New York City officials yesterday notified Verizon that the company is in default of an agreement to bring fiber connections to all households in the city and could file a lawsuit against the company.

The road to a potential lawsuit has been a long one. In June 2015, New York released an audit that found Verizon failed to meet a commitment to extend FiOS to every household in the five boroughs by June 2014. City officials and Verizon have been trying to resolve the matter since then with no success, as Verizon says that it hasn't actually broken the agreement.

The default letter (full text) sent yesterday by the city Department of Information Technology & Telecommunications (DoITT) says Verizon has failed to pass all residential buildings in the city with fiber. As of October 2015, there were at least 38,551 addresses where Verizon hadn't fulfilled installation service requests that were more than a year old, the letter said.

"Moreover, Verizon improperly reduced, from $50 million to $15 million, the performance bond required [by] the Agreement on the basis of Verizon's incorrect representations that Verizon had met the prescribed deployment schedule, when in fact it had not," the letter said. City officials demanded that Verizon restore the bond and wants a response within 30 days. The default letter also accuses Verizon of failing to make records related to its provision of cable service available to the city during its audit.

"Officials say they could sue Verizon unless the carrier shows clear plans for stepping up installations," and that the notice is the first step in that process, The Wall Street Journal reported. The citywide fiber agreement lets NYC seek monetary damages from Verizon if it fails to deliver on the fiber promises.

Verizon told Ars today that it "will defend the good work done by our company" if the city chooses to sue. Verizon has made Internet and TV service available to 2.1 million NYC homes, the company said.

“It is unfortunate and disappointing that the City is taking an adversarial approach to the only company that has challenged New York City's cable monopolies," Verizon's statement said. "The City has now chosen not to work with us to resolve impractical processes for getting access to more buildings which seems at odds with bringing the benefits of competition to New Yorkers."

City officials told The Wall Street Journal that the situation hasn't improved much since last year's audit. "The city recently sampled 52,000 addresses for FiOS availability, and found that outer boroughs were more likely to have access than Manhattan," the Journal report said. "For instance, 90 percent of Staten Island residents could likely get FiOS within seven days, while the same is true for just 19 percent of people in central Brooklyn and 11 percent in upper Manhattan.

Verizon also hasn't made FiOS available to two-thirds of the city's 300 or so public housing developments, which house more than 400,000 people, the report said.

Verizon made its citywide FiOS commitment in 2008 in exchange for a cable television franchise. Technically, Verizon is only obligated to provide TV service, but Verizon provides Internet and phone access over the same wires.

Verizon claims it has met the requirement to pass all households with fiber, but Verizon and the city disagree over the definition of "pass." Verizon says its fiber doesn't actually have to be in front of a building in order to "pass" it, as long as it's close enough to buildings that Verizon can provision service without delay. The city's default letter says Verizon hasn't met the agreement since "it has not run fiber immediately in front of or behind each residential building in the City."

Verizon has blamed landlords for not providing access to buildings. But the city's audit report found evidence that Verizon demanded exclusive agreements from landlords that would shut out other providers, in violation of the franchise agreement.

In the 15 months since the city's audit report, Verizon has made "little progress made in completing its commitment, and [offered] no viable plan for how to complete it," DoITT Commissioner Anne Rose said in a statement provided to Ars. "With very little getting accomplished through discussions, we have been given no choice but to send Verizon a notice of default under several provisions of the franchise agreement. We expect Verizon to take this notice seriously in order to fulfill its promise to fully serve all five boroughs.”