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NYC Charges Verizon With Fios Fraud

Mari Silbey
3/14/2017
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The City of New York is suing Verizon for breach of contract charging that the company has failed to deliver Fios television service to tens of thousands of NYC residents as promised.

How bad is it? According to the complaint, at of the end of 2015, at least 38,551 New York City households had been waiting for more than a year for requested Fios service. The city provided notice of suspected contract breach to Verizon Communications Inc. (NYSE: VZ) in January 2016, followed by an official notice of default in September of last year. The current legal suit demands that Verizon fulfill its obligations per a 2008 franchise agreement to "have fiber up and down each street and avenue in the entire city," and to make Fios service available to residents upon request.

Verizon was quick to respond to the NYC lawsuit, which was filed only yesterday, arguing that it has indeed fulfilled its part of the franchise agreement signed nine years ago. The company says it promised to run fiber past every home in the city, and that while it has accomplished that goal, it cannot deliver service to every residence because it hasn't been given permission by certain landlords to run cable across their properties.

Verizon Spokesman Rich Young also commented in a statement that NYC Mayor Bill de Blasio "is disingenuously attempting to rewrite the terms of an agreement made with his predecessor and is acting in its own political self-interests that are completely at odds with what’s best for New Yorkers. We plan to vigorously fight the city's allegations."

Part of the dispute between Verizon and NYC lies in the definition of "homes passed." While Verizon talked about running fiber up and down every street in the city, the telecom company, according to the City of New York's complaint, says it can claim to have passed a building with fiber even if it has only installed cables to a nearby intersection. Furthermore, where multi-dwelling units (MDUs) are concerned, Verizon reportedly maintains that it can categorize one as passed "as long as Verizon intends eventually to run fiber to it, not directly from the street, but rather through an adjacent MDU or a chain of MDUs, whether or not Verizon has obtained access to any of the MDUs from the property owners."

As the NYC complaint points out, the Verizon definition of "homes passed" stands in contradiction to the definition put forth by the Fiber to the Home Council (as found in a 2009 document of global FTTH definitions). According to the Council, a home does not count as passed when it cannot be connected to service "without further installation of substantial cable plant."


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New York City isn't the only place where Verizon has run into contract fulfillment disputes. DSLReports has cited Verizon transgressions for years, pointing out cases where Verizon was handed subsidies for network build-outs, but failed by many accounts to meet its service obligations. Verizon has also been accused of letting its copper-based phone lines fall into disrepair, thereby depriving rural communities of quality phone service. In 2015, the Federal Communications Commission (FCC) handed the telco a $2 million fine for its lack of attention to rural call completion problems and demanded a $3 million investment by Verizon to help solve the issue.

In more recent news, Verizon has signed a favorable, though still somewhat controversial deal with the City of Boston for broadband deployment. In that case, Verizon has agreed to deploy a mix of fiber and wireless services to the area. The agreement makes economic sense for a network operator looking to justify massive new infrastructure investments, but it has also left some people uneasy over disparities in broadband access. (See Verizon Hails Boston Fios Launch but Eyes 5G and Verizon's Boston Smart Cities Pilot Begins.)

In nearby Lowell, Massachusetts, Verizon is foregoing further Fios expansion and has instead proposed installing 50 new small cell sites to support future 5G wireless services. The telco is currently negotiating cell site fees with the local government.

Meanwhile, back in New York, Verizon has also said it's considering further fiber investments in the city. Verizon's Young stated, "Verizon has proposed investing nearly an additional $1 billion in fiber in NYC over the next four years. We also have committed to continuing to expand Fios availability in New York City to another 1 million households -- and thousands more small businesses -- in addition to the 2.2 million residences that can already get service today. At a time when communities across the country are seeking and encouraging broadband investments like these, the City is inexplicably turning its back on this investment and its residents by pursuing foolish litigation that will harm jobs, business growth and technology competition throughout all five boroughs."

New York has shown itself to be a tough legal opponent in recent months. Several weeks ago, the state's Attorney General Eric Schneiderman filed suit against Charter Communications Inc. for failing to deliver broadband speeds as advertised. The state is "seeking restitution for New York consumers as well as appropriate injunctive and equitable relief." (See NY State Sues Charter for Broadband Fraud.)

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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KBode
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KBode,
User Rank: Light Sabre
3/24/2017 | 3:44:19 PM
Re: A Strong Follow-Through?
I'd agree it's a lose lose scenario.

Verizon intentionally put wiggle room language into these contracts.

But then again, if New York City didn't like it, they shouldn't have signed the deal. Especially not behind closed doors with little to no public transparency (which was the case under Bloomberg).
danielcawrey
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danielcawrey,
User Rank: Light Sabre
3/20/2017 | 3:26:56 PM
Re: A Strong Follow-Through?
I'm sure it is pretty difficult to do these rollouts. I wonder if what happens is these projects end up going way over budget, a lot more than Verizon thinks it is going to cost. Nevertheless, that means maybe they should improve their initial estimate outlays. 
brooks7
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brooks7,
User Rank: Light Sabre
3/14/2017 | 7:46:00 PM
Re: A Strong Follow-Through?
 

I think that the city will be quite surprised when Verizon breaks out their version of F1, F2, F3 and drop plant.

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
3/14/2017 | 5:24:30 PM
Re: A Strong Follow-Through?
Grandstanding pols vs. shifty corporadoes -- hard to choose sides in this one.
msilbey
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msilbey,
User Rank: Blogger
3/14/2017 | 5:23:50 PM
Re: A Strong Follow-Through?
On the "homes passed" front, when I first looked at the FTTH Council's definition, the second phrase wasn't included. But if you go back to the global glossary published in 2009, the full definition is in there.
Carol Wilson
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Carol Wilson,
User Rank: Blogger
3/14/2017 | 4:22:54 PM
A Strong Follow-Through?
I'm intrigued to see how this plays out. As DSL Reports notes, Verizon - and other telecom carriers - have been willing to make big promises to get what they want from regulators whether it's a merger or acquisition approval, tax breaks or something else. But neither the regulators nor the telecom carriers have always done a good job of following through on those promises, and both sides have to be held responsible for that. 

It's funny to think of how different the views are on "homes passed," which would seem to be a fairly straightforward thing - though there's probably no such creature in today's world. 
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