Verizon (VZ) to Face Legal Trouble in FiOS Rollout in NYC

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According to a recent FierceTelecom report, on Mar 13, Verizon Communications Inc.VZ faced a legal notice from the city of New York in relation to its FiOS rollout in the city. Verizon was accused of failing to meet the 3.3 million estimated services as committed by the company in 2008. Reports state Verizon's FiOS rollout has reached only 2.2 million households in NY.

As per the agreement, Verizon was entitled to deploy FiOS throughout New York City by passing through every residential building. This fiber build-out includes installation of fiber in various configurations -underground conduit, aerial utility poles, or in front of (or behind) each residential building.

The city Mayor, Bill de Blasio, mentioned that Verizon has failed to stand up to its promise ofmaking its FiOS services accessible to all households by 2014 even after three years. The city officials also blamed Verizon for incomplete installations and failure to accept many New Yorkers' requests for FiOS service. Meanwhile, city officials also accused Verizon of demanding bulk or expensive video service deals to carry their service in MDUs, which violates FCC's rules.

Verizon's Response

Verizon said that the two major obstacles that came its way were issues with building owners and city officials. Wiring every single-family home in the city, especially multi-dwelling units (MDUs) requires permission from owners to get access to each building. This is a tedious job in itself.

To deal with such issues, Verizon has asked the city to help them out by posting a neutral letter to all landlords in the city, requesting easy access to their buildings for fiber build-out.

Current Lawsuits

Last week, U.S. national wireless carrier Sprint Corp. S won $139.8 million as a damage recovery payment from Charter Communications Inc.'s CHTR Time Warner Cable unit for breaking digital voice telephone services' norms. Time Warner Cable was found guilty of intentionally violating five patents for Voice-over-Internet Protocol.

Meanwhile, U.S. telecom behemoth AT&T Inc. T was trying to resolve its DirecTV's deceptive advertising lawsuit filed by the Federal Trade Commission (FTC) in Mar 2015. AT&T's DirecTV was accused of misleading its customers through false marketing campaigns and not disclosing all its terms, which violated one of the FTC's Acts.

Bottom Line

Lawsuits or legal proceedings, along with their related fines, act as major dampeners toany company's financials and long-term growth. Sometimes, these charges also affect the company's credit ratings. To remain clean in every aspect, a company should avoid illegal business practices, illicit and unlicensed dealings and try to complete the allotted work on time.

We hope Verizon will easily recover from its FiOS litigations in the NYcity. As a recovery to the loss, Verizon has assured completion of FiOS expansion to the city's remaining 1 million households over the next year. For this, the company will spend an additional $1 billion. So far, Verizon has spent $3.7 billion to deploy FiOS in New York City.

We further look forward to seeing how the FiOS' prepaid plans and free mobile data offering influence the stock's price performance, growth and financials, especially subscriber count in the ongoing first quarter of 2017 and also in the future.

The price performance of the stock is depressing. Over the past three months, the stock lost 5.57% compared with the Zacks categorized Wireless National industry's decline of 0.66%.

Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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