In 2006, New Jersey cut a deal with Verizon, signed into law as the Statewide Cable Franchise Act. In exchange for full franchise rights to the state, the company agreed to make its high-speed FiOS service available for the state's 70 densest municipalities, including poor areas in Newark and Jersey City that might not otherwise see coverage. It was a good deal for Verizon, letting the company cut one deal for the entire state — and for progressive legislators, it meant bringing world-class internet access to some of the poorest parts of the state.
Now, two of the state's biggest cities may be missing out on the deal.
A lasting disadvantage for Newark and Jersey City
Mayor Steven Fulop of Jersey City and Mayor Ras Baraka of Newark are expected to call a press conference to discuss whether Verizon is fulfilling its obligations under the act. Public records show that 21,392 different properties in Newark have waived their access rights under the franchise agreement, opting out of any right to FiOS availability. In Jersey City, that number climbed to 25,311, nearly a fifth of the city’s properties. In richer municipalities like Trenton, Weehawken, and Hackensack, that number never climbed above 3,000. Even after adjusting for population, there’s a significant difference, as shown in the chart below. In a statement to The Verge, Mayor Fulop’s office said he was "concerned" about the discrepancy, which could result in a lasting disadvantage for Jersey City.
The problem centers around a loophole in the franchise agreement, which lets Verizon off the hook if landlords demand payment for access to their property. Companies need permission to lay fiber to a building, both for tearing up the lawn and simply getting inside the building, and if property owners simply refuse, there's little a company can do. In some cases, landlords abuse that right, receiving kickbacks for keeping a building exclusive to a specific company. The FCC ruled in 2008 that those kickbacks are illegal, but there's little enforcement, and it means that multi-tenant buildings will sometimes flatly refuse new broadband offerings. Since Verizon can’t force property owners to take the deal, the franchise agreement says that any property that refuses access to Verizon will waive its rights to the company’s fiber offering. But each block that refuses is another expensive portion of fiber that no longer needs to be paid for, and critics are concerned that Verizon is exploiting that loophole to write off many of the state’s poorest areas.
"You have all these landlords that have no idea that they denied Verizon access."
Normally only a small portion of buildings will refuse to get wired, but in both Newark and Jersey City, the waivers are off the charts — and the cities' mayors aren't happy about it. Many critics blame the uptick on shady sign-up practices from Verizon. "What we understand the practice to be is that, if you're in a wealthy high-rise next to the water in Jersey City, they will bend over backwards trying to get into that building," says Seth Hahn of the Communication Workers of America union, which has supported the mayors in their efforts to get more cable laid. "But if you live on the other end of the tracks, they'll send you a letter saying, 'We'd like access to your building.’" After a labyrinth of phone calls and offerings, the landlord will often end up on a waiver list without realizing it, Hahn says.
Verizon doesn't dispute the waiver numbers, but says the forces driving those waivers are more complex than they seem. "Unfortunately for tenants in some buildings in these towns, their landlords do not want Verizon New Jersey’s FiOS service," said a company representative. "However, if a customer in one of these building requests service, Verizon New Jersey files a petition for Mandatory Access with the Board in order to be able to access the building and serve the customer." The company pointed out that inadequate electrical grounding, architectural limitations, or even aesthetic objections might also make access to a given property impossible.
Still, critics like the CWA see a pattern in the disproportionate focus on Newark and Jersey City. Verizon is less likely to recoup its FiOS investment in poorer areas, so each waiver there makes the overall project more profitable. Actively soliciting more waivers might not be an explicit violation of the franchise agreement, but it would leave a lot of landlords out in the cold. According to Hahn, that’s exactly what’s happened: "You have all these landlords that have no idea that they denied Verizon access."
Neither the union nor the mayors have any hard proof that Verizon is pushing for more waivers in poorer areas, but experts say the strange pattern of exemptions suggests there's something out of the ordinary. "The disparity does raise real questions," says Harold Feld of Public Knowledge, an open internet non-profit that isn't involved in the New Jersey agreement. Feld says the strange distribution could also be explained by particularly consolidated landlords in overrepresented areas or an abundance of single-family homes in underrepresented ones, but neither explanation seems plausible based on the current data breakdown. "I would actually expect to find more buildings in the better part of town subject to building lock," Feld says. "If it is concentrated in the areas where Verizon doesn't want to deploy, that seems like an awfully strange coincidence."
"That seems like an awfully strange coincidence."
It’s particularly strange given Verizon’s ongoing ambivalence toward its FiOS offerings. The company has said publicly that it has no plans to continue building out the FiOS network once the current legal obligations are met. The company faced similar complaints over its agreement to build out fiber to all New York City residents, ultimately leaving more than a quarter of the city without access.
For those concerned about the disparity, the larger question is why it took two mayors to raise red flags about the data. Verizon was reporting the waivers to New Jersey's Board of Public Utilities, but the board seems to have exercised little oversight over the process. Even after the mayors raised concerns about coverage, the board seems to have refused to cooperate, and it took a public records request to find out how many waivers were being served. Replying to that request, the board blacked out the justification for the waivers, so we're still in the dark as to how Verizon justified the disparity to the board. As a result, fiber advocates like Hahn see the Board of Public Utilities as even more of an adversary than Verizon itself.
Still, it’s unclear where the fight might go from here. The board is ultimately responsible for regulating Verizon’s franchise obligations, and it’s unclear what the mayors might do to force a more aggressive stance. For now, the hope is just that Verizon will decide to build out more fiber on its own, and Newark and Jersey City will finally get the fiber they were promised in 2006. "Either mayors can put pressure on Verizon to act ethically, or we can wait for Chris Christie to appoint regulators who are not in the pocket of the industries they're supposed to be regulating," says Hahn. "We just sort of thought it was no longer appropriate to wait for the second one."
4:09 PM ET: Updated with comment from Verizon.