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.