannot predict when or how these matters will be decided or the effect on our subsidy or switched access revenues.
A portion of Frontier’s total revenues ($54 million, or 1%, in 2022 and $333 million, or 5%, in 2021) are derived from federal and state subsidies for rural and high-cost support including CAF II and RDOF and also including Federal High Cost support and various state subsidies. The CAF II program and associated support ended as of December 31, 2021.
Risks Related to Regulation and Oversight Changes in federal or state regulations may reduce subsidy and other revenues we receive. A portion of Frontier’s total revenues ($75 million, or 1%, in 2023 and $54 million, or 1%, in 2022) are derived from federal and state subsidies for rural and high-cost support including RDOF.
As a result of these factors, the cost of content acquisition may continue to increase faster than corresponding revenues which could result in lower profitability. ‎ 18 We are subject to a significant amount of litigation, which could require us to pay significant damages or settlements.
We are subject to a significant amount of litigation, which could require us to pay significant damages or settlements.
Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could adversely affect our earnings and equity and increase our pension funding requirements. Pension costs and obligations are determined using actual results as well as actuarial valuations that involve several assumptions.
Any future contribution to our pension plan could be material and could have a material adverse effect on our liquidity by reducing cash flows. 14 Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could adversely affect our earnings and equity and increase our pension funding requirements.
Any resulting inability to attract new or retain existing customers could adversely impact our business and results of operations in a material manner. 17 Our business is sensitive to continued relationships with our wholesale customers. We have substantial business relationships with other communications carriers for which we provide service.
Our business is sensitive to continued relationships with our wholesale customers. We have substantial business relationships with other communications carriers for which we provide service. While we seek to maintain and grow our business with these customers, we face significant competition for this wholesale business.
In addition, enhancements to competitors’ product offerings may influence our customers to consider other service providers, such as cable operators, CLECs, OTT or wireless providers. We may be unable to attract new or retain existing customers from cable companies due to their deployment of enhanced broadband and VoIP technology.
For 16 example, as service providers continue to invest in 5G and low earth orbit satellite networks and services, their 5G services could reduce demand for our network services. Such enhancements to competitors’ product offerings may influence our customers to consider other service providers, such as cable operators, CLECs, OTT or wireless providers.
Removed
Further, we have adopted certain provisions of the American Rescue Plan Act, or ARPA, effective for 2019 and 2020, which decreased the minimum required contributions for those years. 15 We expect to make contributions to our pension plan in future years and the amount of required contributions for future years could be significant.
Added
Our negotiations with vendors, customers and business partners could also be negatively impacted if they deem us a credit risk as a result of our credit rating.
Removed
Inflationary pressures on costs and disruptions in our supply chain, resulting from the COVID-19 pandemic, the global microchip shortage, or otherwise, may adversely impact our financial condition or results of operations, including our fiber expansion plans.
Added
Our business involves the receipt, storage, and transmission of confidential information about our customers and others, including sensitive personal, account and payment card information, confidential information about our employees and suppliers, and other sensitive information about our company, such as our business plans, transactions, financial information, and intellectual property.
Removed
Our revenue and cash flow will be adversely impacted if we cannot reverse our customer losses or continue to provide high-quality services. 16 Some of our competitors have market presence, engineering, technical, marketing, and financial capabilities which are substantially greater than ours.
Added
Cyberattacks against companies like ours have increased in frequency and potential harm over time, and the methods used to gain unauthorized access constantly evolve, making it increasingly difficult to anticipate, prevent, and/or detect incidents successfully in every instance.
Removed
Approximately 27% of our unionized employees are covered by collective bargaining agreements that are scheduled to expire in 2023. In addition, approximately 11% of the unionized workforce are covered by collective bargaining agreements that are on extensions from the dates on which they originally expired in 2021 or 2022.
Added
Use of vendors and third-party technologies could also expose us to supply chain cybersecurity risks, and we may not have accurate or complete information about the risks that third-party service providers face or the security of their systems.
Removed
Risks Related to Regulation and Oversight Changes in federal or state regulations may reduce the switched access charge and subsidy revenues we receive.
Added
Security incidents result from the actions of a wide variety of actors with a wide range of motives and expertise, such as traditional hackers, personnel or the personnel of third parties, sophisticated nation-states and nation-state-supported actors.
Removed
The NTIA has not yet determined each states’ funding allocation, which is dependent on the completion of the FCC’s Broadband Data Collection mapping initiative. We are closely tracking implementation of the BEAD program and anticipate a significant amount of funding will be available for awards in our footprint.
Added
We are required to expend significant resources in an effort to protect against security incidents and may be required or choose to spend additional resources or modify our business activities, particularly where required by applicable data privacy and security laws or regulations or industry standards.
Removed
We are also required to contribute to the Universal Service Fund (“USF”) and the FCC allows us to recover these contributions through a USF surcharge on customers’ bills. This surcharge accounted for $83 million of revenue in the four months ended April 30, 2021.
Added
While we have developed systems and processes designed to protect the integrity, confidentiality and security of the confidential and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers implement will be effective in preventing security incidents, disruptions, cyberattacks, or other similar events.
Removed
If there are substantial sales of shares of our common stock, the price of our common stock could decline.
Added
Many of these technological changes may displace or reduce demand for certain of our services, enable the development of competitive products or services, enable customers to reduce or bypass use of our networks or reduce our profit margins.
Added
Any resulting inability to attract new or retain existing customers could adversely impact our business and results of operations in a material manner. Laws and regulations relating to the handling of privacy and data protection may result in increased costs, legal claims, fines against us, or reputational damage.
Added
We process, store, and transmit large amounts of data, including the personal information of our customers.
Added
Ongoing increases in the potential for misuse of personal information, the public’s awareness of the importance of safeguarding personal information, and the volume of legislation and regulations that have been adopted or is being considered regarding the protection, privacy, and security of personal information have resulted in increases to our information-related risks.
Added
Many states and local authorities have enacted or considered legislative or other actions that would impose restrictions on our ability to collect, use and disclose certain consumer information, particularly with regard to our broadband Internet business.
Added
These new privacy laws and others that we expect to be developed and enacted going forward will impose additional data protection obligations and potential liability on companies such as ours doing business in those states.
Added
We have incurred and will continue to incur significant implementation costs to ensure compliance with Federal and state privacy laws and their related regulations, including managing the complexity of laws that vary from state to state.
Added
Both federal and state governments are considering additional privacy laws and regulations, which, if passed, could further impact our business, strategies, offerings, and initiatives and cause us to incur further costs.
Added
Any actual or perceived failure to comply with data privacy laws or regulations, or related contractual or other obligations, or any perceived privacy rights violation, could lead to investigations, claims, and proceedings by governmental entities and private parties, damages for contract breaches, and other significant costs, penalties, and other liabilities, as well as harm to our reputation and market position.
Added
These changes could be severe and could negatively impact our operations, including damaging our network infrastructure, which could result in increased costs and loss of revenue. We may incur significant costs to prepare for, respond to, and mitigate the impact of climate change on our infrastructure and operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur gross investment in property, by category, as of December 31, 2022, was as follows: ($ in millions) Land $ 244 Buildings and leasehold improvements 1,212 General support 290 Central office/electronic circuit equipment 1,807 Poles 797 Cable, fiber, and wire 5,756 Conduit 1,404 Materials and supplies 546 Construction work in progress 1,130 Total $ 13,186 In connection with our ongoing operational and cost savings initiatives, we have undertaken a review of our real estate portfolio, including leased facilities, and are seeking to consolidate our footprint and reduce our property portfolio where economically and operationally beneficial.
Biggest changeOur gross investment in property, by category, as of December 31, 2023, was as follows: ($ in millions) Land $ 243 Buildings and leasehold improvements 1,221 General support 427 Central office/electronic circuit equipment 2,467 Poles 915 Cable, fiber, and wire 7,718 Conduit 1,416 Materials and supplies 594 Construction work in progress 1,323 Total $ 16,324 In connection with our ongoing operational and cost savings initiatives, we have undertaken a review of our real estate portfolio, including leased facilities, and are seeking to consolidate our footprint and reduce our property portfolio where economically and operationally beneficial.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For more information regarding pending and threatened legal actions and proceedings see Note 22 - ‘‘Commitments, Contingencies, and Guarantees’’ to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Biggest changeFor more information regarding pending and threatened legal actions and proceedings see Note 21 - ‘‘Commitments, Contingencies, and Guarantees’’ to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
In addition, we are party to various other legal proceedings (including individual, class and putative class actions as well as federal and state governmental investigations) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, taxes and surcharges, consumer protection, trademark, copyright and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers.
Legal Proceedings We are party to various legal proceedings (including individual, class and putative class actions as well as federal and state governmental investigations) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, taxes and surcharges, consumer protection, trademark, copyright and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers.
Removed
In 2014, Citynet, a competitive local exchange carrier doing business in West Virginia, filed a qui tam action in federal court in the District Court for the Southern District of West Virginia against Frontier West Virginia, Inc. and others on behalf of the U.S. Government concerning billing practices relating to a government grant.
Removed
The complaint became public in 2016 after the U.S. Government declined to participate in the case and instead allowed Citynet to pursue the claims on behalf of the U.S. On December 6, 2022, the parties reached a settlement in principle. The parties are in the process of attempting to finalize all the terms of an agreement.
Removed
We have accrued an amount for potential penalties that we deem to be probable and reasonably estimable, but we do not expect that any potential penalties, if ultimately incurred, will be material.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeMine Safety Disclosures Not applicable. ‎ 23 Information About Our Executive Officers The table below presents the names, ages, and positions of our current executive officers as of February 24, 2023: Name Age Current Position and Officer Scott Beasley 42 Executive Vice President, Chief Financial Officer Veronica Bloodworth 52 Executive Vice President, Chief Network Officer Ettienne Brandt 46 Executive Vice President, Business Vishal Dixit 43 Executive Vice President, Strategy & Wholesale Alan Gardner 63 Executive Vice President, Chief People Officer John Harrobin 55 Executive Vice President, Consumer Nick Jeffery 55 President & Chief Executive Officer Erin Kurtz 44 Executive Vice President, Chief Communications Officer William McGloin 52 Chief Accounting Officer & Controller Charlon McIntosh 48 Executive Vice President, Chief Customer Operations Officer Mark D.
Biggest changeMine Safety Disclosures Not applicable. ‎ 23 Information About Our Executive Officers The table below presents the names, ages, and positions of our current executive officers as of February 23, 2024: Name Age Current Position and Officer Scott Beasley 43 Executive Vice President, Chief Financial Officer Veronica Bloodworth 53 Executive Vice President, Chief Network Officer Ettienne Brandt 47 Executive Vice President, Business Vishal Dixit 44 Executive Vice President, Strategy & Wholesale Alan Gardner 64 Executive Vice President, Chief People Officer John Harrobin 56 Executive Vice President, Consumer Nick Jeffery 56 President & Chief Executive Officer Erin Kurtz 45 Executive Vice President, Chief Communications Officer William McGloin 53 Chief Accounting Officer & Controller Charlon McIntosh 49 Executive Vice President, Chief Customer Operations Officer Mark D.
McGloin has served at Frontier for over eight years, most recently as Frontier’s Vice President, Controller, since 2018 and as Vice President, Assistant Controller since 2014. Prior to joining Frontier, he spent 17 years at KPMG’s audit practice where he completed a three-year rotation in the Department of Professional Practice (DPP) in the National Office.
McGloin has served at Frontier for over nine years, most recently as Frontier’s Vice President, Controller, since 2018 and as Vice President, Assistant Controller since 2014. Prior to joining Frontier, he spent 17 years at KPMG’s audit practice where he completed a three-year rotation in the Department of Professional Practice (DPP) in the National Office.
Nielsen 58 Executive Vice President, Chief Legal and Regulatory Officer Melissa Pint 48 Executive Vice President, Chief Digital Information Officer John Stratton 62 Executive Chairman There is no family relationship between the directors or executive officers.
Nielsen 59 Executive Vice President, Chief Legal and Regulatory Officer Melissa Pint 49 Executive Vice President, Chief Digital Information Officer John Stratton 63 Executive Chairman There is no family relationship between the directors or executive officers.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe estimate the total number of stockholders to be higher as a number of our shares are held by brokers or dealers for their customers in street name.
Biggest changeAs of February 21, 2024, the approximate number of security holders of record of our common stock was 330. We estimate the total number of stockholders to be higher as a number of our shares are held by brokers or dealers for their customers in street name.
Stock Performance Graph The following chart provides a comparison of the cumulative total return of our common stock to the S&P MidCap 400 Index and the S&P 500 Telecom Services Index for the period from May 4, 2021, the day our common stock was listed and began trading on the Nasdaq, through December 31, 2022.
Stock Performance Graph The following chart provides a comparison of the cumulative total return of our common stock to the S&P MidCap 400 Index and the S&P 500 Telecom Services Index for the period from May 4, 2021, the day our common stock was listed and began trading on the Nasdaq, through December 31, 2023.
Indexed Monthly Stock Price Close Source: FactSet 27 INDEXED Base RETURN Date Year Ending Company / Index 5/21 12/22 Frontier Communications Parent, Inc. 100 94.55 S&P Midcap 400 Index 100 91.27 S&P 500 Telecom Services Index 100 80.41 The stock performance depicted in the graph above is not to be relied upon as indicative of future performance.
Indexed Monthly Stock Price Close Source: FactSet 27 INDEXED Base RETURN Date Year Ending Company / Index 5/21 12/23 Frontier Communications Parent, Inc. 100 94.03 S&P Midcap 400 Index 100 101.85 S&P 500 Telecom Services Index 100 72.81 The stock performance depicted in the graph above is not to be relied upon as indicative of future performance.
Item 5. Market for Registrant's Common Equity; Related Stockholder Matters, and Issuer Purchases of Equity Securities Common Stock Information Our common stock has been traded on the Nasdaq Global Select Market under the symbol “FYBR” since May 4, 2021.
Item 5. Market for Registrant's Common Equity; Related Stockholder Matters, and Issuer Purchases of Equity Securities Common Stock Information Our common stock is currently traded on the Nasdaq Global Select Market under the symbol “FYBR”. We paid no cash dividends to common shareholders in either of 2023 and 2022.
Removed
On the Effective Date (i) shares of Old Frontier’s issued and outstanding common stock immediately prior to the Effective Date were canceled, and (ii) reorganized Frontier, in reliance on the exemption from registration under the Securities Act provided by Section 1145 of the Bankruptcy Code, issued approximately 244,401,000 shares of common stock to holders of certain senior notes claims under the Plan.
Removed
We paid no cash dividends to common shareholders in either of 2022 and 2021. As of February 21, 2023, the approximate number of security holders of record of our common stock was 298.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

84 edited+54 added−51 removed22 unchanged
Biggest changeThe increase in consumer copper broadband churn was driven by the impact of copper to fiber migration activities in newly built fiber areas, the rationalization of our copper acquisition strategy, and adverse weather. ‎ 31 Financial Results Non-GAAP Successor Predecessor Combined For the year ended For the eight months For the four months For the year ended December 31, ended December 31, ended April 30, December 31, ( $ in millions ) 2022 2021 2021 2021 {Link to QDA} Data and Internet services $ 3,390 $ 2,224 $ 1,125 $ 3,349 Voice services 1,498 1,091 647 1,738 Video services 520 397 223 620 Other 325 246 125 371 Revenue from contracts with customers 5,733 3,958 2,120 6,078 Subsidy and other revenue 54 222 111 333 Revenue 5,787 4,180 2,231 6,411 - Operating expenses: Cost of service 2,169 1,532 830 2,362 Selling, general and administrative expenses 1,745 1,131 537 1,668 Depreciation and amortization 1,182 734 506 1,240 Restructuring costs and other charges 99 21 7 28 Total operating expenses $ 5,195 $ 3,418 $ 1,880 $ 5,298 - Operating income 592 762 351 1,113 0 Consumer 3,116 2,125 1,133 3,258 Business and wholesale 2,617 1,833 987 2,820 Revenue from contracts with customers $ 5,733 $ 3,958 $ 2,120 $ 6,078 Fiber revenue 2,769 1,814 903 2,717 Copper revenue 2,964 2,144 1,140 3,284 Non-network specific revenue - - 77 77 Revenue from contracts with customers $ 5,733 $ 3,958 $ 2,120 $ 6,078 REVENUE The table below presents our revenue by technology for the periods indicated: Non-GAAP Successor Combined For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2022 2021 (Decrease) (Decrease) Fiber $ 2,769 $ 2,717 $ 52 2 % Copper 2,964 3,284 (320) (10) % Other - 77 (77) (100) % ' (2) Revenue from contracts with customers (1) 5,733 6,078 (345) (6) % Subsidy revenue 54 333 (279) (84) % Total revenue $ 5,787 $ 6,411 $ (624) (10) % (1) Includes $63 million of lease revenue for both years ended December 31, 2022 and 2021.
Biggest changeGoing forward, we expect moderate movements in ARPC as our customer mix becomes more weighted towards broadband services. ‎ 31 Financial Results For the year ended For the year ended December 31, December 31, ( $ in millions ) 2023 2022 Data and Internet services $ 3,534 $ 3,390 Voice services 1,373 1,498 Video services 430 520 Other 339 325 Revenue from contracts with customers 5,676 5,733 Subsidy and other revenue 75 54 Revenue 5,751 5,787 Operating expenses: Cost of service 2,125 2,169 Selling, general and administrative expenses 1,646 1,745 Depreciation and amortization 1,415 1,182 Restructuring costs and other charges 73 99 Total operating expenses $ 5,259 $ 5,195 Operating income 492 592 Consumer 3,097 3,116 Business and wholesale 2,579 2,617 Revenue from contracts with customers $ 5,676 $ 5,733 Fiber revenue 2,997 2,769 Copper revenue 2,679 2,964 Revenue from contracts with customers $ 5,676 $ 5,733 REVENUE The table below presents our revenue by technology for the periods indicated: For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2023 2022 (Decrease) (Decrease) Fiber $ 2,997 $ 2,769 $ 228 8 % Copper 2,679 2,964 (285) (10) % Revenue from contracts with customers (1) 5,676 5,733 (57) (1) % Subsidy revenue 75 54 21 39 % Total revenue $ 5,751 $ 5,787 $ (36) (1) % (1) Includes $62 million and $63 million of lease revenue for the years ended December 31, 2023 and 2022, respectively.
Pension settlement During the year ended December 31, 2022, lump sum pension settlement payments to terminated or retired individuals amounted to $200 million, which exceeded the settlement threshold of $175 million, and as a result, we recognized non-cash settlement charges totaling $55 million for 2022.
During the year ended December 31, 2022, lump sum pension settlement payments to terminated or retired individuals amounted to $200 million, which exceeded the settlement threshold of $175 million, and as a result, we recognized non-cash settlement charges totaling $55 million for 2022.
See Note 7 of the Notes to Consolidated Financial Statements for additional information. Asset Impairments We review long-lived assets to be held and used, including customer lists, finite-lived intangible assets, and long-lived assets to be disposed of for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
See Note 7 of the Notes to Consolidated Financial Statements for additional information. 40 Asset Impairments We review long-lived assets to be held and used, including customer lists, finite-lived intangible assets, and long-lived assets to be disposed of for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Actual income taxes could vary from these estimates due to future changes in governing law or review by taxing authorities. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.
Actual income taxes could vary from these estimates due to future changes in governing law or review by taxing authorities. 41 We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.
Our estimates are based on assumptions and other considerations, including payment history, customer financial performance, carrier billing disputes and aging analysis. Our estimation process includes general and specific reserves and varies by customer category. In 2022 and 2021, we had no “critical estimates” related to bankruptcies of communications companies or any other significant customers.
Our estimates are based on assumptions and other considerations, including payment history, customer financial performance, carrier billing disputes and aging analysis. Our estimation process includes general and specific reserves and varies by customer category. In 2023 and 2022, we had no “critical estimates” related to bankruptcies of communications companies or any other significant customers.
As of December 31, 2022, and 2021, we utilized an estimation technique that is based upon a settlement model (Bond:Link) that permits us to closely match cash flows to the expected payments to participants. This rate can change from year-to-year based on market conditions that affect corporate bond yields.
As of December 31, 2023, and 2022, we utilized an estimation technique that is based upon a settlement model (Bond:Link) that permits us to closely match cash flows to the expected payments to participants. This rate can change from year-to-year based on market conditions that affect corporate bond yields.
For a discussion of the four months ended April 30, 2021 and the eight months ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.
For a discussion of the year ended December 31, 2022, compared to the four months ended April 30, 2021, and the eight months ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
In the following table, we show the estimated sensitivity of our pension and other postretirement benefit plan liabilities to a 25 basis point change in the discount rate as of December 31, 2022: ($ in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Pension plans Projected benefit obligation $ (48) $ 50 Other postretirement plans Accumulated postretirement benefit obligation $ (15) $ 16 In developing the expected long-term rate of return assumption, we considered published surveys of expected market returns, 10 and 20 year actual returns of various major indices, and our own historical 5-year, 10-year and 20-year investment returns.
In the following table, we show the estimated sensitivity of our pension and other postretirement benefit plan liabilities to a 25 basis point change in the discount rate as of December 31, 2023: ($ in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Pension plans Projected benefit obligation $ (48) $ 50 Other postretirement plans Accumulated postretirement benefit obligation $ (13) $ 13 In developing the expected long-term rate of return assumption, we considered published surveys of expected market returns, 10 and 20 year actual returns of various major indices, and our own historical 5-year, 10-year and 20-year investment returns.
For 2023, we expect to assume a rate of return of 7.50%. Our pension plan assets are valued at fair value as of the measurement date . For additional information regarding our pension and other postretirement benefits (see Note 20 to the Notes to Consolidated Financial Statements). Income Taxes We file a consolidated federal income tax return.
For 2024, we expect to assume a rate of return of 7.50%. Our pension plan assets are valued at fair value as of the measurement date . For additional information regarding our pension and other postretirement benefits (see Note 19 to the Notes to Consolidated Financial Statements). Income Taxes We file a consolidated federal income tax return.
The expected long-term rate of return on plan assets is based on an asset allocation assumption of 25% in long-duration fixed income securities, and 75% in equity securities and other investments. We review our asset allocation at least annually and make changes when considered appropriate. Our asset return assumption is made at the beginning of our fiscal year.
The expected long-term rate of return on plan assets is based on an asset allocation assumption of 35% in long-duration fixed income securities, and 65% in equity securities and other investments. We review our asset allocation at least annually and make changes when considered appropriate. Our asset return assumption is made at the beginning of our fiscal year.
The latest study was completed in the fourth quarter of 2022 and did not result in any significant changes in remaining lives for any of our asset categories. A one-year decrease in the estimated useful lives of our property, plant, and equipment would result in an increase of approximately $92 million to depreciation expense.
The latest study was completed in the fourth quarter of 2023 and did not result in any significant changes in remaining lives for any of our asset categories. A one-year decrease in the estimated useful lives of our property, plant, and equipment would result in an increase of approximately $128 million to depreciation expense.
We define churn as the number of consumer customer deactivations during the month divided by the number of consumer customers at the beginning of the month and utilize the average of each monthly churn in the period. Management believes that consumer customer counts and average monthly revenue per customer are important factors in evaluating our consumer customer trends.
We define churn as the number of consumer customer deactivations during the month divided by the number of consumer customers at the beginning of the month and utilize the average of each monthly churn in the period. Management believes that consumer customer counts, ARPC, ARPU, and consumer customer churn are important factors in evaluating our consumer customer trends.
Analysis of Cash Flows As of December 31, 2022, we had unrestricted cash and cash equivalents aggregating $322 million. For the year ended December 31, 2022, we used cash flow from operations, cash on hand, and cash from borrowings principally to fund our cash investing and financing activities, which were primarily short-term investments and capital expenditures.
Analysis of Cash Flows As of December 31, 2023, we had unrestricted cash and cash equivalents aggregating $1,125 million. For the year ended December 31, 2023, we used cash flow from operations, cash on hand, and cash from borrowings principally to fund our cash investing and financing activities, which were primarily short-term investments and capital expenditures.
We are utilizing a discount rate of 5.50% as of December 31, 2022 for our qualified pension plan, compared to rates of 2.90% and 2.60% in 2021 and 2020, respectively. The discount rate for postretirement plans as of December 31, 2022, was 5.50% compared to 3.00% in 2021 and 2.60%/2.80% in 2020.
We are utilizing a discount rate of 5.20% as of December 31, 2023, for our qualified pension plan, compared to rates of 5.50% and 2.90% in 2022 and 2021, respectively. The discount rate for postretirement plans as of December 31, 2023, was 5.20% compared to 5.50% in 2022 and 3.00% in 2021.
Our reorganization value is derived from an estimate of enterprise value. Enterprise value represents the estimated fair value of an entity’s long-term debt and shareholders’ equity. In support of the Plan, the enterprise value of the Successor was estimated to be approximately $12.5 billion.
Reorganization value represents the fair value of the Successor’s assets before considering liabilities. Our reorganization value is derived from an estimate of enterprise value. Enterprise value represents the estimated fair value of an entity’s long-term debt and shareholders’ equity. In support of the Plan, the enterprise value of the Successor was estimated to be approximately $12.5 billion.
We believe that a fiber network has competitive advantages to be able to meet this growing demand, including faster download speeds, faster upload speeds, and lower latency levels than alternative broadband services. In August 2021, we announced our plan to accelerate our fiber build to reach 10 million total fiber passings.
We believe that a fiber network has competitive advantages to be able to meet this growing demand, including faster download speeds, faster upload speeds, and lower latency levels than alternative broadband services. In August 2021, we announced our plan to pass 10 million total locations with fiber.
Our primary sources of liquidity are cash flows from operations, cash on hand and borrowing capacity under our $900 million Revolving Facility (as reduced by $217 million of revolver Letters of Credit). In addition, potential future sources of capital may include debt and equity (or equity-linked) financing.
Our primary sources of liquidity are cash flows from operations, cash on hand and borrowing capacity under our $900 million Revolving Facility (as reduced by $358 million of revolver Letters of Credit). In addition, potential future sources of capital may include debt and equity (or equity-linked) financing and the $500 million Variable Funding Notes facility.
Our Amended and Restated Credit Agreement, including our $1.45 billion Term Loan Facility and $900 million Revolving Facility, and the indentures governing our outstanding secured First Lien Notes and Second Lien Notes are described in detail in Note 10 to the financial statements contained in Part I of this report.
Our Amended and Restated Credit Agreement, including our $1.4 billion Term Loan Facility and $900 million Revolving Facility, the indentures governing our outstanding secured First Lien Notes and Second Lien Notes, and the indentures governing our Fiber Term Notes and Variable Funding Notes are described in detail in Note 9 to the financial statements contained in Part I of this report.
A summary of certain covenants and our borrowing capacity is provided below . 39 We have assessed our current and expected funding requirements and our current and expected sources of liquidity, and have determined, based on our forecasted financial results and financial condition as of December 31, 2022, that our operating cash flows and existing cash balances, will be adequate to finance our working capital requirements, fund capital expenditures, make required debt interest and principal payments, pay taxes and make other payments over the next twelve months.
We have assessed our current and expected funding requirements and our current and expected sources of liquidity, and have determined, based on our forecasted financial results and financial condition as of December 31, 2023, that our operating cash flows and existing cash balances, will be adequate to finance our working capital requirements, fund capital expenditures, make required debt interest and principal payments, pay taxes and make other payments over the next twelve months.
This network expansion is designed to provide faster, symmetrical broadband speeds, and provide customer and revenue growth opportunities for fiber broadband and certain network access products like ethernet. This initiative will create opportunities for us to provide more fiber-based services to our customers .
Our fiber expansion strategy is expected to positively impact data and Internet services. This network expansion is designed to provide faster, symmetrical broadband speeds and provide customer and revenue growth opportunities for fiber broadband and certain network access products like ethernet. We believe this initiative will create opportunities for us to provide more fiber-based services to our customers.
As of December 31, 2022, the unfunded benefit obligation for these plans recorded on our consolidated balance sheet was $1,083 million. During 2022, we contributed $176 million to these plans in cash and recorded $82 million of operating expense before capitalization, and $468 million of net non-operating income.
As of December 31, 2023, the unfunded benefit obligation for these plans recorded on our consolidated balance sheet was $735 million. During 2023, we contributed $176 million to these plans in cash and recorded $59 million of operating expense before capitalization, and $209 million of net non-operating income.
Given the long-term nature of our fiber build, as of December 31, 2022, we have invested $1,750 million cash in short-term investments to improve interest income, while preserving funding flexibility. Capital Expenditures For the year ended December 31, 2022 and 2021, our capital expenditures were $2,738 million and Non-GAAP combined capital expenditures were $1,705 million, respectively.
Given the long-term nature of our fiber build, as of December 31, 2023, we have invested $1,075 million cash in short-term investments to improve interest income, while preserving funding flexibility. Capital Expenditures For the years ended December 31, 2023 and 2022, our capital expenditures were $3,211 million and $2,738 million, respectively.
Video services also includes pay-per-view revenues, video on demand, equipment rentals, and video advertising. We have made the strategic decision to limit sales of new traditional TV services, focusing on our broadband products and OTT video options. We are partnering with OTT video providers and expect this to grow as OTT options are offered with our broadband products.
We have made the strategic decision to limit sales of new traditional TV services, focusing on our broadband products and OTT video options. We are partnering with OTT video providers and expect this to grow as OTT options are offered with our broadband products.
Fiber Broadband Customers Our investment strategy is focused on expanding and improving our fiber network. In conjunction with this strategy, we are also working to improve our product positioning in both existing and new fiber markets.
We provide service and product options in our consumer and business offerings in each of our markets. ‎ 30 Fiber Broadband Customers Our investment strategy is focused on expanding our fiber network. In conjunction with this strategy, we are also working to improve our product positioning in both existing and new fiber markets.
The FCC announced the results of its RDOF Phase I auction on December 7, 2020. Frontier was awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia).
Frontier was awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia).
The residual tax effects typically are released when the item giving rise to the tax effect is disposed of, liquidated, or terminated. 42 Recent Accounting Pronouncements For additional information regarding FASB Accounting Standards Updates (‘‘ASU’’s) that have been issued but not yet adopted and that may impact the Company, refer to Note 2 – ‘‘Recent Accounting Pronouncements’’ to the audited consolidated financial statements in Part II, Item 8 of this annual Report on form 10-K . ‎ 43
Recent Accounting Pronouncements For additional information regarding FASB Accounting Standards Updates (‘‘ASU’’s) that have been issued but not yet adopted and that may impact the Company, refer to Note 2 – ‘‘Recent Accounting Pronouncements’’ to the audited consolidated financial statements in Part II, Item 8 of this annual Report on form 10-K .
Under Section 338(h)(10) of the Code, Predecessor and Successor made elections to step-up tax basis of certain subsidiary assets. Such Section 338(h)(10) elections will generate depreciation and amortization expense going forward, which may result in NOLs. Such net operating losses would be carried forward indefinitely but would be subject to an 80% limitation on U.S. taxable income.
Such Section 338(h)(10) elections will generate depreciation and amortization expense going forward, which may result in NOLs. Such net operating losses would be carried forward indefinitely but would be subject to an 80% limitation on U.S. taxable income.
Cash Flows used by Investing Activities Cash flows used by investing activities were $4,468 million for the year ended December 31, 2022, compared to Non-GAAP cash flows used by investing activities of $1,683 million in 2021.
Cash Flows used by Investing Activities Cash flows used by investing activities were $2,556 million for the year ended December 31, 2023, compared to cash flows used by investing activities of $4,468 million in 2022.
Copper Broadband Customers For the year ended December 31, 2022, we lost 191,000 consumer copper broadband customers compared to a loss of 115,000 in 2021. For the year ended December 31, 2022, we lost 19,000 business copper broadband customers compared to a loss of 19,000 in 2021.
Copper Broadband Customers For the year ended December 31, 2023, we lost approximately 221,000 consumer copper broadband customers compared to a loss of approximately 191,000 in 2022. For the year ended December 31, 2023, we lost approximately 22,000 business and wholesale copper broadband customers compared to a loss of approximately 20,000 in 2022.
As our copper footprint is transitioned to fiber, we expect fewer copper sales opportunities, and will proactively migrate existing broadband customers from copper to fiber, both of which will reduce our copper net adds. ‎ 33 Business For the year ended December 31, 2022, we experienced a 7% decline in our business and wholesale revenues, as compared to 2021.
As our copper footprint transitions to fiber, we expect fewer copper sales opportunities, and will proactively migrate certain existing broadband customers from copper to fiber, both of which will reduce our copper net adds. Business and Wholesale For the year ended December 31, 2023, our business and wholesale revenues decreased 1%, as compared to the prior year.
Also, we periodically reassess the useful lives of our tangible and intangible assets to determine whether any changes are required. 41 We considered whether the carrying values of finite-lived intangible assets, and property plant and equipment may not be recoverable or whether the carrying value of certain finite-lived intangible assets were impaired, noting no impairment was present as of or for the year ended December 31, 2022.
We considered whether the carrying values of finite-lived intangible assets, and property plant and equipment may not be recoverable or whether the carrying value of certain finite-lived intangible assets were impaired, noting no impairment was present as of or for the year ended December 31, 2023.
Data and Internet services consist of fiber broadband services, copper broadband services, and network access revenues (data transmission services and dedicated high-capacity circuits including data services to wireless providers commonly called wireless backhaul).
Data and Internet services consist of fiber broadband services, copper broadband services, and network access revenues (data transmission services and dedicated high-capacity circuits including data services to wireless providers commonly called wireless backhaul). Network access services are provided primarily to our business and wholesale customers, while fiber and copper broadband are provided to all customer segments.
This section generally discusses the results of our operations for the year ended December 31, 2022 compared to the four months ended April 30, 2021 and the eight months ended December 31, 2021.
This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We are prioritizing our activities to locations which we believe will provide the highest investment returns. Over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber as we implement our expansion plan.
We are prioritizing our activities to locations that we believe will provide the highest investment returns. Over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber as we implement our expansion plan. Our strategy focuses on four strategic priorities : fiber deployment, fiber penetration, operational efficiency, and improving the customer experience.
Debt Covenants and Borrowing Capacity Our Amended and Restated Credit Agreement includes usual and customary negative covenants for loan agreements of this type, including covenants limiting us and our restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material subordinated indebtedness, in each case subject to customary exceptions for loan agreements of this type.
Debt Covenants and Borrowing Capacity Our Amended and Restated Credit Agreement includes usual and customary negative covenants for loan agreements of this type, including covenants limiting us and our restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material subordinated indebtedness, in each case subject to customary exceptions for loan agreements of this type. 37 Our Amended and Restated Credit Agreement also contains a “financial covenant” which provides that our first lien leverage ratio shall not exceed as of the last day of each fiscal quarter 3.50:1.00, with step-downs to: (a) 3.25:1.00 in 2026; and (b) 3.00:1.00 in 2027 and continuing thereafter.
We continuously evaluate the impact these and other factors may have on our business, including demand for our products and services, our ability to execute on our strategic priorities and our financial condition and results of operations. ‎ 29 Financial Overview We reported operating income of $592 million for the year ended December 31, 2022, $762 million for the eight months ended December 31, 2021, and $351 million for the four months ended April 30, 2021.
We continue to closely monitor and evaluate the impact these and other factors may have on our business, including demand for our products and services, our ability to execute on our strategic priorities and our financial condition and results of operations. ‎ 29 Financial Overview – Operating Income We reported operating income of $492 million and $592 million, for the years ended December 31, 2023 and 2022, respectively, a decrease of $100 million.
(2) Includes USF fees that, in conjunction with the application of fresh start accounting, are now recorded net. ‎ 32 Our revenue streams are primarily a result of recurring data, voice, and video services delivered over either our copper or fiber network. Revenues are considered copper or fiber based on the “last-mile” technology used to connect the customer location.
Our revenue streams are primarily a result of recurring data, voice, and video services delivered over our fiber and copper network. Revenues are considered fiber or copper based on the “last-mile” technology used to connect the customer location.
Each asset and liability existing as of the Effective Date, other than deferred taxes, have been stated at the fair value, and determined at appropriate risk-adjusted interest rates. Deferred taxes were determined in conformity with applicable accounting standards. Reorganization value represents the fair value of the Successor’s assets before considering liabilities.
Upon the application of fresh start accounting, we allocated the reorganization value to our individual assets based on their estimated fair values. Each asset and liability existing as of the Effective Date, other than deferred taxes, have been stated at the fair value, and determined at appropriate risk-adjusted interest rates. Deferred taxes were determined in conformity with applicable accounting standards.
However, it remains uncertain whether any such follow-on auction will occur given the recent passage of significant federal funding for broadband infrastructure.
As part of its RDOF order, the FCC indicated it would hold a follow-on auction for the unawarded funding following the Phase I auction. However, it remains uncertain whether any such follow-on auction will occur given the recent passage of significant federal funding for broadband infrastructure.
This increase was primarily a result of transformational investments that are non-recurring such as rebranding costs, higher professional services and recruiting fees, partially offset by a non-recurring $11 million sales tax refund in 2022. ‎ 36 Pension and Other post-employment benefits (“OPEB”) costs We allocate certain pension/OPEB expense to Cost of Service and SG&A expenses.
This decrease was primarily a result of lower compensation and benefit costs, and other fees, partially offset by increased commissions and an $11 million sales tax refund in 2022. Pension and Other post-employment benefits (“OPEB”) costs We allocate certain pension/OPEB expense to cost of service and SG&A expenses.
Consumer Consumer customer losses were driven by reductions in our copper broadband and stand-alone voice customers, partially offset by net additions of fiber broadband customers.
Consumer Customers We experienced a decrease in consumer customers of less than 1% as of December 31, 2023, as compared to December 31, 2022. Consumer customer losses were driven by reductions in our copper broadband and stand-alone voice customers, partially offset by net additions of fiber broadband customers.
OPERATING EXPENSES The table below presents our operating expenses for the periods indicated: Non-GAAP Successor Combined For the year ended For the year ended ($ in millions) December 31, December 31, Variance 2022 2021 % Operating expenses: Cost of Service $ 2,169 $ 2,362 (8) % Selling, general and administrative expenses 1,745 1,668 5 % Depreciation and amortization 1,182 1,240 (5) % Restructuring costs and other charges 99 28 254 % Total operating expenses $ 5,195 $ 5,298 (2) % Cost of Service Cost of service expenses include access charges and other third-party costs directly attributable to connecting customer locations to our network, video content costs and certain promotional costs.
($ in millions) Subsidy and other revenue, December 31, 2022 $ 54 Change in CAF II and other subsidies 5 Change in RDOF and other revenue 16 Subsidy and other revenue, December 31, 2023 $ 75 34 OPERATING EXPENSES The table below presents our operating expenses for the periods indicated: For the year ended For the year ended ($ in millions) December 31, December 31, Variance 2023 2022 % Operating expenses: Cost of Service $ 2,125 $ 2,169 (2) % Selling, general and administrative expenses 1,646 1,745 (6) % Depreciation and amortization 1,415 1,182 20 % Restructuring costs and other charges 73 99 (26) % Total operating expenses $ 5,259 $ 5,195 1 % Cost of Service Cost of service expenses include access charges and other third-party costs directly attributable to connecting customer locations to our network and video content costs.
The FCC is reviewing carriers’ CAF II program completion data, and if the FCC determines that the Company did not satisfy certain applicable CAF Phase II requirements, Frontier could be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations. 40 On January 30, 2020, the FCC adopted an order establishing the RDOF competitive reverse auction to provide support to serve high-cost areas.
Thereafter, the FCC has been reviewing carriers’ CAF II program completion data, and if the FCC determines that the Company did not satisfy certain applicable CAF Phase II requirements, Frontier could be required to return a portion of the funds previously received and may be subject to certain other fines, requirements, and obligations.
In 2022, 2021 and 2020, our expected long-term rate of return on plan assets was 7.50%. Our actual return on plan assets for the year ended December 31, 2022 was loss of 20%, the four months ended April 30, 2021 was a gain of 2.88% and for the eight months ended December 31, 2021 it was a gain of 5.97%.
Our actual return on plan assets for the year ended December 31, 2023, was a gain of 15%, for the year ended December 31, 2022, was a loss of 20%, for the four months ended April 30, 2021, was a gain of 3%, and for the eight months ended December 31, 2021, was a gain of 6%.
If any assets are considered to be impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value.
If any assets are considered to be impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value. Also, we periodically reassess the useful lives of our tangible and intangible assets to determine whether any changes are required.
Our fiber build plans include significant expenditures which could be adversely impacted by supply chain delays, inflation, and other risks. In addition to higher costs, the availability of building materials and other supply chain risks could negatively impact our ability to achieve the fiber build plans we are executing against.
In addition to higher costs, the availability of building materials and other supply chain risks could negatively impact our ability to achieve the fiber build plans we are executing against. During 2023, markets remained volatile, and the economic outlook was uncertain.
Critical Accounting Policies and Estimates The preparation of our financial statements requires management to make estimates and assumptions. There are inherent uncertainties with respect to such estimates and assumptions; accordingly, it is possible that actual results could differ from those estimates and changes to estimates could occur in the near term.
There are inherent uncertainties with respect to such estimates and assumptions; accordingly, it is possible that actual results could differ from those estimates and changes to estimates could occur in the near term. The estimates which require the most significant judgment are listed below. These critical accounting estimates have been reviewed with the Audit Committee of our Board of Directors.
Customers who migrated from our copper base constituted a minor portion of these consumer fiber broadband customer net additions in 2022. For the year ended December 31, 2022, we added approximately 11,000 business fiber broadband customers compared to approximately 1,000 in 2021. Our focus on expanding and improving our fiber network has contributed to improved customer retention.
The quarter ended December 31, 2023 represents the eighteenth consecutive quarter of positive fiber net adds. For the year ended December 31, 2023, we added approximately 303,000 consumer fiber broadband customers compared to approximately 239,000 in 2022 . Customers who migrated from our copper base constituted a minor portion of these consumer fiber broadband customer net additions in 2023.
Our effective tax rates for the four months ended April 30, 2021 and the eight months ended December 31, 2021 were 3.1% and 17.2%, respectively . ‎ 38 (b) Liquidity and Capital Resources As of December 31, 2022, we had liquidity of approximately $2,755 million, comprised of cash and cash equivalents of $322 million, $1,750 million of short-term investments consisting of term deposits earning interest in excess of traditional bank deposit rates, and placed with banks with A-1/P-1 or equivalent credit quality, and our available capacity on our undrawn revolving credit facility of $683 million.
(b) Liquidity and Capital Resources As of December 31, 2023, we had liquidity of approximately $3,242 million, comprised of cash and cash equivalents of $1,125 million, $1,075 million of short-term investments (consisting of term deposits earning interest in excess of traditional bank deposit rates, and placed with banks with A-1/P-1 or equivalent credit quality), $500 million Variable Funding Notes capacity, subject to customary conditions to draw, and available capacity on our undrawn revolving credit facility of $542 million.
(a) Results of Operations Customer Trends As of or for the year ended December 31, (Customer, Subscriber, and Employee Metrics in thousands) 2022 2021 (2) % Change Customers Consumer 3,133 3,165 (1) % Consumer Customer Metrics Net customer additions (losses) (32) (99) (68) % ARPC $ 82.30 $ 84.70 (3) % Customer Churn 1.54% 1.52% 1 % Broadband Customer Metrics (1) Fiber Broadband Consumer customers 1,575 1,336 18 % Business customers 107 96 11 % Consumer net customer additions 239 98 144 % Consumer customer churn 1.38% 1.45% (5) % Consumer customer ARPU $ 62.45 $ 62.34 0 % Copper Broadband Consumer customers 1,043 1,234 (15) % Business customers 114 133 (14) % Consumer net customer additions (losses) (191) (115) 66 % Consumer customer churn 1.79% 1.72% 4 % Consumer customer ARPU $ 48.13 $ 44.69 8 % Other Metrics Employees 14,708 15,640 (6) % (1) Amounts presented exclude related metrics for our wholesale customers.
(a) Results of Operations Customer Trends As of or for the year ended December 31, (Customer, Subscriber, and Employee Metrics in thousands) 2023 2022 % Change Broadband Customer Metrics (1) Fiber Broadband Consumer customers 1,878 1,575 19 % Business and wholesale customers 129 114 13 % Consumer net customer additions 303 239 27 % Consumer customer churn 1.32% 1.38% (4) % Consumer customer ARPU $ 63.39 $ 62.45 2 % Copper Broadband Consumer customers 822 1,043 (21) % Business and wholesale customers 114 136 (16) % Consumer net customer losses (221) (191) 16 % Consumer customer churn 1.90% 1.79% 6 % Consumer customer ARPU $ 52.43 $ 48.13 9 % Consumer Customer Metrics Customers 3,129 3,133 (0) % Net customer losses (4) (32) (88) % ARPC $ 82.53 $ 82.30 0 % Customer Churn 1.52% 1.54% (1) % Other Metrics Employees 13,297 14,708 (10) % (1) Historical amounts have been updated to include related metrics for our wholesale customers.
These declines were primarily driven by linear video customer losses, partially offset by price increases. Other Other customer revenue includes directory listing services and switched access revenue. Switched access revenue includes revenue derived from allowing other carriers to use our network to originate and/or terminate their local and long-distance voice traffic.
Other Other customer revenue includes non-recurring equipment sales, network facility rental income, ancillary customer fees, directory listing services and switched access revenue. Switched access revenue includes revenue derived from allowing other carriers to use our network to originate and/or terminate their local and long-distance voice traffic.
This increase was driven by remeasurement gains for our other postretirement benefit obligation of $248 million in 2022. Additionally, we recorded a remeasurement gain related to our pension plan of $218 million during 2022.
This decrease was primarily driven by a remeasurement gain for our pension benefit obligation of $202 million for the year ended December 31, 2023, compared to a remeasurement gain for our other postretirement benefit obligation of $248 million, and a remeasurement gain related to our pension plan of $218 million for the year ended December 31, 2022.
Net Operating Losses In connection with our emergence from bankruptcy, we consummated a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company. Certain of the net operating losses (“NOLs”) were utilized in offsetting gains from the disposition, certain of the NOLs were extinguished as part of attribute reduction and certain subsidiary NOLs were carried over.
As of December 31, 2023, we were in compliance with all of the covenants under our existing indentures and the Amended and Restated Credit Agreement. Net Operating Losses In connection with our emergence from bankruptcy, we consummated a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company.
The increase in interest expense was primarily driven by a higher debt balance, as well as higher interest rates. Income tax expense (benefit) During the year ended December 31, 2022, we recorded an income tax expense of $158 million on pre-tax income of $599 million. Our effective tax rates for the year ended December 31, 2022 was 26.4%.
Interest expense For the year ended December 31, 2023, interest expense increased $161 million, as compared to 2022. The increase in interest expense was primarily driven by a higher debt balance, as well as higher interest rates.
Capital Resources Our primary anticipated uses of liquidity are to fund the costs of operations, working capital and capital expenditures and to fund interest payments on our long-term debt.
The increase in financing activities was primarily driven by an increase in proceeds from long-term debt borrowings in the first three quarters of 2023 as compared to the prior year period. Capital Resources Our primary anticipated uses of liquidity are to fund the costs of operations, working capital and capital expenditures and to fund interest payments on our long-term debt.
Restructuring costs and other charges Restructuring costs and other charges consist of consulting and advisory fees related to our balance sheet restructuring prior to filing our Chapter 11 Cases and subsequent to the Effective Date, workforce reductions, transformation initiatives, other restructuring expenses.
Restructuring costs and other charges Restructuring costs and other charges consist of consulting and advisory fees, workforce reductions, transformation initiatives, and other restructuring expenses.
The indentures governing the outstanding subsidiary debentures include covenants that limit such subsidiary’s ability to create liens and/or merge or consolidate with other companies. These covenants are subject to important exceptions and qualifications. As of December 31, 2022, we were in compliance with all of the covenants under our existing indentures and the Amended and Restated Credit Agreement.
The indentures governing the outstanding subsidiary debentures include covenants that limit such subsidiary’s ability to create liens and/or merge or consolidate with other companies. These covenants are subject to important exceptions and qualifications. The indenture governing Frontier Issuer’s Fiber Term Notes includes covenants and restrictions customary for transactions of this type.
In 2020, we began the expansion and transformation of our fiber network in order to meet the rapidly increasing demand for data from both our consumer and business customers.
Driven by our purpose of Building Gigabit America TM , we are focused on supporting a digital society, closing the digital divide, and working toward a more sustainable environment. In 2020, we began the expansion and transformation of our fiber network to meet the rapidly increasing demand for data from our consumer and business customers.
Total pension and OPEB service costs were as follows : Non-GAAP Successor Combined For the year ended For the year ended December 31, December 31, ($ in millions) 2022 2021 Total pension/OPEB expenses $ 82 $ 103 Less: costs capitalized into capital expenditures (21) (22) Net pension/OPEB expense $ 61 $ 81 Depreciation and Amortization As a result of fresh start accounting, all of our fixed assets and intangible assets were adjusted to fair value as of the Effective Date.
Total pension and OPEB service costs were as follows : For the year ended For the year ended December 31, December 31, ($ in millions) 2023 2022 Total pension/OPEB expenses $ 59 $ 82 Less: costs capitalized into capital expenditures (18) (21) Net pension/OPEB expense $ 41 $ 61 Depreciation and Amortization For the year ended December 31, 2023, the increased depreciation and amortization expense was driven by higher depreciation expense as a result of higher property, plant and equipment in service.
We paid $8 million in net cash taxes during the year ended December 31, 2022, and $37 million in net cash taxes during the year ended December 31, 2021.
The overall decrease in operating cash flows was primarily the result of changes in working capital. We paid less than $1 million in net cash taxes during the year ended December 31, 2023, and we paid $8 million in net cash taxes during the year ended December 31, 2022.
Our average monthly consumer copper broadband churn was 1.79% for the year ended December 31, 2022, compared to 1.72% in 2021.
Our average monthly consumer copper broadband churn was 1.90% for the year ended December 31, 2023, compared to 1.79% in 2022. The increase in consumer copper broadband churn was driven by the impact of inflationary price increases and changes to our copper broadband go to market approach which impacted gross add volume.
After adjusting for this fresh start change, cost of service declined $109 million for the year ended December 31, 2022. For the year ended December 31, 2022, the decrease in cost of service expense was driven by lower video content costs as a result of declines in video customers, non-renewal of certain content agreements and decreased CPE costs.
The decrease in cost of service expense was driven by lower video content costs as a result of declines in video customers, non-renewal of certain content agreements, and decreased CPE costs. These decreases more than offset higher energy and benefits costs and outside service rate increases resulting from higher inflation.
The table below presents our revenue by product and service type for the periods indicated : Non-GAAP Successor Combined For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2022 2021 (Decrease) (Decrease) Data and Internet services $ 3,390 $ 3,349 $ 41 1 % Voice services 1,498 1,738 (240) (14) % Video services 520 620 (100) (16) % Other 325 371 (46) (12) % Revenue from contracts with customers (1) 5,733 6,078 (345) (6) % Subsidy revenue 54 333 (279) (84) % Total revenue $ 5,787 $ 6,411 $ (624) (10) % (1) Includes $63 million of lease revenue for both years ended December 31, 2022 and 2021.
The table below presents our revenue by product and service type for the periods indicated : For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2023 2022 (Decrease) (Decrease) Data and Internet services $ 3,534 $ 3,390 $ 144 4 % Voice services 1,373 1,498 (125) (8) % Video services 430 520 (90) (17) % Other 339 325 14 4 % Revenue from contracts with customers (1) 5,676 5,733 (57) (1) % Subsidy revenue 75 54 21 39 % Total revenue $ 5,751 $ 5,787 $ (36) (1) % (1) Includes $62 million and $63 million of lease revenue for the years ended December 31, 2023 and 2022, respectively. ‎ 33 We categorize our products, services, and other revenues into the following five categories: Data and Internet Services We provide data and Internet services to our consumer, business, and wholesale customers.
The table below presents our revenue for our consumer and business and wholesale customers for the periods indicated: Non-GAAP Successor Combined For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2022 2021 (Decrease) (Decrease) Consumer $ 3,116 $ 3,258 $ (142) (4) % Business and wholesale 2,617 2,820 (203) (7) % Revenue from contracts with customers (1) 5,733 6,078 (345) (6) % Subsidy revenue 54 333 (279) (84) % Total revenue $ 5,787 $ 6,411 $ (624) (10) % (1) Includes $63 million of lease revenue for both years ended December 31, 2022 and 2021, respectively.
We expect this trend to continue and accelerate due to strong fiber demand and the migration of customers from copper to fiber as we expand our fiber network. ‎ 32 The table below presents our revenue for our consumer and business and wholesale customers for the periods indicated: For the year ended For the year ended December 31, December 31, $ Increase % Increase ( $ in millions ) 2023 2022 (Decrease) (Decrease) Consumer $ 3,097 $ 3,116 $ (19) (1) % Business and wholesale 2,579 2,617 (38) (1) % Revenue from contracts with customers (1) 5,676 5,733 (57) (1) % Subsidy revenue 75 54 21 39 % Total revenue $ 5,751 $ 5,787 $ (36) (1) % (1) Includes $62 million and $63 million of lease revenue for the years ended December 31, 2023 and 2022, respectively.
The Network access revenues declines were the result of an ongoing migration of our carrier customers from legacy technology circuits to lower priced ethernet circuits. ‎ 34 Voice services We provide voice services consisting of traditional local and long-distance service and voice over Internet protocol (VoIP) service provided over our fiber and copper broadband products.
The increase was driven by growth in the fiber broadband revenue, partly offset by declines in copper broadband revenue. Voice services We provide voice services consisting of traditional local and long-distance service and voice over Internet protocol (VoIP) service provided over our fiber and copper broadband products.
OTHER NON-OPERATING INCOME AND EXPENSE Non-GAAP Successor Combined For the year ended For the year ended ( $ in millions ) December 31, December 31, % Increase 2022 2021 (Decrease) Investment and other income (loss), net $ 554 $ (4) NM Pension settlement costs $ (55) $ - NM Reorganization Items, net $ - $ 4,171 NM Interest expense $ (492) $ (375) 31 % Income tax expense (benefit) $ 158 $ (50) NM NM - Not meaningful Investment and other income (loss), net Investment and other expense, net increased by $558 million for the year ended December 31, 2022, as compared to 2021.
For the year ended December 31, 2023, restructuring costs and other charges decreased $26 million, as compared to the year ended December 31, 2022, primarily due to the non-recurrence of a one-time lease impairment charge of $44 million in the prior year, and lower costs related to other restructuring activities, partially offset by higher severance and employee costs. ‎ 35 OTHER NON-OPERATING INCOME AND EXPENSE For the year ended For the year ended ( $ in millions ) December 31, December 31, % Increase 2023 2022 (Decrease) Investment and other income, net $ 278 $ 554 (50)% Pension settlement costs $ - $ (55) NM Interest expense $ (653) $ (492) 33% % Income tax expense $ 88 $ 158 (44)% NM - Not meaningful Investment and other income, net Investment and other income, net decreased by $276 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
These declines were primarily due to net losses in business and consumer customers in addition to fewer customers bundling voice services with broadband. Video services Video services include revenues generated from traditional television (TV) services provided directly to consumer customers as well as satellite TV services provided through various satellite providers .
Video services Video services include revenues generated from traditional television (TV) services provided directly to consumer customers as well as satellite TV services provided through various satellite providers . Video services also includes pay-per-view revenues, video on demand, equipment rentals, and video advertising.
Our average monthly consumer fiber broadband churn was 1.38% for the year ended December 31, 2022, compared to 1.45% in 2021.
For the year ended December 31, 2023, we added approximately 15,000 business and wholesale fiber broadband customers compared to approximately 13,000 in 2022. Our focus on expanding and improving our fiber network has contributed to healthy customer retention. Our average monthly consumer fiber broadband churn was 1.32% for the year ended December 31, 2023, compared to 1.38% in 2022.
It also includes enhanced features such as call waiting, caller identification, and voice messaging services.
It also includes enhanced features such as call waiting, caller identification, and voice messaging services. Voice services revenue declined $125 million, or 8%, to $1,373 million, for the year ended December 31, 2023, as compared to the prior year.
Such access charges and other third-party costs exclude depreciation and amortization, and employee related expenses.
Such access charges and other third-party costs exclude depreciation and amortization, and employee related expenses. Cost of service decreased $44 million for the year ended December 31, 2023, as compared to the prior year.
References herein to “we” or “our” include references to our Predecessor, our Successor, or to our Predecessor and Successor on a combined basis, as the context may require. Business Overview Frontier is a leading communications and technology provider offering gigabit speeds that empower and connect 2.8 million consumers and business customers in 25 states as of December 31, 2022.
References herein to “we” or “our” include references to our Predecessor, our Successor, or to our Predecessor and Successor on a combined basis, as the context may require .
These decreases more than offset higher fuel and energy prices, and outside service rate increases resulting from increased inflation. Selling, General, and Administrative Expenses Selling, general, and administrative expenses (SG&A expenses) include the salaries, wages and related benefits and costs of corporate and sales personnel, travel, insurance, non-network related rent, advertising, and other administrative expenses.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses (“SG&A expenses”) include the salaries, wages and related benefits and costs of corporate and sales personnel, travel, insurance, non-network related rent, advertising, and other administrative expenses. SG&A expenses decreased by $99 million for the year ended December 31, 2023, as compared to the prior year.
($ in millions) Data and Internet services revenue, December 31, 2021 $ 3,349 Change in fiber broadband revenue 143 Change in copper broadband revenue (46) Change in other data and internet services (54) Impact of fresh start accounting (2) Data and Internet services revenue, December 31, 2022 $ 3,390 The revenue growth was primarily driven by a 5% improvement in our broadband revenue for the year ended December 31, 2022, as compared to 2021.
($ in millions) Data and Internet services revenue, December 31, 2022 $ 3,390 Change in fiber broadband revenue 240 Change in copper broadband revenue (96) Data and Internet services revenue, December 31, 2023 $ 3,534 Data and internet services revenue increased $144 million, or 4%, to $3,534 million for the year ended December 31, 2023, as compared to the prior year.
The increase in capital expenditures was driven by increased spending for fiber upgrades to our existing copper network. We expect capital expenditures to be stable in 2023 as compared to 2022.
The increase in capital expenditures was driven by increased spending for transformation of our fiber network. We expect cash capital expenditures and capital vendor financing payments to total approximately $3.0 billion to $3.2 billion in 2024.
Fiber broadband customer net additions continued to outpace copper broadband customer net losses, resulting in 40,000 total broadband customer net additions. - Across the entire company, we have identified opportunities to simplify and digitize our operations. We achieved our annualized gross run rate cost savings target of approximately $250 million more than one year ahead of plan.
Fiber broadband customer net additions continued to outpace copper broadband customer net losses, resulting in 75,000 total broadband customer net additions. Consumer fiber revenue growth of 11% offset consumer copper revenue declines of 14%, resulting in overall positive consumer revenue growth for the second half of 2023. We achieved our annualized gross run rate cost savings target of $500 million at the end of 2023 – double our initial goal of $250 million.
Fresh Start Accounting We adopted fresh start accounting and reporting on the Effective Date, in accordance with FASB ASC 852. Upon the application of fresh start accounting, we allocated the reorganization value to our individual assets based on their estimated fair values.
For a discussion of these and other accounting policies, see Note 1 of the Notes to Consolidated Financial Statements. Fresh Start Accounting We adopted fresh start accounting and reporting on the Effective Date, in accordance with FASB ASC 852.
Cash Flows provided by Operating Activities Cash flows provided by operating activities increased $604 million to $1,401 million for the year ended December 31, 2022, as compared to 2021. The overall increase in operating cash flows was primarily the result of changes in working capital.
Cash Flows provided from Financing Activities Cash flows provided from financing activities increased $918 million to $2,129 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
The primary driver for the change in the working capital surplus at December 31, 2022 was an increase in accounts payable and accrued interest. An approximate increase of $400 million in accounts payable was primarily due to our fiber build plans and consumer premises.
The primary driver for the change in the working capital surplus at December 31, 2023 was due to an increase in cash and cash equivalents of $803 million and a decrease in accounts payable of $307 million; partially offset by a decrease in short-term investments of $675 million and an increase in vendor financing payables of $263 million, as compared to the year ended December 31, 2022.
Driving the 2022 loss was approximately 80,000 in losses for voice only or video only customer combined, offset by gains in broadband customers. In 2022, we experienced a net gain of consumer broadband customers of approximately 48,000 as compared to a net loss of approximately 17,000 for the year ended December 31, 2021. We experienced 4% decline in consumer revenues, as compared to 2021.
Customer preferences as well as our fiber investment initiatives resulted in an increase in the number of our consumer broadband customers and a migration of our customer base to fiber. We lost approximately 4,000 consumer customers for the year ended December 31, 2023, compared to a loss of approximately 32,000 consumer customers for the year ended December 31, 2022, driven by losses in copper broadband, voice and video customers, offset by growth in fiber broadband customers. For the year ended December 31, 2023, we experienced a net gain of consumer broadband customers of approximately 82,000 as compared to a net gain of approximately 48,000 for the year ended December 31, 2022. o The average monthly consumer revenue per customer (“consumer ARPC”) increased $0.23, or less than 1%, to $82.53 for the year ended December 31, 2023, compared to the prior year period.
During the four months ended April 30, 2021, we recorded an income tax benefit of $136 million on pre-tax income of $4,405 million. The driver for the benefit was the tax effect of fresh start accounting adjustments. During the eight months ended December 31, 2021, we recorded income tax expense of $86 million on pre-tax income of $500 million.
Income tax expense (benefit) During the year ended December 31, 2023, we recorded an income tax expense of $88 million on pre-tax income of $117 million. Our effective tax rate for the year ended December 31, 2023 was 75.3 %.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur pension plan assets decreased $622 million from $2,655 million at December 31, 2021 to $2,033 million at December 31, 2022. This decrease was primarily a result of changes in the market value of investments of $523 million, including plan expenses, and benefit payments of $275 million, partially offset by contributions of $176 million. ‎ 44
Biggest changeThe value of our pension plan assets increased $235 million from $2,033 million at December 31, 2022 to $2,268 million at December 31, 2023. This increase was primarily a result of changes in the market value of investments of $305 million, net of plan expenses, and contributions of $134 million, offset by benefit payments of $204 million. ‎ 42
Market risk refers to the potential change in fair value of a financial instrument as a result of fluctuations in interest rates and equity prices. We do not hold derivative instruments, derivative commodity instruments or other financial instruments for trading purposes.
Market risk refers to the potential change in fair value of a financial instrument as a result of fluctuations in interest rates and equity prices. We do not hold or issue derivative instruments, derivative commodity instruments or other financial instruments for trading purposes.
Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, only our $1.4 billion term loan facility has a floating rate at December 31, 2022.
Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, only our $1.4 billion term loan facility has a floating rate at December 31, 2023.
Refer to Note 10 for discussion of the impact of the Chapter 11 Cases on our debt obligations. Equity Price Exposure Our exposure to market risks for changes in equity security prices as of December 31, 2022 is primarily limited to our pension plan assets. We have no other security investments of any significant amount.
Refer to Note 9 for discussion of the impact of the Chapter 11 Cases on our debt obligations. Equity Price Exposure Our exposure to market risks for changes in equity security prices as of December 31, 2023 is primarily limited to our pension plan assets. We have no other security investments of any significant amount.
As of December 31, 2022, 84% of our total debt had fixed interest rates. We had no interest rate swap agreements in effect at December 31, 2022. We believe that our currently outstanding obligation exposure to interest rate changes is minimal.
As of December 31, 2023, 87% of our total debt had fixed interest rates. We had no interest rate swap agreements in effect at December 31, 2023. We believe that our currently outstanding obligation exposure to interest rate changes is minimal.
The discount rate assumption for our OPEB obligation is determined in a similar manner to the pension plan. As of December 31, 2022, and 2021, our discount rate utilized in calculating our benefit plan obligation was 5.50% and 3.00%, respectively.
The discount rate assumption for our OPEB obligation is determined in a similar manner to the pension plan. As of December 31, 2023, and 2022, our discount rate utilized in calculating our benefit plan obligation was 5.20% and 5.50%, respectively.
The discount rate if based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds with durations approximate to that of our benefit obligation. As of December 31, 2022, and 2021, our discount rate utilized in calculating our benefit plan obligation was 5.50% and 2.90%, respectively.
The discount rate is based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds with durations approximate to that of our benefit obligation. As of December 31, 2023, and 2022, the discount rate utilized in calculating our benefit plan obligation was 5.20% and 5.50%, respectively.
At December 31, 2022, the fair value of our debt was estimated to be approximately $8.1 billion, based on quoted market prices, our overall weighted average borrowing rate was 6.76% and our overall weighted average maturity was approximately 6.6 years. As of December 31, 2022, the weighted average maturity decreased from approximately 8 years as of December 31, 2021.
At December 31, 2023, the fair value of our debt was estimated to be approximately $10.7 billion, based on quoted market prices, our overall weighted average borrowing rate was 7.103% and our overall weighted average maturity was approximately 5.5 years, which decreased from approximately 6.6 years as of December 31, 2022.
The annual impact of 100 basis points change in the LIBOR would result in approximately $15 million of additional interest expense, provided that the LIBOR rate exceeds the LIBOR floor.
Commencing July 1, 2023, the annual impact of 100 basis points change in the SOFR would result in approximately $14 million of additional interest expense, provided that the SOFR rate exceeds the SOFR floor.

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