NYC Still Waits for FiOS

After two years, an agreement that could let Verizon Communications Inc. (NYSE: VZ) bring FiOS TV to New York City is getting close -- but not that close.

A recent report in the New York Daily News citing unnamed sources said that a cable franchise agreement between the City of New York and Verizon was being hammered out and that a deal was "going down now." That might not be completely accurate, however.

"We've never expressed that a deal was about to be reached," says Vincent Grippo, chief of staff for the New York City Department of Information Technology and Telecommunications, which is the city agency negotiating the franchise.

According to the Daily News report, one of the sticking points of the negotiations was that the city was unhappy with Verizon's plans to cherry pick wealthier neighborhoods for its FiOS deployments with lower income areas being ignored.

"That's not necessarily one of the major issues," Grippo says. "It's one of many issues that are still on the table, but I think the cherry picking issue has been a little overstated."

Since negotiations between the DOITT and Verizon are still ongoing, Grippo says he isn't sure when an agreement might be announced. He wouldn't get into the details of what some of the issues holding up the agreement are, but he did say that both sides have the same interest in having a widespread deployment.

"Verizon's approach in these negotiations is to have a citywide franchise and buildout, which is something we don't have," says Grippo. By contrast, Cablevision Systems Corp. (NYSE: CVC) and Time Warner Cable Inc. (NYSE: TWC) hold nine cable franchises between them throughout the city.

But don't expect to see FiOS reach New York City in the immediate future. Even once Verizon and the DOITT reach an agreement, no formal franchise will have been created. Verizon will have to bring the proposed franchise to the Franchise Concession and Review Committee, which is subject to the scrutiny and approval from the public, all five borough presidents, and the mayor [ed. note: plus the Rockettes, George Steinbrenner, and that guy who collects cans].

That is a process that Grippo says could take "anywhere from six weeks, if everything goes perfectly, to three or four months."

When it does happen, it will end what has been a long process for both sides. Verizon first approached New York about a cable franchise in May 2005 but wasn't prepared to negotiate until the spring of 2007. Talks have been intense since then.

Verizon certainly hasn't been ignoring New York when it comes to deploying the necessary fiber for FiOS. (See Fiber-to-the-MDU: Verizon's Manhattan Project.) That process had been held up due to complications around getting fiber into old apartment buildings. But Verizon expects that problem to go away in light of a new bendable fiber technology from Corning Inc. (NYSE: GLW) that came out last year. (See Corning Gets the Bends.)

Verizon would not offer comment on the franchise negotiations.

— Raymond McConville, Reporter, Light Reading

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