City Room: Verizon Takes A Step Into City�s TV Market

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By Ken Belson

For years, New Yorkers frustrated with their cable television have dreamed of unplugging Cablevision and Time Warner Cable. The problem has always been where else to go. The two companies have been the only options in most of Manhattan and other densely populated parts of the city where satellite television � the most logical alternative � is hard to hook up.

Verizon just moved a step closer to becoming a realistic second choice this morning when the city’s Department of Information, Technology and Telecommunications signed off on its application to sell television over its new fiber network. The service, called FiOS TV, is already available in towns on Long Island, and in Westchester, New Jersey and other surrounding suburbs.

The effect of the competition has been immediate. Cablevision, Time Warner and Comcast have been selling rival bundles that include discounted television, phone and broadband services. Some say customer service has improved. And the companies have been offering faster Internet connections and more high-definition channels at no extra cost. Customers threatening to switch providers have also been given several months of free Cinemax and other pay television channels.

“Most New York residents see they have no alternative for video, and we hope to be the alternative,” said Monica Azare, Verizon’s senior vice president for public policy in New York and Connecticut. “We are building it and hope they will come.”

But don’t reach for the phone just yet. Verizon’s application now must be approved by at least five of the six members of the city’s Franchise and Concession Review Committee, which includes the mayor, the comptroller, the corporation counsel, the director of the Office of Management and Budget, a mayoral designee, and one vote for all five borough presidents. Public hearings are scheduled for May 20.

The Public Service Commission in Albany must sign off on the deal after that. If all goes well, the company expects to start selling television signals in the city by the end of the year.

But that does not mean everyone will be able to buy it then. Verizon’s fiber network passes only 20 percent of the city’s 3.1 million households, Ms. Azare said. Verizon has promised to reach every home in the city with its network by June 30, 2014.

But only Staten Island has near-complete coverage now. In Queens, only 15 percent of homes and apartments are within reach of Verizon’s fiber-optic lines. In Brooklyn, the rate is 12 percent. According to a copy of the company’s application obtained by The New York Times, Verizon will not pass more than half the homes in all five boroughs until 2011.

And Verizon is installing its fiber network in neighborhoods based not just on potential demand, but also on whether older, copper networks need to be replaced and how close those lines are to the new fiber network.

Verizon and DoITT have developed benchmarks that ensure that neighborhoods aren’t left behind.

“We wanted to make sure they didn’t cherry-pick the wealthy areas of the city, so we set up some milestones so service gets distributed in an even way,” said Paul J. Cosgrave, the commissioner of DoITT.

The deadlines are fungible, though. Verizon can get a 12-month extension if certain benchmarks for signing up television customers are not met. And Verizon still must reach agreements with landlords to wire their buildings. Then Verizon’s technicians must get inside and run their fiber lines to every apartment.

Still, Verizon has made “a historic concession” by agreeing to pass every home in the city, said Dave Burstein, editor of DSL Prime, a newsletter dedicated to all things broadband. Verizon will ultimately provide connections of up to 50 megabits per second, more than enough for all but the most avid geeks.

“What Verizon is building for New York is one of the very best networks in the world,” Mr. Burstein said. “The questions become time and price.”

But Mr. Burstein raised questions about what is not in the agreement, including a promise by Verizon to provide open access to its network, a concept known as network neutrality.

“Verizon was going to settle for whatever the city asked because there is no way they would risk losing access to three million customers,” he said. “So there is no reason why the city couldn’t have demanded a neutral network, minimum service guarantees and lifeline prices,” or discounted prices for the most basic services.

This being America, consumers are likely to be pecked to death with fees and service charges, too. Juan Gonzalez of The Daily News wrote last week that Verizon wants to charge customers who cancel their video service early a $199 penalty.

Verizon said it would only charge customers who have bundles of services, not just television. But since most customers buy bundles, the effect is about the same.

Councilwoman Gail A. Brewer, a Democrat from Manhattan who is chairwoman of the Council’s Technology in Government Committee, also worried that if Verizon fails to its meet targets for introducing service, the penalties will not be stiff enough to hurt a company with more than $90 billion in annual revenue.

“This build-out has to be monitored very carefully,” she said. “Fines do matter, and if they are high enough, people will obey the law.”

DoITT is developing a formula for assessing penalties, and says Verizon has agreed to put up a $1 million cash security fund, a $20 million letter of credit, a $50 million performance bond and an unlimited guarantee.

But Ms. Brewer is hopeful that Verizon will also contribute to a fund that will provide computers and broadband connections to low-income families, the elderly and others who need assistance. The fund, other city officials said, is likely to receive $4 million from Verizon.

“You want to make sure you build out so the poor and rich are included,” she said.

I can’t wait until 2014 to get rid of Time Warner. Pleeeeeeeeease hurry up Verizon. At least scare them into not being so awful for the people stuck with them for a long time coming

� Posted by Manhattan never getting FiOS?

My local, long distance, cell phone, and web service are all Verizon now. What do they want next; my lunch money?

� Posted by Perley J. Thibodeau

We’ve had Verizon FiOS here in parts of Los Angeles for a few years now. Don’t go jumping ship, just yet. If you think big cable is bad, just try dealing with big telco when everything is coming through one company, phone, internet, tv, cellular. The package is not always the best deal.

Can you spell NYNEX?

� Posted by StevieD

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