When New York City officials ordered Verizon to finish the citywide fiber rollout that it promised but didn't deliver on time, the city also said Verizon must not demand bulk agreements from landlords in exchange for faster deployment.

Verizon agreed to wire up the whole city in 2008 in exchange for a lucrative cable television franchise, but it didn't meet the deadline of June 30, 2014. Today, parts of the city are still without access to the FiOS TV, Internet, and phone service, according to city officials. One reason for the missed deadline is that Verizon has demanded bulk agreements or exclusive agreements from multi-unit residential buildings that would limit or eliminate competition from other Internet providers, city officials allege.

Exclusive agreements could violate a Federal Communications Commission rule banning exclusive video service deals in multiple dwelling units.

We wrote about the NYC Department of Information Technology and Telecommunications (DoITT) audit report last week, but now let's dig into the bulk agreement allegations a bit further.

DoITT began by investigating claims from an unnamed property manager "that Verizon was not completing NSIs [requests for 'non-standard installation'] because they wanted exclusive agreements for certain buildings before completion of the NSI." The property manager had a total of 119 addresses, and 26 percent of them had service requests that had been pending longer than 12 months.

Verizon claimed it was refused access to the properties, while "the property manager represented to the City that he had offered to provide access to all of the buildings," the audit report said.

E-mails show Verizon promised faster service in exchange for bulk agreement

City officials then interviewed five other property managers. "[T]wo of the interviewees’ statements supported the first property manager’s statement that Verizon was not completing NSIs because they wanted exclusive agreements for certain buildings before completion of the NSI," according to the audit report. "For example, one property manager from a well-known firm complained that Verizon would not complete the NSI at a building on Sutton Place unless 100 percent of the apartment dwellers committed to Verizon FiOS. This property manager also said only two of the eleven multiple dwelling properties he managed had Verizon FiOS and that installations took anywhere from six months to two years."

Exclusive agreements would prevent customers from being able to use other providers. Anecdotal evidence further showed that Verizon "in some instances" did not "provide timely service unless the management company enters into a bulk agreement for the building."

"The review of correspondence between Verizon and one complainant... indicated that Verizon asked for an exclusive agreement for the property owner’s building before Verizon would complete the NSI," the report said. "A Verizon representative stated in an e-mail dated June 19, 2014 that 'bulk properties receive priority regarding the FiOS build' and in an earlier e-mail dated May 31, 2013 that Verizon could expedite the build if the property owner agreed to a 'bulk agreement.' Also interviews with two property managers further confirmed that Verizon favored bigger buildings over smaller buildings for bulk agreements. When we spoke with the complainant... to get an update on the status of completion of the NSI, the complainant informed us that Verizon completed the NSI in April of 2015 but the complainant rejected cable service for the building because Verizon doubled the price per apartment unit from $100 in May of 2013 to $200 in April of 2015."

New York City officials also reviewed Verizon's database, though Verizon allegedly refused to provide access within the 30 days required in the franchise agreement. It took city officials 147 days to gain access to the system.

NYC found that for 37 properties out of the 99 that were examined, "Verizon exceeded the 12-month requirement for making service available to customers after households were passed" with fiber. In seven instances, Verizon's records claimed that the company brought service to a building before it had been passed by fiber, a physical impossibility. Further, "inconsistent recording" of service requests "resulted in unequal treatment of customers."

In the audit report's conclusion, NYC officials said that "Verizon must not give preference to buildings that agree to bulk agreements and must not seek bulk agreements with promises or intimations of preferential treatment."

Verizon: It’s all just a big misunderstanding

Verizon's official response to the report criticized this finding as being "based strictly on limited anecdotal evidence."

Verizon further said that it "does not offer preferential build treatment to buildings based on their willingness to enter into a bulk agreement." But the company admitted that one of its employees erred in one of the cases detailed by the DoITT.

"[U]pon learning of the correspondence with the complainant... Verizon reinforced its policies with the employee involved in the miscommunication," the company said. "[G]eneral messaging concerning these matters was distributed throughout that sales organization to ensure this would not be an issue going forward. With respect to DoITT’s two unidentified informants, Verizon was never afforded the opportunity to investigate and/or respond to the allegations. Finally, it should be noted that in a City of over 3.5 million households and over 8.4 million people, a single complainant at one address and the unsubstantiated opinions of two unidentified informants apparently constituted the entire basis for this finding."

Verizon argued last week that it "met the requirement to install fiber optics through all five boroughs," and that "the challenge we have is gaining access to properties which of course would expand availability."

The franchise agreement allows NYC to demand financial penalties from Verizon, but for now the city is trying to pressure the company into finishing the promised fiber rollout.

Separately, city officials say they have received allegations that Verizon has made it difficult for competitors to access conduits that "are supposed to be open to any independent Internet provider to lay its own fiber-optic cables," The Wall Street Journal reported yesterday.

The complaints center on a longstanding Verizon rule that prevents competitors from inspecting manholes and pipes themselves, instead requiring them to pay Verizon for inspections. The Journal paraphrased a Verizon spokesperson as saying that "the company charges fair prices for inspections that are already regulated by either the city or New York state’s Public Service Commission, depending on the borough."

Verizon claimed the conduit complaints are suspicious because they were brought at the same time that it is negotiating with its biggest union. Verizon has been relying on this union claim a lot lately. Verizon claimed on June 9 that complaints about landlines not being repaired are "meaningless rhetoric and hyperbole from the unions."

Verizon also claimed that New York City timed the release of its audit report to coincide with the labor negotiations. In fact, Verizon requested that its deadline for wiring up the whole city be delayed, which extended the audit's start date by three months. The audit was then projected to take three to four months, but it "took twice that time, due to Verizon’s persistent intransigence and delay," such as the 147-day wait for accessing Verizon's database, the city said.