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N.Y. Attorney General Overcomes Charter’s Legal Objections to Slow Internet Lawsuit

Phillip Dampier February 20, 2018 Charter Spectrum, Consumer News, Public Policy & Gov't 5 Comments

Charter Communications will have to face a courtroom to answer accusations the cable company intentionally sold internet service at speeds it knew it could not provide to its customers in New York.

New York State Supreme Court Justice O. Peter Sherwood rejected a motion by the cable company to dismiss New York Attorney General Eric Schneiderman’s 2017 lawsuit accusing Time Warner Cable (now owned by Charter) of systematically shortchanging as many as 640,000 New York internet customers by falsely advertising internet speeds it knew it could not deliver, often with at least 900,000 outdated company-provided cable modems incapable of supporting the higher speeds the company promoted.

“Today’s decision by the New York Supreme Court marks a major victory for New York consumers — rejecting every single argument made by Charter-Spectrum in its attempts to block our lawsuit,” said Schneiderman. “This decision ensures that our office can continue to hold Charter-Spectrum to account for its failure to deliver the reliable internet speeds it promised consumers, ripping you off by promising internet speeds it simply could not deliver.”

Charter’s Defense: Spectrum’s Ad Claims for Fast Internet Service are: “Prototypical instances of non-actionable puffery.”

Charter’s lawyers attempted a variety of legal strategies to get Schneiderman’s lawsuit tossed, including undermining the cable company’s own marketing efforts. Lawyers argued the court should ignore Charter’s claims it sold a “blazing fast, super-reliable connection” that could “stream Netflix and Hulu movies and shows effortlessly” as nothing more than “prototypical instances of non-actionable puffery.”

Scheniderman’s office claimed it was much more than that.

N.Y. Attorney General Eric Schneiderman

“Spectrum-TWC failed to maintain enough network capacity in the form of interconnection ports to deliver this promised content to its subscribers without slowdowns, interruptions, and data loss,” stated Schneiderman. “It effectively ‘throttled’ access to Netflix and other content providers by allowing the ports through which its network interconnects with data coming from those providers to degrade, causing slowdowns. Spectrum-TWC then extracted payments from those content providers as a condition for upgrading the ports As a result, Spectrum-TWC’s subscribers could not reliably access the content they were promised, and instead were subjected to the buffering, slowdowns and other interruptions in service that they had been assured they would not encounter.”

Charter also claimed it was not legally responsible for meeting its own advertised speeds because the company only sold speeds “up to” a level, without guaranteeing customers would get the speeds it advertised.

Even if a judge found Charter lacking in its legal defense, lawyers for the company more broadly argued that under FCC Chairman Ajit Pai’s net neutrality order, state courts and regulators had no power to regulate or oversee broadband providers because “regulation of broadband internet access service should be governed principally by a uniform set of federal regulations, rather than by a patchwork of separate state and local requirements,” according to Charter’s attorney Christopher Clark.

Justice Sherwood uniformly rejected all of Charter’s arguments to dismiss the case:

  • Improper state venue for the lawsuit: “Spectrum-TWC fails to identify any provision [of law] that preempts state anti-fraud or consumer-protection claims, or reflects any intention by Congress to make federal law the exclusive source of law protecting consumers from broadband providers’ deceptive conduct.”
  • False advertising: “This court finds that, contrary to defendants’ contentions, the FCC’s goal of promoting competition through [the Internet Transparency Rule], the FCC stated that the rule was intended to ensure consumers had the “right to accurate information, so [they] can choose, monitor, and receive the broadband internet services they have been promised. New York’s Executive Law and Consumer Protection Act […] require that [providers] refrain from fraud, deception, and false advertising when communicating with New York consumers.
  • Netflix/YouTube slowdowns: The issue of interconnection agreements between content providers and Spectrum-TWC are matters for the court to consider because it is not an attempt to regulate those agreements. “Rather, the complaint simply alleges that Spectrum-TWC misled subscribers by claiming that specific online content would be swiftly accessible through its network, while it was simultaneously deliberately allowing that service to degrade […] and failing to upgrade its network’s capacity to meet demand for this content.”
  • “Up to” speeds: Spectrum-TWC claimed that advertising speeds “up to” a certain level was not misleading because consumers understood this to mean the maximum speed, not average speed. In Spectrum’s argument, it claimed “reasonable consumers understand this is not a promise of ‘minimum’ performance, but rather ‘maximum’ performance.” But the judge disagreed. “Defendant’s theory is contrary to New York law regarding ‘up to’ claims” when those speeds are “functionally unattainable as a result of the defendants’ knowing conduct.”

Schneiderman’s office is seeking civil fines and restitution from Spectrum-TWC for customers in New York.

Fidelity Communications Caught Running Astroturf Website to Kill Broadband Competition

Sock Puppet “consumer group” opposing municipal broadband in Missouri is outed by their own website.

Fidelity Communications, a small Missouri-based independent cable operator providing service in Missouri, Oklahoma, Arkansas, Louisiana and Texas, has been outed as the creator and backer of a ‘grassroots’ group trying to prevent West Plains, Mo., from launching a public broadband network that would directly compete with Fidelity.

West Plains, a community of 12,000 in south-central Missouri, runs a public fiber network originally envisioned connecting city buildings, a local medical center, fire, police, and highway offices together. Local cable company Fidelity Communications had shown no interest in providing fiber connectivity in West Plains, so city officials explored the idea of building a city owned and operated fiber network itself. As word spread around town that fiber broadband was under consideration, locals began lobbying city officials to open the network up for private commercial and residential users as well.

By January 2016, supported by a dozen major employers willing to participate as network “anchors,” the city of West Plains got into the internet provider business.

West Plains has been challenged by a lack of digital infrastructure and has seen at least 500 jobs disappear over the past few years. Inadequate service from cable company Fidelity Communications, which suffered from frequent speed slowdowns and service interruptions, drove demands for an alternative.

Local officials have been extremely cautious about entering the broadband business, and have been reluctant to grow their network too quickly. The goal of the network these days is to provide robust and reliable high-speed internet access essential for the local digital economy and the jobs it creates. But city administrator Tim Stehn is also concerned about being a careful steward of the community’s finances.

“Of course, as a city administrator, I’m concerned, because if we would go completely to all businesses and residents, we’re looking at a high price tag that is estimated at $15 million,” Stehn told Christopher Mitchell in a 2017 interview for Community Broadband Bits. “What scares me the most is the customer service aspect of this. If we’re going to do this, I want to make sure the city is successful and that we can respond at serving the customer service. That’s the piece that really scares me the most.”

West Plains’ fiber network has grown carefully over the last few years, both in terms of its reach and its capabilities. At the outset, the network offered 25/25 Mbps dedicated connections primarily to business customers. But where West Plains’ fiber loop passes residential homes, the city has also been willing to provide service to local homeowners as well.

Last September, the city announced a three-month trial of the city’s 1 Gbps Gigabit Passive Optical Network (GPON). Up to 80 businesses and 14 homes in the Southern Hills district were invited to participate. West Plains’ GPON network offers participants a shared 1 Gbps connection. City officials were confident that even though the network is shared, there will be plenty of capacity available — much more than what DSL and cable broadband networks offer. The results of the pilot are designed to ascertain how much peak usage traffic the network will face and help local officials decide on what kinds of speed tiers to offer going forward.

The community’s progress since 2016 has not gone unnoticed. As Stop the Cap! has documented before, one of the best ways to force a stubborn incumbent phone or cable company to upgrade their network is to threaten to compete with it. Last September, Fidelity Communications suddenly announced it, too, was now offering gigabit internet service — at least for download speeds — within West Plains.

The residential service features 1 Gbps download speeds with 10 Mbps uploads, with a flat price of $79 per month, fees and Wi-Fi included, taxes may still apply. The higher speeds support multiple video streams, high-end online gaming, unlimited wireless devices and rapid transfer of huge data files, along with the capability to handle other bandwidth-hungry applications.

Over the past several months, Fidelity completed network upgrades, acquired 1 Gig-capable customer modems and freed up the bandwidth necessary to support the new 1 Gig speeds. These improvements will bring convenience and ease to those using the Internet in West Plains.

“As time goes on, technological demands keep increasing,” said Don Knight, Missouri general manager for Fidelity. “Fidelity intends to meet that demand by providing broadband speeds not normally available in rural areas.”

West Plains receiving gigabit service from two gigabit providers should be welcome news for local residents and businesses. But it apparently was not good news for Fidelity, which does not appreciate the competition.

Stop City Funded Internet has references to “Fidelity” — the area’s local cable company in certain file paths to images and other documents on its website.

StopCityFundedInternet.com was registered on Dec. 13, 2017 (and last updated Jan. 23, 2018, concealing the identity of the entity that registered the domain name behind an anonymous proxy service provided by Namecheap, a well-known domain name registrar.)

When the website went live, it claimed to be a “collection of fiscally conservative Missourians who believe that the role of government is to provide essential services that enhances the lives, safety and prosperity of local communities as opposed to leveraging taxpayer funds on high-risk endeavors that compete with services already provided by the private sector.”

This “independent” website coincidentally promotes the products and services of Fidelity Communications.

The website appeared to borrow heavily from a similar (failed) campaign to stop municipal broadband in Fort Collins, Col. The most common message of anti-municipal broadband campaigns is ‘taxpayer dollars will be wasted on failing broadband networks that take away from investments in schools, local infrastructure spending, and reducing crime.’ The Stop City Funded Internet campaign hit on all three of these messages, along with what it claims are examples of “failed” public broadband projects. The group’s website links to several “news articles” about municipal broadband that are actually opinion pieces typically written by industry-funded groups and individuals.

“West Plains is already a “Gig City,” with other private internet providers,” the website claims, without referring to Fidelity Communications directly. “In fact, residents already have access to a Gig connection for $80 per month. $80 per month is a price that is in line with many other cities around the country. The City of West Plains should focus its limited taxpayer funding on more pressing priorities, like fixing our roads and bridges, improving public safety and supporting our schools. And spending taxpayer dollars subsidizing a broadband utility would mean fewer resources for other services residents need and enjoy.”

The group invites those who oppose public broadband to register for e-mail updates, which will likely involve a $15 million bond and public referendum that would be needed to build out the city’s fiber to the home network to the entire community.

Isaac Protiva of West Plains found something unusual about the sudden appearance of the group and its website, which had no presence in the community before. For one, the group seemed to have an ample budget to spend on targeted Facebook ads for local residents. The ads promote the group’s website and Facebook page. That isn’t the case for Protiva’s own website: Internet Choice West Plains, which promotes the public broadband effort out of his own pocket.

Protiva also discovered certain elements on the group’s web page directly referenced “Fidelity:”

  • Header image: The main image from the homepage has a file name of “Fidelity_SCFI_Website_V2”
  • Privacy Policy: An image from the Privacy Policy page was hosted, or stored, on a website named “Fidelity.dmwebtest.com”

The website’s attempt to painstakingly avoid any connection to Fidelity Communications makes it a classic industry-sponsored astroturf operation. A private company secretly finances an “independent consumer group” that falls in line with the company’s public policy agenda. Many companies even brazenly reference such groups as evidence that their business views are in line with those of the public. In this case, the website developer accidentally outed the operation.

After Protiva began to publicize his efforts to document Fidelity’s funny business, the company initially responded by trying to hide the evidence. The website owners disabled the Internet Achive’s ability to snapshot the website’s history to scrub evidence of the accidental ties to Fidelity, Protiva claims. He also claims the group is heavily censoring its Facebook page.

Presented with strong evidence of the connection between Stop City Funded Internet and Fidelity Communications, the company finally came clean in a Facebook post:

GOP Tax Cut Law Will Deliver $14.4 Billion to Comcast for Mergers, Share Buybacks by 2021

Phillip Dampier January 18, 2018 Comcast/Xfinity, Consumer News, Public Policy & Gov't 1 Comment

The Republican-pushed corporate tax rollback will bring a $14.4 billion increase in available cash flow for Comcast to use for future mergers and acquisitions or share buybacks by 2021, even as the cable company has no plans to share its tax savings bonanza with subscribers in the form of lower rates.

MoffettNathanson analyst Craig Moffett noted Comcast will likely only spend the largess on two things — acquiring other companies to further concentrate the media marketplace or, more likely use its newly available cash flow on a blockbuster share buyback program, which will boost Comcast’s stock price and deliver dramatically higher bonuses to the company’s top executives.

Moffett believes Comcast is following in the footsteps of Time Warner Cable a decade ago, shortly after the company was split away from Time Warner, Inc. The former Time Warner Cable fueled interest in its stock by committing to keep its leverage at a stable 3.25 x EBITDA, which means it would not be spend a lot of money or take on a lot of debt to upgrade its cable systems, make expensive acquisitions, or cut rates for subscribers. As a result, Comcast’s free cash will quickly accumulate, which it will either use to buy other companies, return to investors in the form of a dividend payout, or buy back large numbers of shares of its own stock, making shares already owned by investors more valuable. Since most executive compensation packages tie bonuses to the share price of the company’s stock, and often include stock share awards for executives, top officials can take home tens of millions of dollars in bonuses.

The Trump Administration claimed the dramatic cut in the corporate tax rate from 35% to 21% would create new investment, result in new job creation and higher pay. But at Comcast, its existing investment plans developed before the tax cut law was passed remain largely unchanged, the company laid off nearly 1,000 workers in the last month, and so far has only committed to giving qualified employees a one-time $1,000 bonus, which will cost the company a one time charge of less than $150 million — about 1.04% of Comcast’s tax cut cash haul.

Cablevision, Suddenlink Will Bail Out Altice’s Struggling European Business

Phillip Dampier January 11, 2018 Altice NV, Cablevision, Competition, Consumer News, Suddenlink No Comments

Altice’s American cable companies will help bail out the parent company’s struggling French operations.

Cablevision and Suddenlink are coming to the rescue of their parent company Altice in a deal that will transfer $1.5 billion from the two American cable operators to help bail out its struggling European operation, according to the Wall Street Journal.

Founding shareholder Patrick Drahi is splitting his U.S. cable operations away from Altice NV, spinning them off into a new publicly traded company known as Altice USA. But Drahi has also ordered the new U.S. company to pay a one time $1.5 billion dividend, most of which will end up in the bank account of Altice NV to help the parent company reduce its leveraged debts that have been largely responsible for its falling stock price.

While Cablevision and Suddenlink customers can look forward to additional rate increases, shareholders of Altice USA are being enticed to invest with sweeteners including an unexpected dividend payout and a sudden decision by Drahi to forego his usual management fee charged to companies he acquires to acquaint them with the “Altice Way” of doing business. That fee can amount to an initial $30 million payment plus an ongoing percentage (usually 2-3%) of a Drahi-acquired company’s future revenue.

Altice USA believes it can afford the bailout thanks to President Donald Trump’s tax cuts. In addition to using $2 billion of anticipated savings to pay for share buybacks, Altice USA hopes to quickly recoup an additional $1.5 billion from reduced taxes and revenue increases it will earn from customer rate hikes and new broadband customers.

Altice NV, soon to be renamed Altice Europe, was a veritable disaster financially — called the “worst large-cap performer in Europe” in 2017. At the center of Altice’s European operations remains the dismally performing SFR-Numericable, the French wireless and cable company. After Drahi acquired the company, he slashed costs and investments and threatened to lay off one-third of its workforce. Service deteriorated and customers canceled in droves. Investors starting selling their Altice shares around Halloween of 2017, after watching Mr. Drahi pile on unprecedented debt and become convinced Drahi’s highly leveraged company could not succeed.

The Wall Street Journal cautioned potential investors in Altice USA that the new venture will gladly take your money, but give shareholders almost no say in how it will be governed. Drahi has engineered his continued dominance of the new entity with control of at least 51% of voting rights.

Wall Street analysts are largely positive about the deal, noting Altice USA won’t be attached to Altice’s European money troubles and the company will have the ability to extract revenue from its customers with ongoing rate increases.

Mother Of All Service Outages: Liberty Cable Promises Puerto Rico Full Restoration in Mid-2018

Liberty Cablevision of Puerto Rico has estimated it will take as long as June of this year to fully restore cable and broadband service to Puerto Rico.

It has been over 100 days since Hurricane Maria devastated Puerto Rico and the U.S. Virgin Islands. At least 45% of Puerto Rico remains without any electricity, and the U.S. Army Corps of Engineers estimates it will take until May to fully restore power — eight months after the hurricane hit.

The island’s well-publicized power scandal with a politically-connected contractor also involves a decrepit utility, likely corruption in contract awards, incompetent management, and political interference from conservative groups who want to privatize the island’s utility and sell off its assets to corporate interests and entrepreneurs competing to turn the island into an experimental laboratory for renewable energy sources. All contribute to a slowdown in power recovery because no plan has adequate backing and sufficient resources to quickly bring power back online. Instead, mutual aid assistance from U.S. utilities is gradually rebuilding and strengthening the island’s existing power grid.

Liberty Cable’s original service area.

Liberty Cablevision claims many of its outages are power-related. When power is restored, their service will return as well. But many of their former customers will not. More than 140,000 Puerto Ricans have left since the storm hit Sept. 20 and some experts estimate more than 300,000 more could leave in the next two years. That’s on top of a similar number that have already left over the last decade as a result of the perpetual economic crisis on the U.S. island territory of 3.4 million.

Liberty is rebuilding significant parts of their network, spending millions to replace damaged coaxial cable with fiber optics, especially in areas closest to the eye of the hurricane where damage was greatest.

Liberty Global, controlled in part by cable magnate John Malone, this week completed spinning off Liberty Cablevision of Puerto Rico to Liberty Latin America, a new independent, publicly traded company. Included in the spinoff are Cable & Wireless Communications, a familiar telecom company serving Caribbean islands, parts of Latin America and the African island nation of the Seychelles, and VTR – Chile’s largest cable company.

A portable cell site

Cellular/Cable/Telephone

As of Dec. 29, 11.0% of Puerto Rico’s cell sites remain out of service. One county, Vieques, has greater than 50% of its cell sites out of service.

Satellite Cells on Light Trucks (COLTs) have been deployed in Aguadilla, Arecibo, Cayey, Coamo Sur, Fajardo, Guayama, Manati, Mayaguez Mesa, San German, Vega Baja, and Yauco and Terrestrial Cells on Wheels (COWs)/COLTs in Humacao, Quebradillas, Rio Grande, and Utuado.

U.S. Virgin Islands: Overall, 20.5% of cell sites are out of service. 50% of cell sites in St. John are out of service.

The FCC has received reports that large percentages of consumers are without either cable services or wireline service. While the companies have been actively restoring service, the majority of their customers do not have service because commercial power is not yet available in their respective areas. In Puerto Rico, there are no major telecom switches still affected.

Broadcast Stations

When broadcast stations are listed as “suspected to be out of service,” the statement is based on field scanning of relevant bands. Stations listed may be operating on reduced power or on a reduced schedule.

Television

Puerto Rico

  • 5 TV stations are confirmed operational (WKAQ, WIPR, WNJX, WTIN, WORO)
  • 2 TV stations are suspected to be out of service (WIPM, WELU)
  • 70 TV stations have been issued Special Temporary Authority to be offline
  • 30 TV stations have unconfirmed status

U.S. Virgin Islands

  • 14 TV stations have been issued Special Temporary Authority to be offline
  • 2 TV stations have unconfirmed status

AM Radio

Puerto Rico

  • 42 AM radio stations are confirmed operational (WA2X, WABA, WALO, WAPA, WBMJ, WCMN, WCGB, WCPR, WDEP, WENA, WEXS, WGDL, WI2X, WI2X, WI3X, WIAC, WIPR, WISO, WKAQ, WKFE, WKJB, WKUM, WLEO, WLEY, WMDD, WMNT, WMSW, WOIZ, WOQI, WORA, WPAB, WPPC, WPRA, WPRP, WSKN, WSOL, WTIL, WUNO, WUPR, WVJP, WXEW, WYEL)
  • 8 AM radio stations are suspected to be out of service (W227, WJDZ, WNVE, WVQR, WYAS, WZCA, WZMT, WZOL)
  • 21 AM radio stations are confirmed out of service by the Puerto Rican Broadcast Association (WBQN, WCMA, WDNO, WEGA, WFAB, WGIT, WHOY, WIBS, WIDA, WISA, WIVV, WJIT, WKVM, WLRP, WNEL, WNIK, WOLA, WOSO, WQBS, WRSJ, WUKQ)
  • 1 AM radio station has unconfirmed status
  • 2 AM radio stations have been issued Special Temporary Authority to be offline

U.S. Virgin Islands

  • 2 AM radio stations are confirmed operational (WSTA, WUVI)
  • 2 AM radio stations are suspected to be out of service (WDHP, WSTX)
  • 1 AM radio station has unconfirmed status

FM Radio

Puerto Rico

  • 55 FM radio stations are confirmed operational (WAEL-FM, WCAD, WCMN-FM, WCMNFM3, WCMN-FM6, WEGM, WERR, WERR-FM1, WERR-FM2, WERR-FM3, WFDT, WFID, WIDI, WIRI, WIVA-FM, WKAQ-FM, WKAQ-FM1, WKAQ-FM2, WLUZ, WMAA-LP, WMEG, WMIO, WNNV, WNRT, WNRT-FM1, WNRT-FM2, WNVM, WODA, WORO, WOYE, WPRM-FM, WPUC-FM, WPUC-FM1, WQML, WRIO, WRRH, WRTU, WRXD, WTOK-FM, WTOKFM2, WTPM, WTPM-FM1, WVDJ-LP, WVIE, WVIS, WVJP-FM, WVJP-FM2, WXYX, WXYXFM1, WXYX-FM2, WZAR, WZIN, WZNT, WZNT-FM1, WZOL)
  • 8 FM radio stations are suspected to be out of service (W227CV, WJDZ, WNVE, WVQR, WYAS, WZCA, WZMT, WZOL-FM3)
  • 17 FM radio stations are confirmed out of service by the Puerto Rican Broadcast Association (WCAD-FM1, WCAD-FM2, WCRP, WELX, WIDA-FM, WIOA, WIOA-FM1, WIOC, WNIK-FM, WQBS-FM, WQBS-FM1, WUKQ-FM, WUKQ-FM1, WXHD, WXLX, WYQE, WZET)
  • 3 FM stations have been issued Special Temporary Authority to be offline
  • 28 FM radio stations have unconfirmed status

U.S. Virgin Islands

  • 2 FM radio stations are confirmed operational (WVIE, WZIN)
  • 1 FM radio station is suspected to be out of service (WVIZ)
  • 1 FM radio station has been issued Special Temporary Authority to be offline
  • 19 FM radio stations have unconfirmed status

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