Verizon's battle with N.J. town shows strong thirst for rural wireline broadband

Sean Buckley, FierceTelecom

Verizon's (NYSE: VZ) ongoing war of words with Hopewell Township, N.J.'s officials over telephone service quality and lack of fruitful broadband service shows that consumers' desire for high speed wireline broadband is just as prevalent in rural markets as it is in large cities.

The telco recently found itself fighting claims that there were 156 "serious" and "chronic" telephone service complaints related on its copper-based wireline network in Hopewell Township. A number of customers said that they noticed line noise, static, crackling, buzzing and intermittent service outages during inclement weather.

Not surprisingly, Verizon refuted these claims, telling New Jersey's Board of Public Utilities (BPU) that residents reported "significantly fewer landline service issues to Verizon in 2014 than in 2012, representing a 38-percent decrease in the number of trouble tickets over that period."

The township's grievance with Verizon is part of an agreement New Jersey made with the telco over 20 years that's now apparently gone unfulfilled. Residents want the telco to deliver the 45 Mbps of symmetrical broadband service to every state resident by 2010 in exchange for tax breaks and other incentives they promised under the "Opportunity New Jersey" program.

Despite the fact that local consumers paid nearly $13 billion in surcharges with the hope of getting high-speed broadband service, they have yet to see anything four years following the original deadline.

However, Lee Gierczynski, Manager for Media Relations at Verizon, said that it is not true that Verizon's broadband obligation under ONJ could only be met through fiber facilities. He added that over half of Hopewell Township is already served by Verizon's fiber network, and that 49 percent of the customers served by that fiber network subscribe to FiOS services. 

"Verizon is turning (its) back on the commitment it originally made to cover the entire state," said Hopewell Township Committeeman Greg Facemyer, in a article. "This includes rural communities like Hopewell Township."

In nearby Greenwich and Stow Creek, a spate of customer protests over similar issues finally drove the telco to start installing fiber in those towns. Hopewell has been pleading with Verizon to do the same, but there are unfortunately two things that have emerged that will ensure they will never get fiber-to-the-home (FTTH) services.

For one, the BPU and Verizon crafted a deal in April where they would only be required to serve areas of the state that don't have FiOS yet with either existing DSL or wireless service. While the BPU agreed with the telco's argument that they never agreed to provide fiber-based service, it does not preclude Verizon from using fiber or other technologies to deliver broadband to customers.

In May, Verizon also put the kibosh on any potential of bringing its fiber-based service to any new towns during the Jefferies 2014 Global Technology, Media and Telecom Conference. Fran Shammo, CFO of Verizon, said that while they would honor existing agreements and enhance existing areas like New York City and Texas, other cities and towns like Hopewell Township will have to be content with a slow copper-based DSL line.

"We'll continue to fulfill our FiOS LFAs (license franchise agreements)," he said. "We will complete (the FiOS buildout) with about 19 million homes passed. That will cover about 70 percent of our legacy footprint; 30 percent we're not going to cover."

What this means is the remaining 30 percent of Verizon's customers will continue to be served by its aging copper network that will likely never be upgraded with fiber. They'll have the alternative of either paying for a less reliable wireless connection, DSL or switching to a cable competitor.

However, Verizon's unwillingness to build the fiber network into new areas is starting to cut into its overall FiOS results, a trend that continued into the third quarter of 2014. While Verizon added 162,000 new broadband subscribers in the third quarter of 2014, overall adds were down 6 percent from the 173,000 the telco added in the same period a year ago. Likewise, on the video side, Verizon netted 114,000 new FiOS video subscribers in the third quarter, down 16 percent from the 135,000 it added in the third quarter of 2013.

Verizon is hardly alone in not fulfilling a broadband promise to a remote community.

A similar issue arose at Qwest, now CenturyLink, in Silverton, Colo. In 2009, a report emerged that Silverton would not be connected to the rest of the state by fiber optics. At that time, Qwest had a $37 million contract with the state of Colorado to link every county seat with reliable high-speed Internet access, but the carrier admits it has no plans to run fiber 16 miles to the town by the time the contract ran out in 2010.

It's not hard to understand why large telcos don't like building in rural areas: The lack of customer density means that they can't get the same returns on their investments. Nevertheless, Verizon is ignoring the fact that the desire for high-speed broadband is not just an NFL city phenomenon and the answer to address these customers should be fulfilled with a dedicated wireline connection.--Sean

Updated article on Dec. 4 with additional information from Verizon.