NYC Sues Verizon Over FiOS Buildout Obligations

March 13, 2017–New York City today filed a lawsuit against Verizon Communications, Inc., in a state court alleging that the company has not complied with a cable franchise agreement requiring it to deploy its fiber network to every household in the city by 2014. “Verizon must face the consequences for breaking the trust of 8.5 million New Yorkers. 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,” Mayor Bill de Blasio said in a statement today.

Verizon and the city have been disputing the requirements of the cable franchise agreement since 2015 when a city audit showed that Verizon was not in compliance with the 2008 agreement with the city under which it committed to extend its FiOS network to every household across all five boroughs by June 30, 2014.  New York City’s Department of Information Technology and Telecommunications (DoITT) subsequently informed the company that it was in default of a cable franchise agreement.

During its negotiations for a city franchise in 2008, Verizon agreed that the entire city would be wired with fiber optic cables by June 2014, and every household that requested FiOS would get the service within six months to a year. The June 2015 audit showed that blocks claimed by Verizon as completed do not have the necessary equipment installed to deliver service and that Verizon has been telling certain residents there are no plans to being FiOS to their address. According to the default letter, Verizon has failed to “pass” all residential buildings in the city by the deployment deadline (which had been extended to November 2014) “and has failed to do so by date, in that it has not run fiber immediately in front of or behind each residential building in the city.” Therefore, Verizon is in default of its obligations under section 5.1 [of the franchise agreement].” In addition, the letter states that Verizon “improperly reduced, from $50 million to $15 million, the performance bond required under section 15.9 of the agreement on the basis of Verizon’s incorrect representations that Verizon had met the prescribed deployment schedule, when in fact it had not.”

Verizon refuted the audits findings, and the claims made by the DoITT. Among other things, Verizon said that the franchise with the city only covers obligations for TV service, and that there are no requirements for the buildout of high-speed Internet access.  Verizon also disagrees with the city’s definition of “passing” a home. The company claims that “passing” a home means that its wires are close enough to a building that it can install service within a reasonable amount of time and if it is provided access by the landlord or property owner.

Verizon told the city in a letter Friday that 2.2 million households in New York City currently have access to FiOS and that it’s committed to expanding its fiber reach to the remaining 1 million households.  Despite Verizon’s promises, the city filed a lawsuit today in the New York State Supreme Court, seeking a declaration that Verizon is in the breach of the franchise agreement and should be ordered to complete the fiber buildout.

According to the lawsuit, the cable franchise agreement required Verizon to install fiber optic cable “in front of or behind each residential building” in the city.  Not only has Verizon failed to pass all residential buildings with fiber, the complaint further alleges that the company has failed to complete thousands of 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. Indeed, Verizon has failed even to accept many New Yorkers’ requests for FiOS service, although the agreement requires it to do so,” the complaint states.

In addition, the city said in the lawsuit that it’s well understood 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 to reach the area in which a potential new subscriber is located.”

Verizon didn’t immediately respond to a request for comment in response to the lawsuit today. (“The City of New York v. Verizon New York, Inc., and Verizon Communications, Inc.,”) – Carrie DeLeon, carrie.deleon@wolterskluwer.com

Courtesy TRDaily