In a move that stunned the cable industry, the New York State Public Service Commission has told Charter to sell off all its New York cable systems and get out of town.
Proclaiming itself fed up with Charter Communications Inc. 's allegedly repeated failures to extend cable and broadband service to less populated parts of the state, as promised over the past two years, the state PSC has formally revoked its approval of Charter's acquisition of Time Warner Cable in 2016. The PSC has also ordered Charter to file a plan within 60 days to sell off all its cable systems in the state to another provider and has asked the State Supreme Court to force the company to pay additional fines for non-compliance with the merger conditions.
The move represents the culmination of an escalating battle between Charter and the PSC, which has already fined the cableco several times for not meeting the terms of its TWC deal approval. Charter, which serves 2 million New York cable subscribers, will likely appeal the PSC order in the state courts. (See NY State Levies $13M Fine on Charter and NY State Sues Charter for Broadband Fraud.)
In an extraordinary two-page statement released Friday, the Commission announced that it was taking these drastic steps because "Charter, doing business as Spectrum, has -- through word and deed -- made clear that it has no intention of providing the public benefits upon which the Commission's earlier approval was conditioned." Specifically, the state agency cited five alleged "instances of misconduct" by Charter, including: Charter's "repeated failures to meet deadlines," its "attempts to skirt obligations to serve rural communities," "unsafe practices in the field," the company's "failure to fully commit to its obligations" under the merger deal and its "purposeful obfuscation of its performance and compliance obligations to the Commission and its customers."
For its part, Charter fired back that it's done all it can to meet the PSC's merger conditions. The company also charged that the PSC's actions were at least partly politically motivated, given that New York State Gov. Andrew Cuomo (D) is facing a potentially tough challenge from the left as he runs for re-election this year.
“In the weeks leading up to an election, rhetoric often becomes politically charged," a Charter spokesman said in a written statement. "But the fact is that Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC. Our 11,000 diverse and locally based workers, who serve millions of customers in the state every day, remain focused on delivering faster and better broadband to more New Yorkers, as we promised.”
Under the terms of the PSC approval of the Charter-TWC deal in January 2016, Charter agreed to extend its cable lines to "145,000 unserved or underserved homes and businesses in the state's less densely populated areas within four years of the closing of the transaction." Charter also agreed to deliver broadband speed upgrades to 100 Mbit/s statewide by the end of 2018, and 300 Mbit/s by the end of 2019.
While Charter has made progress towards both goals, the state PSC has repeatedly taken the company to task for not moving quickly enough and falling behind schedule. It has also blasted Charter for shirking its responsibilities, claiming that it's not bound by the merger conditions and falsely boasting in ads that it's exceeding its commitments.
"Its failure to meet its June 18, 2018 target by more than 40 percent is only the most recent example," the PSC said in its statement. "Rather than accept responsibility Charter has tried to pass the blame for its failure on other companies, such as utility pole owners, which have processed tens of thousands of pole applications submitted by Charter."
While it's not clear how this fight will be resolved, one thing seems pretty certain: Gov. Cuomo should not expect any campaign contributions from Charter this year.
— Alan Breznick, Cable/Video Practice Leader, Light Reading