Governor Christie's New Scandal: Verizon's Fiber-Optic-"Digital Bridge" Gate.

03/07/2014 02:05 pm ET | Updated May 07, 2014

It is now clear that while Governor Christie is embroiled in 'bridgegate', which is about clogging and blocking of traffic movement over a bridge, another scandal is brewing. Christie's New Jersey Board of Public Utilities is about to close the digital highways to 1/3 or 1/2 of the State's residential and business customers, not to mention harming schools, libraries, hospitals or the municipalities' services and economic growth in these areas.

President Obama has announced plans for 'bridging the digital divide'. In this scandal, Governor Christie's State Commission, his Attorney General's Office and the state Consumer Rate Counsel are planning to allow Verizon to simply erase the laws and commitments to have 100% of Verizon New Jersey's territory upgraded, replacing the old copper wires with a fiber optic service capable of 45 Mbps in both directions -- and it was supposed to be done by the year 2010.

That's right. Back in 1991, Verizon New Jersey claimed it would make New Jersey the first fully fiberized state with a plan called "Opportunity New Jersey". Customers paid Verizon about $15 billion dollars in excess phone charges (and tax perks) to do this construction for over two decades, not to mention additional rate increases along the way-- and these increase have been built into current rates for the last 2+ decades.

And yet, on January 29th, 2014, the NJ Board of Public Utilities (NJBPU) offered Verizon a stipulation agreement that will extinguish this commitment, which is only partially done. I'll get back to this.

I wasn't suspicious until I started digging into why the NJBPU would take this ridiculous path. In fact, the State had actually woken up in 2012 and issued a 'show cause order', asking Verizon why two towns, Greenwich and Stow Creek, weren't already upgraded. And in 2013, the State ordered Verizon to do the work.

But, what caught my eye was this -- two weeks before, on January 14th, 2014, a new President of the Board of Public Utilities was installed and she was not only chosen by Governor Christie, but is part of his cabinet.

"Dianne Solomon was named by Governor Christopher J. Christie as President to the N.J. Board of Public Utilities (BPU) on January 14, 2014. President Dianne Solomon also serves as a member of the Governor's Cabinet. President Solomon was nominated by Governor Chris Christie to serve as Commissioner to the Board of Public Utilities on April 17, 2013, and confirmed by the New Jersey Senate on June 27, 2013."

And all the State had to do was to just enforce the laws. All it had to say was - 'You didn't complete the job. Now upgrade 100% of your state territory or we'll audit the books and have you give back the money'

Instead, we ask - Is it a coincidence that the State decided to erase the laws at this juncture? Does Governor Christie know about this or was it his decision?

There's an underbelly to this. The State never interceded when parts of New Jersey were harmed by Sandy and Verizon refused to fix the wires, even though the law requires the return of service after an emergency. Instead, in New Jersey, Mantoloking and other communities were forced onto inferior 2G-styled cell phone service, named Voice Link. In New York, Fire Island revolted when Verizon pulled these shenanigans and is now getting wired.

Questions abound: Did Verizon get FEMA money or insurance or other disaster funds to fix the wires and then didn't? And is OK for the Verizon's wired-utility to simply give the business to Verizon Wireless for free? Isn't Wireless supposed to compete and not collude?

And let's face it. The Governor has always had a warm and fuzzy relationship with Verizon. Dennis Bone, former President of Verizon New Jersey, was the co-chair of Gov. Christie's Economic Development Transition Team, which led to the creation of Choose New Jersey,

But this all fits with Verizon's overall plans for their wired customers -- which is to close down the wires in areas that have not been upgraded and force the customers onto wireless.

Lowell McAdam, CEO of Verizon said, quote- 'Kill the Copper', June 21, 2012.

"But the vision that I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper. We are going to just take it out of service and we are going to move those services onto FiOS. We have got parallel networks in way too many places now, so that is a pot of gold in my view.

"And then in other areas that are more rural and more sparsely populated, we have got LTE built that will handle all of those services and so we are going to cut the copper off there. We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there..."

This is not about helping customers. This is all about one thing -- more money to Verizon - read charging customers more money or forcing them onto more expensive services.

At the September 2012 J.P. Morgan analyst conference, McAdam said moving the customers to wireless makes the company more profits:

"And in many areas we're also taking customers that aren't performing well on copper and we're moving them over to the wireless technology. So that improves our cost structure significantly and streamlines all those ongoing maintenance costs."

And Verizon knows that wireless, even their LTE product, doesn't replace wireline broadband networks for video.

Lowell McAdam, June 2012 stated:

"I mean we want to shift as much onto FiOS or onto the fixed network where we can and then provide -- use that capacity to provide those higher demand services like video. I don't expect anybody to sit in their home watching video over LTE. I want them to be able to watch it on their tablet anywhere in the house using the Wi-Fi network."

What Verizon Promised in New Jersey--100% Gets Fiber Optic Service.

We've written about the commitments made by Verizon and the specifics about the law and regulations, including the show cause order issued in 2012 and Verizon's responses.

To summarize: In 1991 Verizon (then New Jersey Bell) proposed to be the first state in America to have 100% of the state 'fully fiberized', replacing the aging utility wire with a fiber optic one that could offer a service capable of 45 Mbps in both directions -- and completed in 2010. And in 1993 it became law. In 1997, the State added that Verizon would also wire schools with fiber optic wires, known as "Access New Jersey".

And this was not being done as a gift. Verizon received massive financial incentives - i.e. more profits via phone rates and tax perks to do this work. And yet, by 2006, not one customer or school could get this service and the company pulled a 'bait and switch', where they decided to simply offer ADSL over the old copper wiring -- a service that could never offer high speeds. And Verizon claimed it was inferior in 1992.

Alongside this obligation, in 2006 the State passed a cable franchise bill where Verizon could offer FIOS TV 'system-wide'. In 2013, during the renewal of this franchise, Verizon only had 70 communities out of 526 that were required to be fully upgraded and while they added other communities for a total of 352, this means that at least 1/3 will never get wired and about 50% of customers will never get service as there are no obligations to do these other communities completely.

Meanwhile, 2010, the year that 100% of Verizon New Jersey should have been completed, came and went. However, in 2012, two towns complained that they were not upgraded and the state issued a 'show cause order' asking Verizon why hadn't they completed the upgrades and in 2013, Verizon was forced to wire the towns.

But, in 2014, the State NJBPU not only agreed to renew the cable franchise without any major changes, but decided that they would erase Verizon's prior obligations for fiber optic upgrades. There will be no cable competition and choice of a broadband provider for much of the state.
What Does Erasing a Law Look Like?

There is a stipulation agreement between Verizon and the State and it says -- forget you paid thousands of dollars to have the phone networks upgraded with fiber optics. If you have any other choice for broadband, including Verizon Wireless 4G, or a cable provider or even DSL or satellite -- we don't have to serve you.

A potential customer must:

1) "have no access to Broadband from cable service providers (including single-line business or residential consumers located outside of cable providers' Primary Service Area (defined in the applicable cable providers' Franchise Order issued by the Board));
2) have no access to 4G-based wireless service;"

And while the original law from 1993 was for 45 Mbps in both directions, this stipulation agreement would allow Verizon to only be as fast as DSL, which is about 5-10 Mbps and it is only fast in one direction.

"Broadband is defined as delivering any technology including Verizon's 4G wireless, fiber, copper or cable, data transmission service at speeds no less than the minimum speed of Verizon New Jersey's Digital Subscriber line (DSL that is provided by Verizon New Jersey today."

I.e., the phone company is continuing their plan to close down the copper wires and they'd be glad to give you their more expensive wireless 4G product.

Screw Competition.

This agreement doesn't give customers cable service or cable competition. Ironically, Verizon sold the original franchise as bringing cable competition to the state. One of the Verizon's astroturf groups, Consumers for Cable Choice (C4CC), ran this campaign in New Jersey:

"C4CC is committed to the development of a competitive, vibrant cable communications market. Our goal is the creation of an open, diverse, pro-consumer market for cable subscribers that will stimulate price, choice and service options. "

"Consumers for Cable Choice advocates...Unreasonable franchise rules that nurtured and protected cable video providers during the last century must make way for a new era in cable video based on competitive choice in the marketplace."

In fact, this Verizon funded the group claimed that New Jersey families would save $19 million a year in cable savings.

So, based on their own numbers, if 100% of the State had no cable competition from 1996-2006 -- and 1/3-1/2 of customers did not have and will never get cable competition starting in 2006 to 2014, (and onward) basic math indicates that customers were overcharged about $325 million and counting and that's just from paying extra for a lack of cable competition in the state.

Take Action:

Right now the law states that 100% of Verizon New Jersey should have a 45 Mbps bi-directional service. This stipulation agreement should not stand.

You can file comments until March 24, 2014, email: and include "Verizon New Jersey, Docket No. TO12020155".

See our resources page, with many of the documents quoted in this article.

Finally, is Governor Christie pulling the strings on closing down Verizon's obligations? Is this really Verizon's Fiber-Optic-"Digital Bridge" Gate?