New York City today filed a lawsuit against Verizon. The city claims Verizon failed to complete a citywide fiber rollout by 2014 as required in its cable franchise agreement.
Verizon disputes the city's allegations. The telecom giant says that it is not required to install fiber in front of each building. Meanwhile, nearly 1 million New York households do not have access to Verizon's fiber-based FiOS service. Verizon says it has brought its network to 2.2 million NYC residences, while the city has an estimated 3.1 million households.
The city government's complaint in the New York State Supreme Court seeks a declaration that Verizon is in breach of its obligations and an order to complete the project. The 2008 agreement, which gave Verizon a citywide cable television franchise, said Verizon must "pass all households" with its fiber-to-the-premises network by June 30, 2014. The agreement covered only cable television, but the fiber build-out also provided faster Internet speeds because the same fiber is used to deliver both services.
"This build-out required Verizon to install fiber optic cable—in underground conduit, along above-ground utility poles, or otherwise—in front of (or behind) each residential building," the city's complaint says. NYC says that even Verizon agreed with this interpretation, quoting a Verizon statement in 2008 that said its fiber-optic distribution facilities "will have to be run past all of the residence locations in the city."
But, according to the complaint, Verizon hasn't passed all residential buildings with fiber, and it has failed to complete many requested installations.
"Verizon has failed in many instances—believed to number at least in the tens of thousands—to timely complete installations as requested by potential subscribers, leaving such New Yorkers without the desired television service," the complaint said. "Indeed, Verizon has failed even to accept many New Yorkers' requests for FiOS service, although the agreement requires it to do so."
A Verizon spokesperson told Ars that "Mayor [Bill] de Blasio should read our agreement with the city. Then he could clearly conclude—as others have before him—that we have lived up to our obligation 100 percent. We'd appreciate his support in getting access to buildings where landlords resist allowing us to build fiber to people’s homes."
In a statement today, de Blasio said, "Verizon promised that every household in the city would have access to its fiber-optic FiOS service by 2014. It’s 2017 and we’re done waiting. No corporation—no matter how large or powerful—can break a promise to New Yorkers and get away with it.”
Verizon proposes investment plan
Verizon also said it has "proposed investing nearly an additional $1 billion in fiber in NYC over the next four years." The company also wants 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."
According to the lawsuit, Verizon agreed, as part of the franchise agreement, to make service "available to all residential dwelling units" in the city.
Verizon told the city last month that there are 36,000 outstanding requests for NSIs, or "non-standard installations" (these are residences where Verizon can't immediately provide service). But the real number of people who don't have service despite requesting it is higher, the city says.
The lawsuit says:
[S]ome residences requesting service have been told by Verizon that FiOS was not available in their area and that installation orders would not be accepted, notwithstanding Verizon's representation to the city that, no later than November 2014, it passed the premises where these residences are located. Verizon's failure to fulfill its installation and related obligations with respect to these residences constitutes a further breach of... the agreement. An untold number of city residents have been deprived of FiOS service because of Verizon's breach in this regard.
The definition of “pass”
New York began its fight against Verizon in June 2015. This is when the city's department of information technology and telecommunications (DoITT) issued an audit report that said Verizon failed to complete its obligations. Attempts to resolve the dispute were unsuccessful, and, in September 2016, the city notified Verizon that the company is in default of the agreement and that it could face a lawsuit. The franchise agreement allows NYC to seek monetary damages if Verizon fails to live up to its commitments.
Verizon disputed the allegations again in a letter to the city on Friday. The telecom accused New York of using a different definition of the word "pass" than the one used when the cable franchise agreement was signed in 2008. Essentially, Verizon argues that a home has been passed with fiber as long as the wires are near enough to a building that service can be installed in a reasonable amount of time and if a property owner provides access to the building.
"In negotiating the agreement, both parties understood and agreed that Verizon would generally place its fiber-optic network along the same routes as had been used for its copper network and would use similar strategies for accessing individual buildings," Verizon wrote. "The obligation to 'pass' all buildings in the city was based on and consistent with that approach."
Verizon said its argument is confirmed by the fact that the NYC/Verizon agreement "intentionally omitted language" saying that households are passed only when facilities "have been installed in the street fronting the building," even though that language was used in the city's agreements with other cable providers.
Verizon also said that the DoITT verified Verizon's progress in meeting its deployment milestones four times in previous years.
"A political change in City Hall is not a basis to reinterpret long-agreed contractual provisions or to ignore years of consistent DoITT findings," Verizon said. (Republican Michael Bloomberg was mayor of New York when the cable franchise agreement was signed in 2008, while Democrat Bill de Blasio has been mayor since 2014.)
The city's previous findings during the earlier years of the fiber construction verified that Verizon had met requirements to pass certain percentages of buildings in the city by dates specified in the agreement. This allowed Verizon to reduce the amount of its performance bond. However, the city never agreed with Verizon that it had passed 100 percent of buildings.
NYC's lawsuit acknowledges that the cable franchise agreement doesn't define the word "pass," but it argues that it is "well understood within the telecommunications industry." NYC pointed to a definition used by the Fiber to the Home Council industry group, which said that the definition of "homes passed... excludes premises that cannot be connected without further installation of substantial cable plant such as feeder and distribution cables (fiber) to reach the area in which a potential new subscriber is located."
Verizon blames landlords and NYC officials
Verizon has blamed landlords for not providing access to buildings. But some building owners have said they sought fiber installations, but Verizon didn't follow through. City officials allege that Verizon has demanded bulk agreements or exclusive agreements from multi-unit residential buildings that would limit or eliminate competition from other providers, even though the Federal Communications Commission bans exclusive video service deals in multiple-dwelling units.
Verizon also blames the city for not helping the company gain access to buildings. Verizon writes to the city:
[F]or over a year now, we have asked the city to provide us with a competitively-neutral letter to landlords advocating for property access; we have yet to see even a draft of that letter. We also have proposed increased use of traditional telephone pole lines in the public rights of way and provided you data showing how these resources could significantly reduce outstanding service requests, but those proposals have been rejected.
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