San Diego loses revenue from Verizon 5G deal, potentially costing taxpayers over $1.3 million
A new report from CWA analyzing the outcomes of San Diego’s 2019 public-private partnership with Verizon to deploy 5G throughout the city found evidence suggesting that after three years, the public has subsidized Verizon’s deployment, to the tune of more than $1 million over the course of the deal, while the city of San Diego has been unable to produce records showing Verizon provided promised community benefits.
As part of the deal signed by former Mayor Kevin Faulconer – whose administration bypassed the City Council and public input and negotiated the deal with a Verizon lobbyist – Verizon was to provide several types of in-kind benefits totaling over $2.6 million in value, including smartphones and tablets for San Diego’s police and fire departments, and technology that would enable the city to better measure traffic and street safety. However, many of these benefits never came to fruition, as they were contingent on meeting a benchmark of 500 approved permits for small cell deployments on city-owned poles each year for three years. The deal did not require a minimum number of deployments from Verizon, and based on permitting data, it appears that Verizon never requested the number of permits required for the city to meet the benchmarks and unlock the benefits. As of September 2022, the city had only 788 Verizon small cell sites.
The report comes in advance of a critical opening to bring Verizon to the table to recoup costs and renegotiate the deal’s terms moving forward, beginning in January 2023. CWA recommends a formal review of the deal in order to inform and prepare the city for those negotiations.
The recommended review would include determining the real cost of the deal to San Diego taxpayers and whether or not Verizon has hired San Diegan workers for deployment work. CWA is also calling for the City Council to establish a regular monitoring process through the end of the deal’s term in 2029, with open and accessible opportunities for the City Council and the public to provide feedback on the impact of this deal on communities.
San Diego workers must also be centered in the review and monitoring process to understand if Verizon supported local jobs for this massive construction project. New contractor transparency laws passed by the City Council and signed by Mayor Gloria in August 2022 would support the monitoring process, which requires that permittees disclose their contractors and certify that their employees are adequately trained and have workers compensation coverage. Multiple Verizon subcontractors identified in the field by CWA were not headquartered in San Diego, and CWA has documented labor law violations by Verizon subcontractors in California.
Additionally, CWA recommends assessing what can be done to prevent this kind of giveaway of public resources for corporate benefit in the future and identifying measures to allow for transparency and public input around any similar proposals in the future.
While Verizon marketed the deal as a way to make the city more digitally inclusive, no mechanisms or provisions were built in to ensure equitable deployment or bridge the digital divide. In San Diego, there are still an estimated 53,000 households without home internet and nearly 1 in 4 San Diego households earning less than $20,000 per year, or about 36,000 people, don’t have any internet subscription, including a cell phone.
Verizon began marketing San Diego as a 5G city more than two years ago, and launched the 5G Home internet service in March 2021, but the coverage area at the time was limited to a few commercial intersections, and still entirely leaves out the most under-connected communities. A review of San Diego’s largest affordable housing buildings found that just one building had access to 5G Home internet, one other building had access to 4G LTE Home internet only on certain floors, and the remaining 7 buildings didn’t have access to any Verizon home internet service at all.
“The digital divide exists, in part, because of the failures of big internet providers like Verizon to prioritize equity and access in the distribution of their technology,” said CWA Local 9509 President Chris Roberts. “While tens of thousands of families across San Diego lack high-speed broadband, Verizon is promising its Wall Street investors bigger cash payouts through stock buybacks in the near future, and its 5G deal with the City of San Diego is a prime example of prioritizing profits over people. After promising to address equity in its 5G deployment here, Verizon has failed to make good on community benefits, while profiting from hundreds of thousands in subsidies from San Diegans under this deal signed in the final year of the Faulconer era. Luckily, city officials now have a critical opening to bring Verizon to the table and ensure it is made whole, and CWA is ready to help prepare for those conversations in whatever way possible.”
“Verizon’s early marketing of San Diego as a ‘5G City’ was deceptive, at best,” said Earl Lum, founder of EJL Wireless Research. “My research found frequent network downgrades from the ultra-fast mmWave network to much slower networks, even with the smartphone pointed directly at the antenna. As Verizon shifted 5G strategy away from deploying small cells, the promise of the ultra-fast network Verizon sold to San Diegans all-but disappeared, while some of the most under-connected communities still don’t have access even to Verizon’s slower network. This partnership has not lived out to be a solution to San Diego’s digital divide.”
Further investigation is needed to determine if Verizon has indeed provided promised in-kind benefits to the city of San Diego, to determine the actual value of any in-kind benefits, and to determine if local workers benefited from Verizon’s 5G network deployment jobs, but thus far the city has been unable to produce any documentation to support either. While the real cost of this deal to San Diego taxpayers is still unclear, San Diego is losing hundreds of thousands of dollars per year in reduced fees, and if Verizon failed to provide any in-kind benefits, CWA estimates it will have cost San Diego taxpayers over $1.3 million.
Three years into Verizon 5G deal, new report finds San Diego loses annual revenue while promised community benefits failed to materialize, potentially costing taxpayers over $1.3 million (CWA, Nov. 22, 2022)
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