Broken Promises by Big ISPs

One of the most frustrating things for regulators has to be when giant ISPs renege on regulatory deals they’ve negotiated and don’t follow through with their promises. Books could be written listing all of the times when big ISPs have promised to do something and then never did it.

I am reminded of one such deal when I read that New York City is suing Verizon over its broken promise to bring FiOS fiber to the city. The lawsuit states that almost a million households are still unable to get FiOS, although the company had promised full coverage when they got a franchise from the city in 2008. In that agreement Verizon promised to bring fiber service to the whole city by 2014. The agreement with the city required that Verizon bring fiber, in conduit, directly in front of, behind, or otherwise adjacent to every residential building in the City.

Verizon had a similar longstanding dispute with the State of Pennsylvania. Back in 2002 the company made a promise to bring DSL service to cover 80% of the state as a prerequisite for the company being relieved of a lot of regulatory oversight by the state. But Verizon never completed a lot of the needed upgrades and huge parts of rural Pennsylvania still didn’t have DSL a decade later.

I wrote a blog a few months back about Charter in New York. There the state had found that the cable modems deployed by the company were not technically capable of delivering anything close to the speeds that the company was advertising. Charter agreed to fix the problem, but five years later had made almost no upgrades and was recently sued by the State.

I could list more examples all day long and there have been disputes all across the country with major telcos and cable companies that have made deals with regulators and then either ignored the agreements or only implemented them in a half-hearted manner.

The problem is that there are really no regulatory penalties that are big enough to penalize an ISP for not doing what it promised. There have been fines levied, but those fines are never nearly as big as the profits or savings realized by the ISPs for ignoring the agreements with regulators. For example, it’s unlikely that lawsuits or penalties will be able to force Verizon to finish the FiOS build in New York City. I am sure the company built to the parts of NYC that made economic sense and decided, for whatever reason, that there is not sufficient payback to justify building to the remaining parts of the city.

And that’s what regulators fail to recognize – big ISPs make decisions based upon the anticipated return for stockholders. I think it’s likely that in many of these cases that the big ISPs had no intention of complying with their agreements from the start. The cynical side of me says that they are often willing to take the upsides associated with these kinds of deals – be that decreased regulation or the ability to complete a merger – while knowing up front that they are unlikely to ever complete whatever they have agreed to do.

I think we are likely to see another round of broken promises in a few years as we start moving towards the end of the FCC’s CAF II program. The big telcos accepted over $9 billion over six years to improve rural broadband to speeds of at least 10 Mbps. I’ve been getting feedback from a lot of areas in the country that those deployments seem to be behind schedule. It will certainly come as no surprise if one or more of the big telcos spends the CAF II funding without bringing broadband to the promised households, or else will deliver speeds under the promised levels. The FCC recently issued a warning to carriers telling them that it expects them to fulfill the CAF II commitments – and I suspect that warning is due to the same kind of rumblings I’ve been hearing.

But ultimately the FCC doesn’t really have any way to make these telcos complete the builds. They might withhold future funding from the telcos, but as the FCC keeps eliminating regulation it is going to have very little ability to enforce the original CAF II agreements or to take any steps to really penalize the telcos.

The saddest part of these various broken promises is that millions of real people get hurt. It’s been reported that there are significant pockets of residents in urban areas like New York City that still don’t have even one broadband provider. There are huge rural swaths of the country that are desperate for any kind of broadband, which is what CAF II is supposed to deliver for the first time. But I think we need to be realistic in that big ISPs often do not meet their promises – whether deliberately or not. And perhaps it’s finally time to stop making these big deals with companies that have a history of broken promises.

4 thoughts on “Broken Promises by Big ISPs

  1. Dear Doug:
    The unfortunate truth here — and this point transcends the field of telecom… we see it in the airlines, in non-telecom utilities, in sports teams business offices and all over the business world — is that some companies care; some companies are good for their word; and some companies are pillars of our society. These are not the companies for whom regulations and guidelines are written — they know how to act appropriately.

    And then there are the others… the companies for whom regulations are intended to rein in… the only way you tell that these companies, and their CXOs and spokespeople, are NOT lying is because their mouth is shut!!

  2. “The Book of Broken Promises: $400 Billion Broadband Scandal & Free the Net”, is the 3rd book in a trilogy that started in 1998 — and we put it into the record at the FCC as part of the ‘shut off the copper’ proceeding, and will also put it into the new, brain-dead, section 706 proceeding.

    I’ve been tracking the broken promises since the 1990’s, when my then clients– the companies that are now AT&T, Centurylink and Verizon, told America that it would rewire states, cities, schools and libraries with fiber, at speeds starting at 45Mbps in both directions. — And we documented the majority of states.

    Verizon NJ was to have its territories completed by 2010, PA was 2015, and CA was to have 5.5 million households wired — by 2000 (and spend $16 billion)

    Just read the chapter on Opportunity New Jersey; it is the complete story of 1 state; PA’s plan was fiber as well, starting in 1994; the DSL part in 2002 was a bait and switch from the original plan;

    And in both states, in the companies got the state to allow them to do ‘wireless’ at the speed of DSL as a substitute, and in both states, Verizon got billions extra in rate increases, multiple times, to pay for these upgrades.

    I should know — We used the NJ state law in 2012 to get 2 small towns upgraded to fiber in NJ — and then Gov. Christie put in a new head of the State PUC to do a ‘stipulation agreement’ to stop the original law that was still on the books.

    In short, nothing was ever built as stated or completed — ever, and the companies were able to game the regulatory system to get financial incentives, starting in 1993.

    New York city is just one of many casualties.

    And I note that these were the state-based utilities, where the wiring was supposed to be replaced with fiber.

    And a group of us have been filing about this at the FCC since 1998, when the FCC decided to ignore every state commitments and the billions collected in rate increases, and so almost everything in the book is missing from the FCC’s previous section 706 reports.

    So, free PDF book for your late-summer reading– and feel free to pass it around.

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