Verizon Wireless has sued the City of Rochester, N.Y. in a potentially precedent-setting case, for demanding excessive and discriminatory fees to use public rights-of-way to deploy a fiber backhaul network and hundreds of small cells to support the introduction of 5G wireless service in the community.

The lawsuit, Cellco Partnership (d/b/a Verizon Wireless) v. City of Rochester seeks a declaratory judgment acknowledging that local laws regarding the use of rights-of-way by telecommunications companies have been largely overridden by the Trump Administration’s Federal Communications Commission. Under FCC guidelines, the maximum compensation rate a city can generally collect is $270 annually for each small cell site, far less than what the City of Rochester hopes to collect from telecommunications companies planning to dig up streets and place hundreds of small cell antennas on utility and light poles across the city.

The two parties are far apart on what defines fair and just compensation. In early 2019, the City of Rochester introduced a new fee schedule that seeks $1,500 annually for the use of each publicly owned utility or light pole, and $1,000 per standalone “smart pole” erected by a wireless company to support a small cell. Verizon Wireless wants to pay no more than $270 annually for either type.

The City also wants compensation to cover “administrative costs for retaining and managing documents and records,” “costs for managing, coordinating and responding to public concerns and complaints,” and “the costs of the City’s self-insurance.” Verizon Wireless’ attorneys argue that the FCC’s “presumptive limit” of $270 annually is all-inclusive, and therefore the fees requested are inherently unreasonable.

The City ordinance is also designed to discourage providers from installing cables on existing utility poles, preferring underground installation.

“Aerial installation of fiber or other telecommunications facilities and accessory equipment strung between poles, buildings, or other facilities, is strongly discouraged due to area weather, safety concerns, limited capacity, and aesthetic disturbances,” the ordinance reads. But Verizon Wireless argues the extra fees demanded by the City for underground burial of fiber optic cable are illegal under federal law.

“The Code’s ‘underground’ fee structure is not a reasonable approximation of actual cost, is not objectively determined, and is discriminatory,” Verizon Wireless argues.

The City’s fees for fiber optic cable installation are significant. Verizon Wireless’ lawsuit notes fees start at $10,000 for up to 2,500 linear feet of installed fiber optic cable, plus an additional $1.50 for each additional foot from 2,500-12,500 feet and $0.75 for each additional foot above 12,500 feet. After the first year, fees continue at $5,000 annually for up to 2,500 feet, $1 for each additional foot from 2,500-12,500 feet, and $0.50 for each additional foot above 12,500 feet. Somewhat lower fees apply if Verizon places its fiber cables in an existing conduit with other cables, or if it uses directional boring to place conduit and wiring without disturbing lawns, roads, or sidewalks.

Curtin

Verizon Wireless’ attorneys argue the fees cannot possibly reflect the City’s true costs because the charges are the same regardless if Verizon installed three feet or 2,000 feet of fiber optic cable.

But City Corporation Counsel Tim Curtin told the Democrat & Chronicle the city’s new fee schedule is comparable to what other cities are charging, and the City is planning more restrictions to keep providers from repeatedly digging up streets and yards to place new cable and equipment.

“This is a serious problem with people digging up the same right of way every other day and not repairing it,” Curtin told the newspaper.

The City is also exploring passing a new “dig once” policy that would incentivize providers to coordinate fiber installation to place wiring and equipment in a single shared conduit in return for lower fees. But providers like Verizon Wireless consider it in their competitive advantage to wire cities like Rochester before their competitors do.

“To better serve its customers and the City and to begin to serve new customers and provide new services, Verizon Wireless seeks to extend, densify, and upgrade its wireless network infrastructure [in Rochester], including to install additional Small Wireless Facilities to support the provision of current and next-generation telecommunications services such as 5G and to deploy fiber to connect these facilities. To successfully do this, Verizon Wireless requires new approvals from [the City of Rochester] to access City property,” Verizon’s lawsuit states. Because of the City’s fees and policies, “Verizon Wireless has been, and will continue to be, damaged and irreparably harmed, […] [including] an effective prohibition on Verizon Wireless’s ability to provide telecommunications services in the affected area of the City.”

In short, Verizon Wireless is threatening not to deploy 5G service in the area if the City successfully defends its fees and requirements.

Curtin argues Verizon Wireless is the only provider unwilling to comply with the City’s requirements, while others are moving forward under the new ordinance. One provider likely covered by Curtin’s claim is residential fiber overbuilder Greenlight Networks, which has installed fiber to the home service across several city neighborhoods for the past several years. But in 2019, Greenlight began focusing on installations in suburbs west of Rochester, and several city neighborhoods proposed for service have languished for years with “easements required” status, which could reflect Greenlight’s reluctance or ability to pay the City’s new fees.

Verizon has been the most aggressive wireless provider in Western and Central New York with respect to the proposed 5G service expansion. In addition to being the incumbent local telephone company in several New York cities (excluding Rochester), it has also offered spotty FiOS fiber to the home service in several suburbs of Buffalo and Syracuse.

A small cell

In contrast with Rochester, the City of Syracuse decided to effectively “partner” with Verizon Wireless to deploy 5G small cells to be considered America’s “first fully 5G city.” To win Verizon over, the City mothballed its existing fee policy in 2019 that charged $950 per small cell tower, resetting the rate to match the FCC’s presumed maximum of $270 annually. In return, Verizon has tentatively agreed to place up to 600 smart cell poles around the city, paying $162,000 a year. Verizon also agreed to pay a $500 application fee for each pole project (covering up to a maximum of five poles per project). Nobody is certain whether 600 smart cells are enough to saturate the city with 5G coverage, where exactly Verizon will ultimately place the small cells, or exactly when.

Ken Schmidt, president of Steel in the Air, a consultant to public and private landowners and municipalities on matters related to wireless infrastructure valuation, offered to advise the City of Syracuse for free about its agreement with Verizon Wireless, but the City never returned his calls, despite his direct experience working with other cities that negotiated with Verizon Wireless over 5G smart cells, pole attachment fees, and antenna placement rules.

“Syracuse seems to have bent over backward for Verizon,” Schmidt argues on his blog. “Make no mistake, there are benefits to becoming a 5G city, but this agreement does no more for Syracuse than it does for other cities where Verizon promised the same thing. At least some of the other cities didn’t enter into such a one-sided agreement. For example, Sacramento, San Diego and San Jose negotiated better terms and conditions than Syracuse did, and will have a similarly robust small cell deployment.”

Many consultants recommend that cities consider whether Verizon’s threats not to deploy 5G service are real, especially considering the company’s PR claims that moving forward with 5G is essential to Verizon’s network expansion.

Schmidt

Schmidt acknowledges the current FCC has a vested interest in helping large wireless companies deploy 5G infrastructure with a minimum of interference or fees from local governments.

“While the City could have negotiated a higher amount for the pole access rights or permit fees, it would have had to demonstrate that its actual costs in reviewing small cell applications and maintaining the rights-of-way were higher than the nominal fees allowed by the FCC,” Schmidt said.

Verizon’s lawyers appeared to outmaneuver the City’s attorneys by winning a number of concessions for Verizon that Syracuse will have to live with for up to 45 years. Schmidt’s recommendations may be useful to other cities, including Rochester, wrestling with these issues.

Schmidt:

Syracuse granted rights to Verizon for upward of 45 years when it didn’t have to. The city signed a master license agreement for 20 years, which allows Verizon to install poles under individual pole licenses that run up to 25 years from the date the pole was installed. Thus, if a pole is installed in year 20, it will be there for another 25 years. In short, the city is entering a possible 45-year agreement even though there is no legal requirement to do so by the FCC or any other agency. While Verizon surely prefers a much longer agreement, other cities are entering much shorter, 10-year agreements with Verizon. Verizon retained the right to terminate “at any time for any reason or no reason by written notice to the city,” but the city does not have the same right. So, the city is now committed to this specific agreement legally, regardless of what happens with technology in the future.

The agreement entered into by the city concedes unnecessary rights to Verizon under contract law. The agreement is substantially the same as other agreements proposed by Verizon to other cities. It attempts to incorporate many of the standards from the FCC Order into the license agreement. From a legal perspective, these clauses did not need to be in the license agreement. If Verizon felt the city was not adhering to the FCC order, Verizon by default has the option of requesting relief from the FCC or filing in federal court for injunction or damages. However, by adding the language in the license agreement, Verizon can now file in state court on a civil claim if Verizon believes the city is in breach of the agreement and collect monetary damages. This is absolutely of no benefit to Syracuse.

Other cities have received additional compensation in the form of public safety or “internet of things” monitoring and services, and higher fees to help pay for additional staff to review small cells applications. Syracuse received nothing. In fairness, the other cities are bigger and more important to Verizon than Syracuse. Nonetheless, the only concession Verizon appears to have made to Syracuse is the requirement for Verizon to monitor a limited set of small cells for compliance with applicable radio frequency emission standards. Verizon did not commit to deploying a certain number of small cells by any date. It is not required to deploy in the poorer areas of the city. And it did not commit to smart city initiatives or research on how 5G can benefit the residents of Syracuse.

The agreement gives the city limited rights to terminate, even if health risks are identified and proven. The city, in what appears to be an effort to appease its citizens that small cells are safe, inserted language that requires Verizon to test up to 5% of the small cells annually to confirm that they meet the minimum applicable health, safety and radio frequency regulations. The city could also test on its own, but only to confirm compliance with applicable FCC standards. By agreeing to a long-term license with limited rights to terminate, the city could be legally committed to Verizon small cells in the public right of way even if there is ample evidence that they should be removed, unless the FCC revokes its order.

By agreeing to such a one-sided agreement, the city has condemned itself to agree to similar agreements with any company providing wireless services who want to deploy in the right-of-way. Under the FCC Order and previous case law regarding the Telecommunications Act of 1996, the city may not discriminate between similar providers of wireless services. By agreeing to the terms with Verizon, the city will have a difficult time agreeing to different terms with other providers.

The Justice Department has helped engineer an approvable merger deal between T-Mobile and Sprint that will get antitrust regulators’ blessings as early as tomorrow, according to a report in the Wall Street Journal.

The sticking point that held up merger approval for weeks was the divestiture of certain wireless assets to Dish Network, which claims it will temporarily use Sprint and T-Mobile’s wireless networks to offer a new nationwide “fourth option” for cell phone service. Dish’s new cell phone service will come from a $1.4 billion acquisition of prepaid carrier Boost Mobile, which currently relies on reselling Sprint’s 4G network. Dish would inherit Boost’s nine million customers. Dish will also be able to lease access to T-Mobile and Sprint’s existing wireless networks for up to seven years while it builds out its own network of cell towers. The deal also includes a guarantee that Dish can pay $3.6 billion to acquire 800 MHz wireless licenses held by Sprint.

The Justice Department claims that lower frequency spectrum will allow Dish to service rural communities, assuming Dish is willing to invest in cell tower construction in high cost, low return areas.

Regulators in the Trump Administration’s Justice Department claim shaving assets from a super-sized T-Mobile will preserve the competition that will be lost when Sprint becomes a part of T-Mobile. But Dish will emerge as a miniscule player with only a fraction of the 100+ million customers that AT&T and Verizon have, and at least 80 million customers signed with T-Mobile. One of the core arguments T-Mobile and Sprint made in favor of their merger was that each was too small to afford to deploy 5G service quickly and efficiently. Dish will have even less money to build out a basic 4G wireless network.

Another merger requirement for the combined T-Mobile and Sprint will be mandatory support for eSIM, which allows consumers to change wireless carriers quickly without investing in a physical SIM card. But that requirement will not impact AT&T or Verizon Wireless, which both continue to push physical SIM cards on the much larger customer bases.

If the Justice Department does publicly approve the merger, the last hurdle the wireless companies will have to overcome is a multi-state lawsuit filed by attorneys general that argue the merger will impact low-income customers and is anti competitive. That court case is unlikely to be heard until late fall at the earliest.

CNBC’s David Faber reports that T-Mobile and Sprint have settled with the Department of Justice to go through with their merger deal. (6:14)

While net neutrality in the United States has been neutered by the Republican-controlled FCC, the concept of an online level playing field is alive and well in Germany, and T-Mobile’s parent company Deutsche Telekom (DT) just got called out for a foul ball.

The German telecom giant has lost its legal battle with Germany’s telecom regulator, the Federal Network Agency (Regulator Bundesnetzagentur) over StreamOn, its all-you-can-stream mobile video product that does not count against customer usage allowances. The company introduced the unlimited video streaming service in Germany in 2017, emulating a similar service available in the United States that offers zero rated mobile video content at a reduced video resolution. An appeals court in Münster this week ruled that the German regulator was correct to forbid DT from continuing to offer StreamOn to customers in its present form for two reasons:

• StreamOn was only available to T-Mobile customers inside Germany or those who visited the country, violating Europe’s “roam like at home” rules that require carriers to not restrict or charge more for mobile services or features when traveling between member states of the European Union.
• StreamOn violates German net neutrality rules by delivering only T-Mobile approved, speed-throttled, low resolution video content that won’t count against a customer’s usage cap.

“StreamOn must conform to the ‘roam like at home’ principle and customers must have video streaming available in an unthrottled bandwidth,” said Federal Network Agency president Jochen Homann. “The rule of equal treatment is a cornerstone of European net neutrality regulations. The principle of equal treatment has made the internet a driver of innovation, and the diversity of applications and services benefits all consumers.”

Hohmann

DT immediately contested the regulator’s decision and sued. The case has been drifting through German courts since December 2017, with the most recent ruling in favor of the regulator issued by an appeals court, which declared its ruling to be final.

DT has claimed it finds the regulator’s objections “very puzzling indeed,” claiming StreamOn has been wildly popular in the United States and Germany. Two years ago, it warned that if the courts upheld the regulator’s ruling, it would force the company to stop offering it.

“The Bonn-based regulatory authority is ordering us to also offer StreamOn in other EU countries. It bases this order on the EU Roaming Regulation,” DT said in a statement in 2017. “Fulfilling the order would mean the end of our free service, because we would not be able to offer it cost-effectively in other countries.”

Despite its threat to shutter StreamOn in Germany, the company claimed this week it would continue offering the service for the time being, without increasing prices.

“We are delighted that the court has confirmed our interpretation of the law,” a Federal Network Agency spokesman said after the decision was announced. “We will take quick action to ensure that Telekom adjusts its product accordingly.”

“We expect the [Federal Network Agency] to allow an appropriate amount of time to make the necessary adjustments,” a DT spokesman said. “We are convinced that StreamOn is a legal product and will explore all our legal options.”

Locast, the not-for-profit cooperative that has successfully streamed local, over the air stations without running afoul of copyright law and attorneys, has announced a big expansion into the cities of Los Angeles, San Francisco, Sioux Falls and Rapid City (South Dakota).

The free, donation-supported service now covers (in addition to the aforementioned) New York City, Philadelphia, Boston, Washington, D.C., Baltimore, Chicago, Houston, Dallas, and Denver.

In each city, Locast streams all the major network stations, almost all independents, some low power outlets, and a host of digital sub-channels featuring digital multicast networks like MeTV, Grit, Comet, and many others. It skips home shopping outlets and some minority language stations. Viewers get a program grid to know what to watch, and picture quality is generally very good to excellent.

Locast has staked its position as a “virtual translator” operation. FCC rules allow independent groups to pick up and rebroadcast television stations without the permission of the stations involved, as long as the operation is not-for-profit:

Before 1976, under two Supreme Court decisions, any company or organization could receive an over-the-air broadcast signal and retransmit it to households in that broadcaster’s market without receiving permission (a copyright license) from the broadcaster. Then, in 1976, Congress passed a law overturning the Supreme Court decisions and making it a copyright violation to retransmit a local broadcast signal without a copyright license. This is why cable and satellite operators, when retransmitting a broadcast signal, either must operate under a statutory “compulsory” copyright license, or receive permission from the broadcaster.

But Congress made an exception. Any “non-profit organization” could make a “secondary transmission” of a local broadcast signal, provided the non-profit did not receive any “direct or indirect commercial advantage” and either offered the signal for free or for a fee “necessary to defray the actual and reasonable costs” of providing the service. 17 U.S.C. 111(a)(5).

Sports Fans Coalition NY is a non-profit organization under the laws of New York State. Locast.org does not charge viewers for the digital translator service (although we do ask for contributions) and if it does so, will only recover costs as stipulated in the copyright statute. Finally, in dozens of pages of legal analysis provided to Sports Fans Coalition, an expert in copyright law concluded that under this particular provision of the copyright statute, secondary transmission may be made online, the same way traditional broadcast translators do so over the air.

For these reasons, Locast.org believes it is well within the bounds of copyright law when offering you the digital translator service.

Earlier efforts to stream over the air stations without the permission of the networks or stations involved quickly resulted in lawsuits and eventual forced closedowns. Locast is the exception, at least so far, having launched first in New York City in January 2018. Since that time, no lawsuits have been filed against the service despite its rapid expansion.

Locast suggests viewers donate $5 a month to help cover its costs and is soliciting donations to launch in more cities. Currently, Seattle, San Diego, Alexandria, La., and Albany, N.Y. are the top contenders.

The service is geofenced, so only those present in a Locast-serviced city can access the service.

 James

New York Attorney General Letitia James and California Attorney General Xavier Becerra today filed an unusual multi-state lawsuit, along with eight other State Attorneys General to halt the proposed merger of telecom giants T-Mobile and Sprint, deciding not to wait for a decision from the Department of Justice, which is also reviewing the merger. The complaint, filed in the federal Southern District of New York court in coordination with Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin alleges that the merger of two of the four largest national mobile network operators would deprive consumers of the benefits of competition and drive up prices for cellphone services.

“When it comes to corporate power, bigger isn’t always better,” said Attorney General Letitia James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country. That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

“Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it,” said Attorney General Xavier Becerra. “This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices. Today, along with New York and eight other partner states, we’ve filed a lawsuit to block this merger and protect the residents of our state.”

The states departed from traditional courtesies in the case, deciding to launch a pre-emptive legal challenge to the transaction without providing Justice Department officials advance notice of their decision to sue. That decision may have come after FCC Chairman Ajit Pai gave his full support for the merger, with indications the Republican majority on the FCC would also vote in favor of approving the deal. Staffers in the Antitrust Division of the Justice Department object to the merger, and are recommending it be rejected. But the Justice Department’s unpredictability, and its poor track record trying to block the AT&T-Time Warner (Entertainment) merger in court may have pushed the state attorneys general to also act on their own.

T-Mobile USA and Sprint are the third and fourth largest mobile wireless networks in the U.S., and are the lower-cost carriers among the “Big Four” — with market leaders Verizon Wireless and AT&T controlling the larest share of the wireless market. Intense competition, spurred in particular by T-Mobile and Sprint, has delivered declining prices, increased coverage, and better quality for all mobile phone subscribers. According to the Labor Department, the average cost of mobile service has fallen by roughly 28 percent over the last decade, while mobile data consumption has grown rapidly. The merger, however, would put an end to that fierce competition, argue the attorneys general, which has delivered a great number of benefits to consumers.

States with large urban poor communities are particularly sensitive to the merger, because both T-Mobile and Sprint focus their coverage on urban areas. With the average U.S. household spending $1,100 annually on wireless phone service, even small rate increases can dramatically increase service suspensions or disconnections due to late or non-payment.

“Low-and moderate-income (LMI) New Yorkers put a greater share of their household income toward their phone bill, and when you are looking at a budget that is already stretched thin, every dollar counts,” said Mae Grote, CEO of the Financial Clinic. “Cellphones now not only give us the ability to communicate with friends and family, here and abroad, but are increasingly the way we engage with many critical services. Our customers use cellphone apps to access public information, send and receive money, manage their SNAP benefits, look for a job, and even communicate with their doctors, and maintaining competition in the market for this critical service ensures LMI consumers have the same access to quality, affordable service as the more financially secure. The Clinic is proud to advocate on behalf of the communities we serve to protect their inclusion in the modern economy.”

The attorneys general investigation laid bare many of the alleged merger benefits offered by T-Mobile and Sprint to win approval of the merger. The group found many of the claimed benefits were completely unverifiable and were likely to be delivered years into the future, if ever. But within weeks of approving such a merger, the companies would have an immediate incentive to raise prices and reduce service quality. Sprint’s network, in particular, was scheduled to be largely mothballed as a result of the merger, even though Sprint provides coverage in some areas that T-Mobile does not. Although the two companies could identify several self-serving deal efficiencies that would reduce their costs and staffing needs, there is no evidence the merger would deliver consumers lower prices and were outweighed by the merger’s immediate harm to competition and consumers.

Additionally, the merger would harm thousands of hard-working mobile wireless independent dealers in New York and across the nation. The ten states are concerned that further consolidation at the carrier level would lead to a substantial loss of retail jobs, as well as lower pay for these workers in the near future.

Becerra

“CWA applauds the Attorneys General and especially General Letitia James’ leadership in taking decisive action today to prevent T-Mobile and Sprint from gaining anti-competitive power at the expense of workers, customers, and communities,” added Chris Shelton, president of the Communications Workers of America (CWA). “Reducing the number of national wireless carriers from four to three would mean higher prices for consumers, job loss for retail wireless workers, and downward pressure on all wireless workers’ wages. The states’ action today is a welcome development for American workers and consumers, and a reminder that regulators must take labor market concerns seriously when evaluating mergers.”

Before filing suit, the states gave significant consideration to T-Mobile and Sprint’s claims of increased coverage in rural areas. However, T-Mobile has yet to provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint. As stated in the complaint, the U.S. previously won the “race to LTE” as a direct result of vigorous competition among wireless carriers. Finally, continued competition, not concentration, is most likely to spur rapid development of a nationwide 5G network and other innovations.

“This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service,” stated Carri Bennet, general counsel for the Rural Wireless Association. “We are pleased that the New York Attorney General, along with nine states have filed their lawsuit to block the merger. The process at the FCC has not been transparent and the FCC appears to be blindly accepting New T-Mobile’s words as truth.”

The complaint was filed under seal, because it contains unredacted confidential information, in United States District Court for the Southern District of New York.  A redacted copy of the lawsuit is likely to be made available later.

T-Mobile currently has more than 79 million subscribers, and is a majority-owned subsidiary of Germany’s Deutsche Telekom AG. Sprint Corp. currently has more than 54 million subscribers, and is a majority-owned subsidiary of Japan’s SoftBank Group Corp.