UPDATE 1-Verizon Communications sued over subscriber numbers

(Adds Verizon's, Digital Art lawyer's comments)

NEW YORK, Oct 3 (Reuters) - A marketing company sued Verizon Communications Inc (VZ.N) on Wednesday, alleging that the No. 2 U.S. phone company overstated subscribers to its fiber-optic cable service and charged inflated prices for advertisements there.

New York-based Digital Art Services Inc said in a complaint filed in U.S. District Court in Manhattan that Verizon included "pending" customers in its public subscriber reports.

"Those reported numbers were false and inflated, since they included prospective subscribers who might not become actual subscribers until weeks or months later," it alleged.

A Verizon spokesman said he had not seen the lawsuit, but called it a "garden variety business dispute," where Digital Art wanted to be released from its contract.

"They would like to get out of the contract," spokesman Eric Rabe said. "We would like them to fulfill it."

"We certainly reject the idea that we somehow inflate numbers or overstate numbers or are not honest or straightforward with customers," Rabe said.

Digital Art's lawyer, Andrew Hayes, said: "People who find out that they have been defrauded often want to get out of their contract."

Digital Art said the percentage of pending subscribers in the New York region increased from 22 percent at the beginning of April to 33 percent by the end of June, noting that their rate of growth far outstripped that of active subscribers.

Digital Art said it discovered the practice by accident while meeting with the company's sales agent, Viamedia Inc, to complain about "poor response" to its ads.

It also named Viamedia and Verizon Online LLC in the suit and is seeking class action status for the case.

Digital Art said it was told that it was reasonable to include pending customers as they were usually converted to active subscribers within two weeks.

"Verizon's documents flatly contradict that assertion," it alleged. "The reality is that many prospective subscribers have waited up to 10 months for their service to become active." (Reporting by Paritosh Bansal)