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NYC Scolds Verizon for FiOS Shortfall

Mari Silbey
6/18/2015
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Verizon has failed to deliver FiOS service throughout New York City, and the Big Apple isn't happy about it.

Seven years ago, Verizon Communications Inc. (NYSE: VZ) promised former NYC Mayor Michael Bloomberg that it would offer FiOS to everyone in the city as part of a franchise agreement. The payout on that promise, however, came due in 2014, and Verizon still hasn't wired a big chunk of the five boroughs for FiOS service.

According to a city audit cited by the Wall Street Journal, there are currently more than 40,000 requests for FiOS from NYC residents that haven't been answered. Plus, roughly three quarters of them have been outstanding for at least a year.

As DSLReports has noted, Verizon was careful to include caveats in its contract that allowed the company to back away from its deal if adoption rates were low, and/or if it was willing to pay certain fines. However, the city's audit appears to paint a pretty bleak picture of just how far Verizon has fallen short of its stated FiOS goal.

According to one telecom analyst, Bruce Kushnick, Verizon's coverage of NYC falls somewhere between 46% and 59%.

For its part, Verizon has repeatedly pointed out that it has already exceeded the number of households it promised to pass with FiOS service on a national basis. At launch, Verizon said it would pass 18 million premises. According to the company's latest earnings report, it has now passed close to 20 million households across the US.


For more fixed broadband market coverage and insights, check out our dedicated gigabit/broadband content channel here on Light Reading.


On the other hand, it's become increasingly clear that Verizon is more interested in focusing on its wireless business than its wireline one. While bulking up on digital media assets and expertise with a plan to purchase AOL Inc. (NYSE: AOL) for $4.4 billion, the company has geared its strategy toward putting content assets to work in a mobile-first, over-the-top video service that is expected to launch this summer… not toward improving its established FiOS offering. (See Verizon's $4.4B AOL Buy a Digital Media Play and Verizon Focuses on Cashing In on LTE.)

Also, Verizon recently sold off a large piece of its FiOS wireline business to Frontier Communications Corp. (NYSE: FTR). That transaction added up at $10.54 billion for Verizon's FiOS markets in California, Florida and Texas. (See Verizon Sells Towers & Wireline Assets for $15B.)

A Verizon spokesperson has promised a statement on the situation in New York City, but a response hadn't arrived by press time. We will update this story when a response is available.

UPDATE: Verizon provided the following statement regarding its NYC deployments.

"First and foremost, it is important to note that it's not a mere coincidence that the report is made public today, and labor negotiations with our largest union begin on Monday. It's well known the union has ties to the city administration, and things like this are a familiar union tactic we have seen before.

We disagree with many parts of the report. The review was based on erroneous factual conclusions and incorrect interpretations of the Agreement, particular its conclusions on Verizon's passing all of the households in the City with fiber-optic facilities. We indeed have met the requirement to install fiber optics through all five boroughs. Our 3.5 billion investment and the 15,000 miles of fiber we have built have given New Yorkers added choices and a robust set of advanced, reliable and resilient services. The challenge we have is gaining access to properties which of course would expand availability. We look forward to working with the City to seek solutions to this issue."

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

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brooks7
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brooks7,
User Rank: Light Sabre
6/21/2015 | 2:53:38 PM
Re: Brilliant
Dennis,

 

Agreed on the use of the free market here.  I have come to believe that we really only have 2 choices:

- High Speed Broadband as a Universal Service

- Structural Separation

I think the latter is impossible politically and the former only slightly less so.  That is why I find the focus on Net Neutrality so wrong headed.  We fixed a problem that did not exist yet and wasted whatever political capital that we had because of that.

Steveq,

You make it hard to respond to you because you are not using complete sentences.  I think you are asking how FiOS can be stopped if it is a great solution for the customer.  The reason is what I am saying here.  Value to the customer and value to the supplier are NOT the same thing.

 

seven
kq4ym
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kq4ym,
User Rank: Light Sabre
6/21/2015 | 11:04:11 AM
Re: Brilliant
It's always interesting to see how those folks get contract language that allows an "out" and then even when it's maybe apparent even that language won't cut it, there's still no penalty imposed but just lots of talk and delays...
steve q
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steve q,
User Rank: Light Sabre
6/20/2015 | 4:03:19 PM
Re: Brilliant
If verizon like to tell there customer that fios is the answer but stop how can the do anything right. The wireless side is nice but the issue is the price of data and can't match that of fios.
mendyk
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mendyk,
User Rank: Light Sabre
6/20/2015 | 9:54:00 AM
Re: Brilliant
seven -- You've identified the fundamental flaw in how this whole residential broadband thing is playing out: Regulators are trying to mandate behavior that runs counter to some of the operators' business interests. The flaw can be traced to relying on free-market dynamics to execute what amounts to social and economic policy.
MordyK
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MordyK,
User Rank: Light Sabre
6/19/2015 | 4:51:09 PM
Re: Brilliant
The same way you sell added professional services to businesses, can be repeated with residential. The upcoming wave of the "connected home" will require alot of assistance for most customers, and the last mile providers are in prime position to be a big part and beneficiary of that.

A casual glance around shows the thriving market for low-voltage installation and management companies.

The difference between business and residential is that they need to truly embrace an open ecosystem ala the app stores, and not try to pick and choose the winners as has been their historical modus operandi.
brooks7
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brooks7,
User Rank: Light Sabre
6/18/2015 | 3:04:53 PM
Re: Brilliant
Dennis,

I don't disagree....but the thing is under what business conditions can we get them to do more?  That is I think the regulatory question of our day.  Verizon is not going to turn off FiOS.  But remember how investors treated them for starting FiOS and ask yourself what would make anyone do it again?

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
6/18/2015 | 2:17:06 PM
Re: Brilliant
Well, the fiber plant that VZ and other operators have already installed is going to be worth something to someone -- and it doesn't say much for the visionaries if they spent umpty-ump billions on networks that they now consider worthless. Here's hoping that less lofty operators like Frontier scoop up these assets and do something positive with them.
brooks7
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brooks7,
User Rank: Light Sabre
6/18/2015 | 2:11:47 PM
Re: Brilliant
Dennis,

And cable companies will be right there to deliver wireline broadband.  What you have at your house is not going to impact your 100G interface decision at your workplace.  So, there is almost no synergy there.  Again, the whole point is residential wireline investment is going to continue to decline and nobody seems to pay attention to it.  They would much rather have a philosophical debate than a practical one.

 

seven

 
brooks7
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brooks7,
User Rank: Light Sabre
6/18/2015 | 2:08:46 PM
Re: Brilliant
msibley,

There the case is different.  Verizon has shown no plans to get rid of its FiOS assets in its core territories.  It is getting rid of the former GTE properties.  Having to manage those widely dispersped networks may have been a lot of work for not a lot of gain.  And they sold them for a pretty penny ($10B).

But there is one other element that you guys forget, they get to dump a boatload of union employees when they get rid of residential wireline.

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
6/18/2015 | 2:07:31 PM
Re: Brilliant
Without a network, there's nothing for OTT to ride on top of -- so that's my simplistic point. And I agree that Verizon may not have the internal will or interest to continue on this path. But somebody's gonna have to do it. The greater good will be best served if Verizon divests that part of the business sooner rather than drag this out another half decade or so. Just as a side point about "business services," the economy is changing to the point that businesses also want anytime, anywhere connectivity.
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