Verizon sued by New York City over Fios build-out commitment

New York City
Verizon said that deploying fiber as quickly as the City of New York wants would "impose immeasurable inconvenience and hardship" on residents.

Verizon is once again squaring off against New York over claims from the city that the telecom giant did not live up to its Fios build-out promises.

In a lawsuit (PDF via Ars Technica) filed in the New York State Supreme Court on Monday, the city said that Verizon’s Fios rollout has only reached 2.2 million households, falling short of the 3.3 million estimated when the telco made an agreement with New York City in 2008.

New York mayor Bill de Blasio accused the service provider of "breaking the trust" of millions of New York residents.

"Verizon promised that every household in the city would have access to its fiber-optic FiOS service by 2014," said de Blasio in a statement. "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."

Ray McConville, a Verizon spokesman, told FierceTelecom that Verizon can currently provide FiOS service to 2.2 million households in New York City.

“On the residential side, 2.2 million homes can actually order the service today and get it within a week,” McConville said. “The reason for the disconnect between the amount of homes passed and how many can actually order service has everything to do with getting access from landlords for those properties.”

Unlike wiring single-family homes, wiring in New York City means going into multi-dwelling units (MDUs). Verizon has to get permission from building owners to get access to each building and then must wire each living unit with necessary cable to carry the service.

“In the denser, more apartment-centric MDU areas of the city, you have to get permission from the building owners to bring it in,” McConville said. “When you have a property that’s in the middle of a block, you have to run through all the neighboring properties to get there and the city is trying to retroactively rewrite the terms of the agreement that we came to with the Bloomberg administration.”

Under the agreement, Verizon agreed to deploy Fios throughout New York City by passing every residential building in the city. In conducting its fiber build-out, Verizon agreed to install fiber in various configurations: underground conduit, aerial utility poles, or in front of (or behind) each residential building.

However, in its complaint, New York City said that did not meet its obligation.

"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."

Understanding buildings passed

One of the key sticking points between New York City and Verizon is understanding the definition of passing a building with fiber.

This required Verizon to "have fiber up and down each street and avenue in the entire city."

The city alleged in its suit that Verizon failed to meet its obligation to "pass" every residential building in the City by the agreed upon deadline. Additionally, the city claimed that Verizon did not complete installations as requested by potential subscribers.

In a letter sent to the city (PDF) on Friday obtained by Ars Technica, Craig Silliman, Verizon’s executive vice president of public policy and general counsel, said New York City is using a different definition of the word "pass" than the one agreed upon when it signed its franchise agreement in 2008.

As part of Verizon’s plan, the service provider leverages the existing infrastructure such as conduit and paths that carried its existing copper pairs for traditional POTS voice service and DSL.

"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," Silliman wrote. "The obligation to 'pass' all buildings in the city was based on and consistent with that approach."

Using the existing pathways makes sense as Verizon doesn't have to invest additional capital on getting necessary permits from the city to construct new entry ways into buildings.

In the instances where Verizon can’t get permission from neighboring buildings to reach a customer, the city said Verizon should install more fiber along new paths. Silliman said that if Verizon had to construct new paths to carry its fiber into more MDUs, the build-out would cause more harm than good to the broader city.

“Digging up City streets and sidewalks on the scale that you are demanding would cause enormous and unnecessary disruptions to vehicle and pedestrian traffic, and would impose immeasurable inconvenience and hardship on countless residents and businesses,” Silliman said.

Landlords, city officials remain obstacles

Verizon said that two of the obstacles it has faced in rolling out Fios in New York City is finding common ground with building landlords and city officials.  

What has emerged is a war of words between Verizon, building owners, and city officials.

A number of building owners claim they asked Verizon to install fiber, but Verizon never fulfilled those promises. Meanwhile, city officials accused Verizon of demanding bulk or exclusive agreements to carry their service in MDUs. The FCC has banned service providers from making exclusive video service deals in MDUs.

Verizon said that it asked the city to provide it with a competitively-neutral letter to landlords advocating for property access.

“We’ve asked landlords for their help in solving the whole-access challenges,” McConville said. “We have asked them to produce a city noncompetitive letter to help us with the access issue.”

McConville added that in other cases some landlords either don’t respond or want to be paid for giving Verizon access to their building.

“Sometimes we have a hard time getting a response at all,” McConville said. “There are some who say (they) don’t want this construction to provide what they view is a duplicative service, and (some) landlords that want to be compensated for it.”

Fios expansion plan

Verizon said Monday that it is committed to expanding Fios availability to the city's remaining 1 million households over the next year.

As part of the next stage of its expansion effort, Verizon will spend an additional $1 billion to deploy Fios to the remaining locations in the city. Thus far, Verizon has spent $3.7 billion to deploy Fios in New York City.

“These are significant investments that communities across the country are clamoring for and would be thrilled to have,” McConville said. “You have a mayor that is outright turning his back on it instead of working with us to solve some of the challenges that are inevitably going to come up with a project of this scale.”  

At this point, Verizon said in February that it has 36,000 outstanding requests for NSIs, or "non-standard installations" for Fios. NSIs are residential locations where Verizon does not have the ability to provide service right away.

RELATED: New York City audit says Verizon failed to deliver on FiOS promise

However, the city claimed that the actual number of residential customers who have requested service is much higher than Verizon’s estimates.

This is not the first time Verizon and the city have clashed over the Fios build-out agreement.

In 2015, an audit conducted by New York City's Department of Information Technology and Telecommunications found that Verizon failed to deliver on its promise to provide fiber-optic service for television and broadband by 2014 to anyone who wanted it.

Verizon said in a statement to FierceTelecom that the audit is based upon erroneous information and incorrect interpretations of the company's franchise deal that was signed with the city in 2008, which allowed it to deploy FiOS throughout the city.