Windstream Holdings filed a suit against Charter Communications (d/b/a Spectrum) on Friday, claiming the cable company is trying to poach its customers with a “despicable” false advertising campaigned designed to make people believe the phone company’s days are numbered.

“Shortly after Windstream filed for Chapter 11 protection, Charter commenced a false and misleading advertising campaign designed to cause irreparable injury and damage to Windstream’s reputation and business,” the lawsuit filed with the U.S. Bankruptcy Court for the Southern District of New York states. “Charter targeted Windstream customers in Alabama, Georgia, Kentucky, Ohio, Nebraska, and North Carolina, which are several of Windstream’s top performing states.”

“On the envelopes for the advertisement, Charter intentionally utilized Windstream’s trademark and signature color pattern to mislead Windstream customers into believing that the advertisement came directly from Windstream. Indeed, Charter’s advertisement stated that it was ‘Important Information Enclosed for Windstream Customers.’”

Inside the envelope was an ad for Charter Spectrum:

Windstream Customers,

Don’t Risk Losing Your Internet and TV Services.

Windstream has filed for Chapter 11 bankruptcy, which means uncertainty. Will they be able to provide the Internet and TV services you rely on in the future? To ensure you are not left without vital Internet and TV services, switch to Spectrum.

With a network built for the future, Spectrum is here for the long haul.

Goodbye, Windstream.
Hello, Spectrum.

Windstream’s future is unknown, but Spectrum is here to stay—delivering internet and TV services you can count on. . . .

Windstream told the Bankruptcy Court the ads were evidently effective, based on call transcripts and messages sent from customers to Windstream’s customer service department. Windstream’s attorneys attached multiple examples:

“I got a letter in the mail saying that ya’ll were going bankrupt and for me to go with Spectrum so I have gone to Spectrum and I have just called to have the services of Windstream disconnected.”

“I’ve got Spectrum over here so they go everything hooked up and so they told me not to call you until they got everything going like it’s supposed to be but I got that letter in the mail from Windstream and told me to get with you guys – to get with Spectrum so that’s what I did.”

“Oh, well I was just going there because it says hello I mean goodbye Windstream and uh..to got to Spectrum.”

“Oh lord, well I’ve been [Inaudible] on ‘em honey. I thought the letter was from you cause it said Windstream Corporation.”

The lawsuit complains Windstream had to take 160 calls regarding the Charter mailers over a 10-day period.

The phone company is demanding compensation for a number of reasons, but in part because it was forced to offer inquiring customers a better deal in order to convince them to stay with Windstream.

“As a direct result of Charter’s advertising campaign, Windstream has been forced to expend substantial time, money, and resources to combat these false claims. When distressed customers have called in, Windstream has offered upgrades, which many customers have taken,” the lawsuit states. “Windstream has also incurred costs and resources to educate its customer care associates on how to provide a comprehensive response to Charter’s false claims, which includes an explanation of the true effects of the Chapter 11 proceedings. In addition, as a direct result of Charter’s advertising campaign, Windstream has undertaken an extensive mailing and advertising campaign, at significant cost and expense, to counter Charter’s false and misleading advertising campaign. Windstream’s Legal department has also expended extensive time and effort in researching and responding to this matter.”

Windstream also complained Charter somehow disconnected service to approximately 350 Windstream customers on March 14, 2019, without notice to the phone company. The phone company also alleges Charter has told customers that Spectrum is buying out Windstream.

“When Windstream customers contacted Charter to have their services reinstated, they were told by Charter that service was not being reinstated because of Windstream’s failure to pay certain amounts due to Charter,” the lawsuit claimed. “Windstream, however, is not currently authorized to make any payments to Charter on account of prepetition debt as a result of the Chapter 11 filing.”

Keith

Windstream sent two angry letters to Charter complaining about the mailers.

“This misconduct is unacceptable and will not be tolerated,” Windstream’s deputy general counsel Carol Keith wrote. “This goes beyond a mere marketing decision made in bad taste and is clearly an illegal targeting of Windstream’s services and/or business in the marketplace using ‘false and misleading’ representations. Furthermore, when given the opportunity, Spectrum employees have been directed to double down and outright lie to Windstream customers that Spectrum has a contract to buy Windstream out.”

When Windstream took their complaints straight to Charter, their claims were rebuffed.

“On March 26, 2019, Charter responded to Windstream’s letters, contending that its advertisements were not false or misleading, and that it was proper to describe Windstream’s bankruptcy as creating an ‘uncertainty.’ According to Charter, a Chapter 11 bankruptcy filing ‘creates ‘uncertainty’ regarding Windstream’s future until the bankruptcy is resolved.’”

Charter also told Windstream it believed the confusion over a “buyout” has to do with the cable company’s long-standing offer to pay up to $500 in contract termination fees for new customers switching to Spectrum.

Charter Spectrum denies it offers better deals to customers served by fiber-fast internet competitors than those stuck with the phone company’s slow speed DSL as their only alternative:

Spectrum doesn’t set rates based on one area or the other, or based on what’s available to customers in specific locations, company spokesman Michael Pedelty said.

“We don’t make decisions based on that,” he said.

But Stop the Cap! has repeatedly found that with respect to promotional pricing, offered to entice customers to switch, that is not true.

“It is easy for any customer checking Spectrum’s new customer rates to test this for themselves,” said Stop the Cap!’s Phillip Dampier. “We did (again), and confirmed your street address and the providers that compete for your business make all the difference whether you are going to get a good deal or not.”

That is important because when providers won’t budge on regular prices, your only alternative is to switch. Some customers repeatedly bounce between providers to get a better deal. The savings can be dramatic. A customer with 400 Mbps internet-only service that remains with Spectrum for three years on a good three-year promotion will save more than $3,000 over customers that are offered only a one year promotion from Spectrum because their only other choice was DSL from the phone company.

At Stop the Cap! headquarters in Rochester, N.Y., there is only one choice for broadband service — Charter Spectrum. Frontier Communications, the incumbent phone company, still only offers 3 Mbps DSL at this location, despite it being less than one mile from the Rochester city line. Spectrum does not see low-speed DSL as a competitive threat, because entering our address as a new customer brought forth this blasé offer for internet-only service, good for 12 months:

Notice this promotion is good for 12 months.

This offer is for 100 Mbps service. An upgrade to Ultra costs an extra $25 a month for 400 Mbps. Notice also, the Wi-Fi feature enabled on their router/modem equipment is $5 extra a month.

Across the street from us, the competitive situation is a little different. Neighbors have a choice of three providers — Charter Spectrum, Frontier DSL, or Greenlight’s fiber to the home network. Greenlight changes everything for Spectrum, as this new customer offer across the street illustrates:

Notice this promotion is also $44.99 a month, but is good for two years instead of one.

Notice the promotion is also for 100 Mbps, but check out the FREE upgrade to 400 Mbps, a $25 savings just because there is more serious competition. Also notice the $5 monthly Wi-Fi charge is gone.

Where Google Fiber offers service (or offered, in the case of Louisville, Ky.) in addition to high-speed internet from the phone company, Spectrum’s promotions are even better:

This deal is for $29.99 and is good for THREE years.

This promotion begins with 200 Mbps service, but offers a FREE upgrade to 400 Mbps and that pesky $5 a month Wi-Fi fee is nowhere to be found.

In short, any claim that Spectrum does not target different promotional pricing offers based on the competitive landscape on the ground is provably false. The evidence is right here.

Now let us consider how the cost of no competition will empty your wallet:

• Non-Competitive Pricing – 400 Mbps service with Wi-Fi: $74.99/month for 12 months; $95.99/month for next 24 months ($90.99 internet, $5 Wi-Fi)
• One Competitor Pricing – 400 Mbps service with Wi-Fi: $44.99/month for 24 months; $95.99/month for next 12 months ($90.99 internet, $5 Wi-Fi)
• Two Competitor Pricing – 400 Mbps service with Wi-Fi: $29.99/month for 36 months

Assuming you remained a customer for 36 months, paying regular prices after two of these promotions expired, here is what you would pay in full based on the latest rate card and advertised pricing (mostly the additional $5/mo Wi-Fi fee after a promo expires):

• Non-Competitor Pricing: $4,103.52¹
• One Competitor Pricing: $2,231.64² which delivers a savings of $1,871.88 over three years because of presence of one serious competitor.
• Two Competitor Pricing: $1,079.64³ which delivers a savings of $3,023.88 over three years because of the presence of Google Fiber and one other serious competitor.

¹$74.99 x 12 = $899.88; $95.99 x 24 = $3203.64
²$44.99 x 24 = $1079.76; $95.99 x 12 = $1151.88
³$29.99 x 36 = $1079.64

Comcast is giving some of its customers a way to get back unlimited data for their home broadband connection without having to spend an extra $50 for an unlimited data add-on.

The cable operator is offering customers in parts of its Central Division its xFi Advanced Gateway — a combination cable modem and router — that comes bundled with unlimited data, xFi Advanced Security, and a Home Wi-Fi Assessment for an extra $15 a month. That amounts to $4 a month more than the cost of renting Comcast’s traditional xFi Gateway buys and also buys you a return ticket to unlimited internet service.

Comcast has also offered some new customers unlimited service in time-limited promotions, but this seems to be permanent, assuming Comcast offers it in your area.

The xFi Advanced Gateway with unlimited data appears to have quietly launched last fall, but so far it has not expanded to Comcast service areas outside of its Central U.S. division, which includes (Heartland) Michigan, Indiana, Kentucky and Arkansas, (Big South) Alabama, Arkansas, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Virginia, plus the state of Florida and the greater Chicago area. Comcast says it has 17 states in its Central Division, but we could not find a definitive list that includes the three other states not listed here.

Interested customers will have to contact Comcast to determine if their area qualifies for this offer.

If you are a Comcast customer already paying an extra $50 a month for unlimited data, this could save you a considerable amount of money, assuming you live in a qualified area and don’t mind using their gateway.

Windstream Holdings, Inc. filed bankruptcy this afternoon, citing its inability to cover $5.8 billion in outstanding debt.

The independent phone company, which provides legacy landline and broadband service to around 1.4 million customers in 18 states, filed voluntary to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York, citing a judge’s decision almost two weeks ago that the company defaulted on its obligations.

“Following a comprehensive review of our options, including an appeal, the Board of Directors and management team determined that filing for voluntary Chapter 11 protection is a necessary step to address the financial impact of Judge Furman’s decision and the impact it would have on consumers and businesses across the states in which we operate,” said Tony Thomas, president and chief executive officer of Windstream. “Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream’s strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization.”

Windstream received a commitment from Citigroup Global Markets Inc. for $1 billion in debtor-in-possession (“DIP”) financing. Assuming a bankruptcy judge approves of the arrangement, Windstream claims this stop-gap financing will allow it to run its current business as usual.

Windstream provides residential service in 18 states including: Alabama, Arkansas, Florida, Georgia, Iowa, Kentucky, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina and Texas.

The company claims it was forced into bankruptcy after a judge found Windstream’s attempt in 2015 to shift its valuable fiber optic network assets off its own books into a sheltered real estate investment trust (REIT) named Uniti Group violated the rights of bondholders which hold some of Windstream’s debt. Those debts are backed, in part, by the valuable fiber optic assets Windstream had  spun them off to a new entity. In fact, Uniti’s fiber optic assets are essential to Windstream’s viability. The phone company has the exclusive right to use Uniti’s fiber assets and two-thirds of Uniti’s revenue comes from Windstream, making the two companies inseparable.

Windstream’s bankruptcy is a concern to investors of both companies because it will allow Windstream to renegotiate the terms of its contract with its fiber partner. Windstream customers are equally concerned because the phone company needs Uniti’s network to manage its broadband service.

The judge’s decision on Feb. 15 to declare the arrangement inappropriate was reportedly a shock to the investor community, which has made money buying repackaged corporate debt in the form of bonds for years. Corporations have issued bonds to retire older debt, while giving investors a piece of the action. Since investors are making money, they typically do not complain too loudly about the persistence of corporate debt, frequently repackaged in new bonds. As a result, companies can hold onto more cash used to pay shareholder dividends and executive compensation instead of permanently retiring debt.

Aurelius, a hedge fund, is making some of its money scrutinizing these arrangements looking for contract violations such as the Uniti spinoff. When it finds one, it takes a stake in the company and then threatens to sue as a harmed investor. Based on the judge’s decision, Aurelius won a judgment that will effectively empty the pockets of many of the bondholders and investors that could lose a lot of their investments because of the bankruptcy. If the hedge fund is going to actively seek other questionable arrangements or violations of bondholders’ rights at other companies, it could cause an earthquake in an investment community that has quietly conspired with companies to generate transactions that enrich investors while allowing companies to carry more debt.

Customers could end up covering some of the costs of today’s bankruptcy filing if Windstream files a plan with the Bankruptcy Court promising to raise prices to help it demonstrate ongoing viability.

Windstream’s Thomas complained the phone company is little more than a victim of a predatory hedge fund out to enrich itself at the expense of others.

“The company believes that Aurelius engaged in predatory market manipulation to advance its own financial position through credit default swaps at the expense of many thousands of shareholders, lenders, employees, customers, vendors and business partners,” Thomas said. “Windstream stands by its decision to defend itself and try to block Aurelius’ tactics in court. The time is well-past for regulators to carefully examine the ramifications of an unregulated credit default swap marketplace.”

AT&T has laid off more than 16,000 employees since 2011, eliminating thousands of customer service positions while transferring others to cheap offshore call centers where some employees earn less than $2 an hour.

The company is rapidly closing call centers and consolidating others in hopes of wringing “deal synergies and cost savings” out of its operations, including DirecTV, acquired by AT&T in 2015.

Altogether, AT&T has closed 44 call centers, according to the Communications Workers of America (CWA), over the last seven years. Four call centers have been closed so far this year, including one in Harrisburg, Pa., that cost 101 jobs, some employed for over a decade. Many other call centers are being radically downsized, but have not yet been closed.

Betsy LaFontaine, a 30-year veteran at an AT&T call center in Appleton, Wisc. told The Guardian her call center has been slashed from 500 employees to less than 30 today.

“They’re liquidating us,” LaFontaine said. “This is not a poor company. On the shoulders of all its employees, we’ve made the company extremely profitable.”

AT&T took over this DirecTV call center.

While workers in Pennsylvania were offered new jobs if they were willing to move… to Kentucky, other workers would have to be willing to move overseas to keep a job with AT&T. As a cost saving measure, AT&T is offshoring an increasing amount of its customer service operation to India, Mexico, and the Philippines where it pays some English-challenged workers less than $2 an hour.

The savings from layoffs and offshoring are helping AT&T buy back shares of its own stock to help investors grow their stock portfolio’s value. The company has spent $16.45 billion on buybacks since 2013, including $419 million in the second quarter of 2018, the most AT&T has spent on buybacks since 2014.

AT&T has also banked at least $20 billion in savings from the Trump Administration’s corporate tax reform program. CEO Randall Stephenson was among the country’s biggest backers of the Trump tax cut program and was a principal member of the Business Roundtable lobbying group, which heavily lobbied Republicans to pass the measure.

According to the Institute on Taxation and Economic Policy, AT&T actually paid an effective tax rate of just 8 percent between 2008 and 2015, despite recording a profit in the United States each year, by exploiting tax breaks and loopholes. But the thought of paying even less was appealing to Stephenson.

When the measure passed, AT&T’s chief financial officer John Stephens shared the good news with shareholders.

“With the passage of tax reform, we see a significant boost to our balance sheet, reducing $20 billion of liabilities and increasing shareholder equity by a like amount,” Stephens said.

Stephenson

AT&T promised if the Trump Administration passed tax cuts and reduced the corporate tax rate to around 20%, AT&T would create 7,000 new middle class jobs paying $70,000-80,000/year. The CWA argues AT&T instead laid off an estimated 7,000 workers. AT&T disputes this, claiming the company hired 8,000 new employees in the United States so far this year and 87,000 over the past three years. AT&T also claims it promised to pay $1,000 bonuses to 200,000 employees over the next year, tied to the tax cuts. In fact, AT&T’s unions negotiated the bonuses with AT&T before the Trump Administration’s tax reform was passed.

For AT&T employees, mass layoffs come without warning. Managers at the Cleveland call center repeatedly calmed employees that its call center, open for decades, was not targeted for closure. Until it was in 2011. Most employees were laid off or offered positions in Detroit, a city two hours away.

Employees feel insecure, despite recruitment campaigns that stress AT&T is a company where stability is part of the job. In reality, an out-of-state executive can decide to close call centers and other AT&T facilities without ever having to face the employees being laid off. Many of those laid off face the prospect of competing in job markets where single, younger employees are willing to accept much less and do not have the same financial obligations veteran AT&T workers have to their families.

AT&T has increased investment in network upgrades with some of its tax savings, but much of that work is farmed out to third-party contractors. AT&T’s much larger investment is in mergers and acquisitions, acquiring Time Warner (Entertainment), Inc., for $85 billion.

Critics of the tax cut plan predicted the money would be spent on almost everything but job creation and investment.

“They can either create new jobs and capex for expansion or they can create greater shareholder wealth through dividends and stock buybacks. There are some other issues to consider, but that’s the main line of reasoning why corporate tax cuts incentivize buybacks and dividends,” Fran Reed, regulatory strategist at FactSet told US News & World Report.

A typical job offer to work in an AT&T call center. Starting salary is $22,880. Maximum pay is $37,518.

History tells the rest of the story. In 2004, a one-time tax holiday to repatriate foreign earnings temporarily cut tax rates from 35% of 5.25%.

“The primary use of the repatriated funds was to increase shareholder payouts, particularly stock buybacks, rather than increase firm investments such as capital expenditures, research and development spending,” said Stephen J. Lusch, associate professor of accounting at the University of Kansas.

In 2011, the Senate Permanent Subcommittee on Investigations found the 2004 tax break did not deliver the promised benefits of increased employment and investment. In fact, the largest recipients of the tax break downsized and collectively fired more than 20,000 employees, while enriching shareholders and executives:

U.S. Jobs Lost Rather Than Gained. After repatriating over $150 billion under the 2004 American Jobs Creation Act (AJCA), the top 15 repatriating corporations reduced their overall U.S. workforce by 20,931 jobs, while broad-based studies of all 840 repatriating corporations found no evidence that repatriated funds increased overall U.S. employment.

Research and Development Expenditures Did Not Accelerate. After repatriating over $150 billion, the 15 top repatriating corporations showed slight decreases in the pace of their U.S. research and development expenditures, while broad-based studies of all 840 repatriating corporations found no evidence that repatriation funds increased overall U.S. research and development outlays.

Stock Repurchases Increased After Repatriation. Despite a prohibition on using repatriated funds for stock repurchases, the top 15 repatriating corporations accelerated their spending on stock buybacks after repatriation, increasing them 16% from 2004 to 2005, and 38% from 2005 to 2006, while a broad-based study of all 840 repatriating corporations estimated that each extra dollar of repatriated cash was associated with an increase of between 60 and 92 cents in payouts to shareholders.

Executive Compensation Increased After Repatriation. Despite a prohibition on using repatriated funds for executive compensation, after repatriating over $150 billion, annual compensation for the top five executives at the top 15 repatriating corporations jumped 27% from 2004 to 2005, and another 30%, from 2005 to 2006, with ten of the corporations issuing restricted stock awards of $1 million or more to senior executives.