Sacramento-Verizon 5G Partnership Fails To Deliver Community Benefits

Sacramento-Verizon Communications Inc. (NYSE:VZ) 5G Partnership Fails To Deliver Community Benefits, Serves Corporate Interests

Community Benefits

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Two years into the partnership, Verizon’s promises ring hollow as analysis reveals lack of transparency, accountability, and equity

New website offers tools for local communities to negotiate stronger agreements with wireless carriers

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Q1 hedge fund letters, conference, scoops etc

SACRAMENTO – A new report from the Communications Workers of America (CWA) shows that Verizon has failed to deliver key community benefits it promised when the company and the City of Sacramento established a public-private partnership to build out a next generation 5G wireless network. Based on a year-long investigation and a series of public records requests, the report outlines the serious problems in the process by which the deal was approved and shortfalls in how it has been implemented over the past two years.

In conjunction with the report release, CWA is launching a new website to inform Sacramento residents and communities across the country about the pitfalls of deals like the Verizon-Sacramento agreement, which favor corporate profits over the public interest. The site, www.Fair5G.org, provides resources to equip communities in their negotiations with wireless carriers.  CWA is also launching a digital ad campaign to educate the public and municipal leaders about the fight for Fair 5G.

“It’s clear that Verizon pushed Sacramento into an unfair deal with the promise of being a 5G city. Our report and website provide insight and resources to ensure the people of Sacramento, as well as folks across the country, get the transparency and accountability we deserve,” said Tom Runnion, CWA District 9 Vice President. “The report clearly shows there was no transparency around the approval process for the deal and that Verizon has faced no accountability despite delaying or completely dropping key community benefits that it promised to deliver.”

CWA and the Sacramento Central Labor Council alerted the city council and mayor to concerns about the Verizon partnership in a letter sent in the Fall of 2018. In the letter, and through the newly released report, CWA and the Labor Council encourage the City Council to take a closer look at the agreement and consider a formal review in order to address its deficiencies.

Two examples of community benefits promised by Verizon in its agreement that have been delayed or canceled completely are public Wi-Fi in city parks and digital kiosks.

  • Wi-Fi in city parks: Despite committing to establishing public Wi-Fi in 27 city parks, as of April 2019, Verizon has failed to set up public Wi-Fi in a single one of Sacramento’s parks.
  • Digital kiosks: Although Verizon agreed to build 15 digital kiosks around the city to promote pedestrian engagement, offer free Wi-Fi and generate ad revenue to support other aspects of the partnership, in November of 2018 the plans, originally described as a “key deal point,” were scrapped with no proposal to replace them.

“Verizon and other utility companies can and should be held accountable for delivering on their promises,” said Mark Toney, Executive Director of The Utility Reform Network (TURN). “A public-private partnership becomes a corporate giveaway if companies aren’t required to provide promised public benefits in exchange for preferred access to infrastructure or other public resources.”

As of March 2019, Verizon’s 5G Home internet coverage only reaches 6% of residents in tested areas of Sacramento, according to telecom equity analysts at Moffett Nathanson, and within that coverage area only 3% of households had subscribed. Technical experts who have examined the Sacramento-Verizon deal and its implementation have raised questions about the viability of the 5G Home network, which relies on the deployment of “small cells” that act as the building blocks of the 5G network.

“The plan Verizon put forth and the city approved is fundamentally flawed in part because it’s unclear Verizon’s 5G Home wireless internet product is even viable for the city of Sacramento,” said Earl Lum, President of EJL Wireless Research. “The small cell technology needed to beam the 5G network into residents’ homes requires a direct line of sight and a very large number of cell sites to cover the city, more than Verizon may be willing to deploy.”

The City of Sacramento is now facing litigation related to the Verizon partnership., as the agreement potentially conflicts with another contract the city entered in 2015 to allow 5 Bars, LLC (now called XG Communities) to market and manage city assets for small cell deployment. Despite being made aware of the potential conflicts on multiple occasions, the city chose to move forward with the Verizon partnership anyway. A Superior Court judge has already ruled in favor of 5 Bars and the city has appealed.

Beyond the flaws in the approval process and Verizon’s failure to deliver on tangible community benefits that were promised, the report outlines that one of the key problems with the partnership is its lack of consideration for digital equity issues in Sacramento. More than 20% of households in Sacramento lacked home Internet access in 2017, according to publicly available data. Yet, as the report shows, Verizon’s existing and planned deployment for the small cells concentrates coverage in commercial and higher and middle-income neighborhoods, which indicates the deal does little to address the connectivity gap in Sacramento and leaves the city’s lowest income residents behind.

The CWA report also details the major issues around Verizon’s use of subcontractors for the work associated with the 5G network build-out. Instead of generating jobs for Sacramento by hiring locally, out of 10 known subcontractors Verizon has hired to build the 5G network, seven are out-of-state firms, many with bad track-records when it comes to accountability and safety.

“This partnership should be an opportunity for job growth in Sacramento, but instead the work went to folks with no local knowledge and no accountability,” said Fabrizio Sasso, Executive Director of the Sacramento Central Labor Council. “Sacramento workers have been given the short-end of the stick and the damage these subcontractors are causing is obvious, yet Verizon gets to operate without real consequences or accountability to the community.”

Since the deal was signed, there have been numerous examples of Verizon’s subcontractors damaging Sacramento infrastructure. Between May 2018 and January 2019, Verizon contractors caused 41 utility hits that were reported, according to documents provided by the City of Sacramento. These disruptions impact households and businesses and cost the city tens of thousands of dollars and hundreds of employee hours to fix.

The report points the way forward with a series of recommendations – regarding network distribution and digital equity, public accountability and transparency, and subcontracting – for actions Verizon and the City of Sacramento should take to right the wrongs of their partnership.

At the Federal level, CWA is pushing back against policies that enable industry-driven efforts to preempt local authority and undermine efforts to close the digital divide. Dozens of cities and counties across the country have sued the Trump administration in an effort to roll back a Federal Communications Commission (FCC) ruling that dramatically weakens municipal authority to manage streets and public property. For 5G deployment, companies often need to place equipment – or “small cells” – on public property, like light poles and sidewalks; the ruling forces localities to rent out public property well below market value. On Monday, June 17, CWA, the National Digital Inclusion Alliance, and Public Knowledge filed an amicus brief in the 9th Circuit Court of Appeals in the lawsuit against the FCC decision.

Read the full report here: https://www.fair5g.org/system/files/cwa_sacramento_verizon_june_2019_1.pdf




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Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own 2.5 grams of Gold