Policy

Verizon Sues Md. County Amid Impasse

7/14/2006 8:00 PM Eastern

Verizon Communications Inc. has sued Montgomery County, Md., in federal court, claiming officials overstepped their regulatory role by requiring burdensome concessions in order to approve a local cable franchise.

The telephone company’s Maryland division filed a complaint in U.S. District Court for the District of Maryland, Southern Division, on June 26, asking the county’s franchise procedure to be ruled invalid.

County officials said they were stunned and accused Verizon of trying to influence national policy and eradicate local cable authority by trumpeting its franchising woes with the county. (While the lawsuit highlights the telco’s problems with a Maryland agreement, it notes it has successfully negotiated operating agreements with more than 100 cities and counties.)

The two sides have been trying to negotiate a contract since March 2005. But county policy requires that new applicants match the operating requirements of the incumbent providers, which include Comcast Corp. and RCN Corp. Verizon, according to its lawsuit, submitted its own version of an operating agreement and was rebuffed, but negotiations continued.

“The county has been more than patient with Verizon. We facilitated the deployment of their fiber-optic technology even though it created construction problems in our neighborhoods and caused disruption of service for Comcast and others,” said Marilyn Praisner, the county council’s vice president.

Verizon’s lawsuit maintains the county franchise ordinances violate the company’s First Amendment rights, the federal Cable Act and state law. The local rules are written in a way that would allow Montgomery to charge franchise fees on Internet service revenue in violation of federal law, the suit asserts.

Also, the county process — which includes committee hearings, public hearings, 30-day notices and other proceedings — slows the negotiation process and constitutes a barrier to entry.

The telco appears most challenged by a “most favored nations” clause in current contracts, which requires Verizon to match the operating standards of Comcast, the area’s dominant provider.

“Comcast’s agreement to furnish enormous benefits to obtain and preserve its monopoly position can’t justify the county’s exorbitant and unlawful demand that Verizon furnish identical payments as a condition of offering FiOS TV to local consumers,” the suit said.

They are also at loggerheads over buildout conditions. The county wants the system built in four years, reaching down to 15 homes per mile. Verizon wants five years from the date it decides to begin delivering service, and only down to a density of 30 homes per mile.

October