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Charter to Pay $175M to Settle Broadband Speed Suit

Jeff Baumgartner
12/18/2018

Charter Communications is still paying for its acquisition of Time Warner Cable two years after sealing that deal.

Just weeks after an appeals court upheld a $140 million jury verdict against TWC in a VoIP patent spat with Sprint Corp. (NYSE: S), Charter has agreed to a $174.2 million settlement with New York State Attorney General Barbara Underwood stemming from a suit filed last year claiming that Time Warner Cable had under-delivered on promised Internet speeds. (See Court Upholds Sprint's Victory in Old Patent Spat With TWC .)

The settlement follows a complaint filed in 2017 and led by then AG Eric T. Schneiderman that cable systems in the state formerly run by TWC did not live up to their speed claims. The suit further alleged that the operator conducted a "deliberate scheme to defraud and mislead" consumers there. The suit claimed that customers were short-changed on some higher-level speed plans (up to 300 Mbit/s) that were up to 70% slower than promised, due in part to the ongoing use of outdated modems, as well as WiFi speeds that were more than 80% slower than advertised.

Multi-faceted settlement
Per the settlement, Charter Communications/Spectrum Management Holding Company reportedly did not admit any wrongdoing. But it did agree to pay direct restitution of $62.5 million to more than 700,000 active customers in New York (they'll each get between $75 and $150).

Charter is also to provide 2.2 million active subs in the state with streaming services and premium channels worth more than $100 million, at no added charge. Subs with Internet/TV bundles can get either three free months of HBO or six free months of Showtime; other active Charter Internet subs will get a free month of Charter's Spectrum TV Choice streaming service, including a free month of Showtime.

Charter is also to award a $75 refund to each of more than 700,000 active subs, based on its earlier leasing of inadequate modems or WiFi routers, or to those who were on a TWC legacy speed plan of 100 Mbit/s or higher. Charter will notify subs of their eligibility for refunds and disburse them within 120 days. The MSO has already meted out more than $6 million in refunds for inadequate modems separate from today's settlement, so those customers are ineligible for a further payment, Underwood announced.

She said the $62.5 million in direct funds "are believed to represent the largest-ever payout to consumers by an internet service provider (ISP) in U.S. history" and "should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price."

While $174.2 million is a healthy sum, it's equal to just 4% of the $3.8 billion in residential Internet services revenues that Charter generated in Q3 2018.

Charter -- which had earlier defended itself against the allegations, holding that it had already made substantial investments and upgrades of TWC systems in the state -- said Tuesday in a statement that it was glad to put the suit to bed.

"We are pleased to have reached a settlement with the Attorney General on the issue of certain Time Warner Cable advertising practices in New York prior to our merger, and to have put this litigation behind us," a Charter official said. "Charter has made, and continues to make, substantial investments enhancing internet service across the state of New York since our 2016 merger, as acknowledged by the Attorney General in this settlement. We look forward to continue providing the best TV, Internet, Voice and Mobile products to our customers, and to bringing broadband to more homes and businesses across the state."

Notably, Charter, since adding TWC to the fold, has launched Spectrum Internet Gig, a DOCSIS 3.1-powered broadband service, across its New York State footprint, and has been offering entry-level speeds of 100 Mbit/s (downstream) in its NY footprint since March 2017. Charter has also offered a 300 Mbit/s tier in the region since August, and just recently introduced an 802.11ax router option. (See Charter Nears Gigabit Finish Line and Charter Rolls Out 802.11ax Router .)

In December 2016, Charter, as part of a pledge linked to its acquisition of TWC, launched Spectrum Internet Assist, a low-cost broadband service for qualified families and seniors that delivers 30 Mbit/s downstream for $14.95 per month.

More messes in New York to clean up
The settlement clears just one issue that Charter has been grappling with in the state of New York. The state Public Service's Commission is still pushing Charter to exit the state over alleged failures to meet buildout commitments linked to the TWC acquisition.

In July, Charter Chairman and CEO Tom Rutledge stressed that the MSO has lived up to its commitments under the PSC's earlier approval of the TWC merger, and that Charter is trying to iron things out with the state. But, if necessary, Charter is also ready to battle it out in the courts, Rutledge said. (See Charter to New York: We Ain't Going Anywhere.)

The New York State PSC has given Charter more time to figure it out. The MSO has until Feb. 11, 2019, to submit a six-month plan on how it might pull out of the state without disrupting service, according to Multichannel News.

— Jeff Baumgartner, Senior Editor, Light Reading

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