Hoping for FiOS, some cities now feel abandoned by Verizon

Posted: April 29, 2012

Years after Verizon Communications Inc. wired the suburbs of Boston, Buffalo, and Baltimore with superfast Internet, more than one million residents in the poorer urban neighborhoods of those metro areas are still waiting for FiOS.

Ditto, according to a union representing Verizon workers, for Syracuse, Albany, Erie, Scranton, and other Northeast cities. No FiOS.

City officials didn’t think that would last. They believed — hoped — that Verizon would get around to them to compete head to head with the cable companies.

But now, they say, those hopes are dashed. Verizon Wireless, a subsidiary of Verizon, has formed partnerships with Comcast Corp., Time Warner Cable, and Bright House Networks that critics consider a truce among the telecom giants that could diminish price and customer-service competition for high-speed Internet. There will be little incentive, they say, for Verizon to expand FiOS into their cities.

Others have even suggested that Verizon could abandon FiOS.

Verizon denies any such plan. “That is a groundless concern,” general counsel Randal S. Milch told senators at a public hearing in March in Washington. The company is investing $23 billion into FiOS, he said, and it won’t walk away.

But an additional investment of billions in FiOS seems unlikely, leaving some cities feeling as if they are permanent FiOS have-nots.

“It’s an arrogant stand,” Buffalo Councilman Darius Pridgen said in a phone interview Thursday, referring to Verizon’s decision to upgrade other areas in upstate New York with FiOS, but not financially distressed Buffalo. “It’s advertised in the city, but it’s not available in the city.”

Buffalo residents, Pridgen said, have spoken out and held demonstrations over FiOS — or the lack of it. As regards negotiations with Verizon for FiOS, he said, “we’re at a dead-end.”

Based on deals announced late last year, Verizon Wireless will acquire wireless spectrum from the cable companies for $3.6 billion. In separate agreements announced at the same time as the spectrum sale, Verizon Wireless and the cable companies agreed to form joint marketing partnerships to sell TV, Internet, traditional wirelike phone service, and mobile phone service. Comcast and Verizon Wireless launched the marketing partnerships early this year in several cities on the West Coast.

The Federal Communications Commission and the Justice Department are analyzing the deals for public benefits and anticompetitive concerns. Some believe that the deals should be rejected, but others don’t think they pose a threat to consumers. One concern is that Verizon Wireless, the nation’s largest wireless carrier, could be hoarding spectrum and making it difficult for others to compete.

Verizon and Comcast say the deals benefit consumers by putting spectrum into the hands of Verizon Wireless, which can use it to satisfy booming demand placed on wireless services. In addition, they say, the quad-play bundles expand choice for consumers, who can buy the four services in one place at one time.

Verizon officials say the $23 billion it is putting into FiOS allows the upgraded network to connect 18 million homes, or about 70 percent of its traditional phone footprint, in 12 states and Washington. That rollout will take several more years. The company made economic decisions on where to invest in FiOS, and in 2009, it indicated that it would not be expanding FiOS to new franchise areas.

Verizon spokesman Edward McFadden said the decision to build the FiOS network was not popular on Wall Street. “We got hammered,” he said, “and our shareholders were punished for this.”

Verizon will have a strong incentive to maintain its FiOS business because of the huge investment and because it is now such a large revenue producer, McFadden said. As for why FiOS was deployed where it was, he said, “This is what we could do within the window, and that’s where we are.”

Philadelphia made the cut. In early 2009, Verizon obtained a 15-year video-franchise license by agreeing to extend the FiOS network throughout the city by 2016. Officials here insisted that Verizon expand the service in both poorer and more-affluent neighborhoods at the same time, and set benchmarks.

City Councilman James Kenney recently called for a public hearing amid complaints that Verizon was running FiOS lines, but not connecting the lines to individual homes.

Over Verizon’s objections, City Council approved a resolution April 19 to hold a public hearing on the matter. No date has been set. Verizon spokesman Lee Gierczynski said the company agreed as part of its franchise agreement to provide information on the build-out privately to the city, but not publicly.

The first benchmark, Gierczynski said, is for Verizon to expand FiOS to 45 percent of the city’s homes by 2013, and the company “is on target to meet or exceed that goal.”

Baltimore wishes it had the same deal. It’s a Comcast-only city, and that steams Councilman William Cole, who represents 25 neighborhoods and the downtown area.

Verizon advertises FiOS at Orioles games and at the Inner Harbor entertainment district in the city, Cole said, but “you call them, and you can’t get it here. … It’s clear we were skipped for a reason.”

Not extending FiOS could cost thousands of jobs, said Debbie Goldman, a policy director for the Communications Workers of America, which represents Verizon’s unionized employees.

Competition between the cable companies and the phone companies was the promise of the sweeping 1996 Telecom Act, Goldman said.

“They wanted deregulation, and they said they would compete,” she said. “This marks the beginning of the surrender, this truce.”

Comcast executive David Cohen has said the agreements would not diminish competition between the cable giant and Verizon.

At the March public hearing, Milch said: “We have every incentive to continue to compete hard with FiOS against cable.”

Contact Bob Fernandez at 215-854-5897 or bob.fernandez@phillynews.com.

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