Blind Spots In Corporate Merger Strategy

Verizon Communications Inc.’s $20 billion acquisition of Frontier Communications Parent, Inc. made media headlines in May 2025 when it secured approval from the Federal Communications Commission (FCC) after promising to remove its Diversity, Equity, and Inclusion (DEI) policies to appease the current administration. Yet for the last six months, the merger has been stalled by the California Public Utilities Commission (CPUC), which claims, among other things, that Verizon’s concession to eliminate DEI programs might violate California state laws intended to promote diversity and equity among employers and businesses. These laws include California Government Code § 12999, which mandates pay-data reporting for private companies with 100 or more employees, and General Order 156 and Public Utilities Code § 8283, which set expectations for procurement and diversity planning among regulated utilities. Verizon has commented that it may not be able to comply with California’s diversity demands and the pledges the company has made to the FCC.

The CPUC’s review of Verizon’s application remains active following multiple public forums seeking input from citizens on whether the deal serves the public interest. The companies recently settled with two opponents to try and secure approval before the Department of Justice’s clearance expires on February 13, 2026. Verizon’s concessions ̶ including participation in California’s $20-per-month broadband subsidy program for low-income households and deployment of 75,000 fiber passings in the state within five years and 250 cell sites in seven years ̶ have cost the company hundreds of millions of dollars. The companies are now pushing for the CPUC to vote on the deal at its upcoming December 18 meeting to stay within the Justice Department’s window.

The hurdles Verizon and Frontier have faced in closing the deal serve as a cautionary tale that federal approval of corporate mergers is not the final word, and exclusive focus on the wishes of federal agencies can be counterproductive. State and local governments have their own laws and their own demands and concerns, and they are starting to find their voice. This can be particularly challenging when federal priorities and values are in tension with local priorities and issues.

In the telecom ISP space specifically, state public utilities commissions (PUCs) have explicit jurisdiction to approve changes of control for Certificates of Public Convenience and Necessity (CPCN), a regulatory authorization required for retail and wholesale providers of telephone services to operate as a local provider. In 2020, California’s PUC reviewed Sprint’s wireline subsidiary in connection with the merger of T-Mobile/Sprint. Local franchising authorities (LFAs) must also approve license transfers involving installation or maintenance of structures necessary to provide services. For example, 47 U.S.C. § 537 (Cable Act § 617) requires local consent within 120-days for franchise transfers for cable companies. A denial means that the cable franchise transfer cannot proceed in that locality.

State Attorney Generals (AGs) also have authority to independently block or hold up mergers. AGs can file antitrust suits under state or federal law, and negotiate consumer-protection settlements if they think the merger hurts consumers. For example, in 2019, 16 states plus D.C. brought suit in New York federal court to block the T-Mobile/Sprint merger under Clayton Act § 7, arguing that the merger threatens competition. Ultimately, the DOJ and seven states entered into a settlement with the wireless companies under which the companies agreed to sell portions of Sprint’s business to Dish Network to form an additional competitor. Although the New York court ultimately allowed the merger to go forward, the states held up the transactions and negotiated a settlement post-trial with the merging companies to provide low-cost plans/rates for a certain period and reimburse the states up to $15 million for the costs of the investigation and litigation.

The growing clash between the Trump Administration and state/local governments with respect to DEI policies has put merging companies between a rock and a hard place. The Trump administration is actively rolling back DEI initiatives, and FCC chief Brendan Carr has pressured entities seeking merger approval to eliminate their DEI policies and practices. Carr’s February 2025 letter to Verizon announcing that the FCC was opening a probe into Verizon’s diversity practices—at the same time that Verizon was actively seeking to acquire Frontier—was no doubt strategically timed. And the day after Verizon announced changes to its diversity practices, including removing all roles focused on DEI and references to DEI from websites and training materials, the FCC approved its merger. What Verizon may not have anticipated was the impact its quick concession had on state and local authorities who disagree with the current administration’s policies and are willing to use their own laws and authorities to counter act federal government actions. Companies seeking merger approvals must consider carefully all the pieces on the board before making their next move.