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New York City declares Verizon broke FiOS rollout agreement, could sue company

New York City and Verizon have been tangled in a spat over Verizon’s failure to fulfill its agreement to offer FiOS in all five boroughs of the city by 2014. Verizon insists that it fulfilled the agreement, while New York City takes a very different view.

New York City has released the result of an extensive audit into Verizon’s practices, and they don’t paint the company in a flattering light. On July 15, 2008, Verizon and NYC agreed to an arrangement in which Verizon would be granted a cable license to bring cable TV to every household in NYC via a fiber-optic line. As a result of this decision, the FCC issued declarations in 2008 and 2009 that prevented New York City’s Department of Information Technology and Telecommunications (DoITT) from continuing to regulate cable TV prices. Thanks to Verizon’s entering the market, the FCC believed the cable TV market in NYC was now robust enough to prevent any single provider from abusing customers by monopolizing the market and raising prices.

Under the terms of its contract, Verizon has six months to fulfill a customer request for FiOS once that property has been “passed” by its fiber optic line. If the order cannot be fulfilled within six months, Verizon must notify the resident and state a new deadline of not more than six months for fulfilling the order. This is referred to as a non-standard installation, or NSI. If Verizon cannot gain access to a multi-unit dwelling via its landlord, it is entitled to commission the NY Public Service Commission to require the landlord to allow Verizon access to the property. Crappy landlords, in other words, aren’t allowed to prevent customers from buying FiOS.

The city has accused Verizon of simultaneously declaring households as “passed” for the purpose of fulfilling its contract by the 2014 deadline while simultaneously refusing to accept first-order requests for an NSI. Verizon fought the requirements of the audit at every turn, declaring that DoITT was required to prove auditors’ needed to view documents. Audit meetings were staffed with attorneys, but the company refused to provide documentation that would allow the city to consider whether it had met its requirements. Based on the information the auditors were able to extract, 74.68% of the NSI’s Verizon was contractually obligated to perform were not completed within 12 months of a customer requesting service.

Verizon has attempted to justify its delays by claiming that property owners refused to allow it access, and the company did file 3,177 petitions to be allowed access to multi-unit dwellings as per its agreement with NYC. Testaments taken from multiple property managers revealed that Verizon — in complete breach of its contract — refused to wire apartment buildings it listed as “passed” in its report to the city unless 100% of the residents in that building committed to buying FiOS. Installation times in buildings that already had FiOS, according to the property managers in question, ranged from six months to two years.

This next bit is long, but it’s worth the read (PDF).

Verizon’s working definition of “passing” a household with fiber optic cable is inconsistent with industry practice and is inconsistent with Section 5.4 of the franchise agreement. Since the agreement does not define “passed” we turn to the industry for a definition. In its glossary of common terms the Fiber to the Home Council states: “The number of “Homes Passed” is the potential number of premises to which an operator has capability to connect in a service area, but the premises may or may not be connected to the network. This definition excludes premises that cannot be connected without further installation of substantial cable plant such as feeder and distribution cable (fiber) to reach the area in which a potential subscriber is located.” (emphasis added).

Verizon maintains that “passing” a premises means “going by, past, beyond, or through a place (such as a building), and include[s] no requirement as to how close a place must be approached in order to constitute a ‘passage.’ ” But the argument that “passing” a premises with fiber optic cable includes no requirement of any proximity to that premises is manifestly untenable…

Although Verizon claims it “passed” all residential premises, Verizon still does not accept orders from all City residents. In fact, it still informs residents that service is “unavailable” at an address if their network has not been created on the block. For example, we performed two recent inquiries on Verizon’s website for service availability for 675 Academy Street and 590 West 204 Street and the website displayed notices that both property locations were unavailable for service on May 7, 2015. Verizon considers all the addresses on a block “passed” if their fiber is in conduit under or on poles over any street that serves as a boundary to that block. Verizon does not deem it necessary for that fiber to have been pulled to a point of entry on the block for the block to be deemed passed. Our understanding is that the cable television industry defines a building as “passed” if it is immediately adjacent to cable facilities and an order for service can be processed by the cable company.

The audit also notes that 23.6% of blocks Verizon deems “passed” have zero buildings currently receiving FiOS, with no facilities installed on the block. Verizon claims to offer service to all of New York City, but its customer service reps regularly tell NYC residents who call seeking FiOS that FiOS is not and will not be available at their address. Verizon is also accused of agreeing to provide service at one rate (in exchange for bulk access to an entire building), then doubling that rate once the building was wired.

New York City has formally notified Verizon they are in material breach of the 2008 contract. A lawsuit is thought to be in the works unless Verizon does an about-face and begins fulfilling what it’s been paid to do. The company has faced similar accusations in other states, but both New Jersey and Philadelphia caved and let the company off its hook. The company has also faced widespread criticism for its deliberate neglect of its copper infrastructure in favor of moving customers to fiber deployments, which do not carry the same service guarantees under federal law. Its business and advertising practices are also the subject of widespread criticism and, in some cases, investigation.

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