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Relationship Between Spectrum and New York State Growing Worse By the Day

Whatever pleasantries were exchanged between Charter Communications and the New York Department of Public Service (Public Service Commission) earlier this year are now gone as the relationship between the cable company and state officials continues to deteriorate.

The first shot across the bow this summer came in Charter’s June 28th letter in response to a demand by the state to unconditionally accept the state’s terms of its 2016 Merger Order granting the acquisition of Time Warner Cable by Charter Communications. Except the cable company did not actually agree unconditionally to those terms. As part of a dispute over Charter’s fulfillment of its responsibilities in the Merger Order regarding rural broadband expansion, one section seemed to predict future litigation:

“While Charter’s acceptance of these commitments is unconditional, this acceptance remains subject to applicable law. Charter does not waive its positions as to the meaning or proper interpretation of its commitments (including Charter’s position that the negotiating history of Appendix A must guide such interpretation), or any of its legal rights including its right to seek review of the Commission’s June 14, 2018 Orders and the Commission’s interpretation and application of the January 8, 2016 Order.”

On July 3rd, Charter’s attorneys sent another letter to the telecommunications regulator doubling down on this language:

“Charter fundamentally disagrees that the Commission’s June 14th Order accurately reflects the agreement that was reached with Charter with respect to the Merger Order. The company intends to appeal the Order….”

That notification was included in a letter requesting an extension of the deadline to file a revised rural buildout plan to replace disqualified addresses with other New York addresses where broadband service is not currently available. Charter warned it would pursue “administrative and legal appeals” and did not want to take the time update its buildout lists until those challenges (and appeals) are exhausted. The company’s lawyers made sure to reserve all of Charter’s rights in an even lengthier footnoted disclaimer:

“Certain subjects discussed in this filing pertain to non jurisdictional products and services. Discussion of nonjurisdictional products and services is not intended as a waiver or concession of the Commission’s jurisdiction beyond the scope of Charter’s regulated telecommunications and cable video services. Charter respectfully reserves all rights relating to the inclusion of or reference to such information, including without limitation Charter’s legal and equitable rights relating to jurisdiction, compliance, filing, disclosure, relevancy, due process, review, and appeal. The inclusion of or reference to non jurisdictional information or to the ordering clauses or other requirements of the Order as obligations or commitments to provide non jurisdictional services shall not be construed as a waiver of any rights or objections otherwise available to Charter in this or any other proceeding, and may not be deemed an admission of relevancy, materiality, or admissibility generally. The requests discussed herein should not be construed in any way as a waiver by Charter of any of its legal rights, including (without limitation) Charter’s right to seek review of the June 14th Order or otherwise seek review of the Commission’s interpretation and application of its January 8, 2016 Merger Order.”

The key takeaway from this legal word salad is “non jurisdictional products and services” — code language from Charter to the state suggesting New York regulators have no legal authority to stand on imposing rules, regulations, and requirements on deregulated services like broadband. Charter’s lawyers defended the company against accusations it failed to meet the agreed-on schedule for rural broadband buildout to 145,000 unserved/underserved New Yorkers using similar language. Charter only began suggesting the state’s broadband expansion plan violated federal law after the state declared the company was out of compliance and fined.

Any legal action by Charter will likely rest on claims the federal government deregulated much of the cable business, including broadband service. Therefore, the state lacks enforcement power to compel Charter to offer broadband service to any unserved area, much less on a timetable. Remember, however, Charter was only too happy to agree to the terms of the merger agreement, with all its terms and conditions, to get the merger finished, without any complaints. Now it seems to have second thoughts.

“Charter finds that the task of revising the detailed Buildout Plan and the other requirements is far too large an undertaking to be accomplished with the necessary care and diligence required within the 21-day timeframe mandated in the Commission’s June 14th Order,” the cable company’s lawyers wrote, asking for an extension of the deadline.

Today, the Department issued a terse response to Charter’s legal team, authored by Kathleen Burgess, secretary of the Public Service Commission:

“Your request for a stay of the revisions of Charter’s Buildout Plan and the other provisions required by the Commission’s Order is not a matter for the Secretary. Your request for a 60-day extension is excessive and not adequately justified. Therefore, your request for an extension is denied.”

Two things seem clear: New York will continue to fine Charter for further missed deadlines, and it seems likely this matter is headed for court.

Spectrum Dumps Time Warner Cable’s Phone2Go App Today, Citing Low Usage

Phillip Dampier July 5, 2018 Charter Spectrum, Consumer News No Comments

Charter Communications will close down Time Warner Cable’s Wi-Fi calling app Phone2Go on July 5, 2018, citing low customer usage.

Originally introduced in 2014, Phone2Go was marketed as a free Wi-Fi calling app alternative to Skype or Vonage. The Android and iOS app linked to Time Warner Cable/Spectrum’s phone service, allowing customers to make free calls, text and video conference over the app when away from home or abroad. Each account supported up to five devices, which allowed distant relatives, friends, or family members to make and receive free calls.

“One of the important advantages of Phone2Go is you can give an ID to a relative or friend who lives abroad. And they can make calls as if they were in the United States. So they can call you say on your cellphone, they may be say in Europe and you are in the U.S. and they would only pay the local rate,” said Time Warner Cable Phone general manager Jeff Lindsay back in 2016.

The app was never popular with customers, however, because call quality was often poor and the app was infrequently updated. It was also cumbersome to change or add devices, and once registered to a device, it was very difficult to re-register those devices for use with another account. After Charter Communications acquired Time Warner Cable, there were frequent and long-lasting service outages affecting the Phone2Go app, which may have driven off what loyal users it had.

Spectrum is contacting customers registered for the app by phone to alert them the Phone2Go service would be discontinued on Thursday.

Charter Spectrum Launches Mobile Phone Service Today

Charter Communications today launched Spectrum Mobile, a new no-contract mobile phone service for existing Spectrum internet customers offering two simplified plans, including a “pay per gigabyte” plan that will allow customers to get unlimited calling, texting and 1 GB of data for $14 a month.

Spectrum Mobile relies on Verizon Wireless’ 4G LTE network to assure strong network coverage, and phones sold are also designed to simplify connections to home Wi-Fi and Spectrum’s nationwide network of Wi-Fi hotspots. But Spectrum Mobile appears to limit speeds of certain Verizon Wireless network traffic, notably videos, which “typically stream at 480p.”

The plans and website are remarkably similar to Comcast’s XFINITY Mobile, except Spectrum’s “pay per gig” plan costs $2 more ($14) than the one on offer from Comcast ($12).

Spectrum Mobile also does not currently permit customers to bring their own devices — customers must buy new devices from Spectrum’s store, which as of today only offers five Android phones from Samsung (Galaxy S8, S8+, S9, S9+)  and LG (K30). Phones can be purchased up front or financed for 24 months at 0% interest at prices ranging from $7.50 a month for the LG phone to $35.42/month for the Galaxy S9+. A separate trade-in program is available to reduce the cost of investing in a new phone. Spectrum accepts most phones from Apple, Samsung, HTC, Google and LG as long as they meet trade-in standards.

Customers are given the option of two plans, based on anticipated data consumption. Customers who typically use 3 GB or more per month should sign up for the unlimited plan:

Unlimited $45

  • Unlimited talk
  • Unlimited texting (does not count against 20 GB threshold)
  • “Unlimited” data: After 20 GB of usage per month, speeds may be throttled for the rest of the billing cycle.
  • Customers can switch a line from Unlimited to By the Gig at the end of your billing cycle, charged $14/GB.

By The Gig $14

  • Unlimited talk
  • Unlimited texting (does not count towards data usage)
  • $14/GB for data
  • Customers can switch a line from By the Gig to Unlimited at any time during the billing cycle, assuring you won’t pay more than $45 a month for a plan.

Spectrum’s initial assortment of smartphones is extremely limited.

There are various fine print terms and conditions to be aware of if considering switching to Spectrum Mobile:

  • New Spectrum internet customers with fewer than 30 days of service are limited to up to two lines. Devices associated with these lines are shipped to the internet service address on file. After 30 days of Spectrum internet service, customers may be eligible for more lines, up to a total of five, based on credit rating.
  • Equipment, taxes and fees (including regulatory recovery fees, surcharges and other applicable charges) extra and subject to change.
  • There are no additional fees for using your phone as a mobile hotspot. After 5 GB of mobile hotspot data use in the bill cycle, mobile hotspot speeds are reduced to a maximum of 600 kbps for the rest of the bill cycle. Mobile hotspot data counts toward your 20 GB high-speed data allowance.
  • DVD-quality video streaming is supported. Video typically streams at 480p.
  • If a residential Spectrum internet subscription isn’t maintained, an additional $20 per-line monthly charge will be applied and Spectrum Wi-Fi speeds will be limited to 5 Mbps. You can change your rate plan, but you won’t be able to add additional lines.
  • Spectrum Mobile is not currently considered part of your Spectrum service bundle, so no bundling discounts are available.
  • Spectrum will not pay any early termination fees you might encounter if you cancel service with your old carrier and have a service contract.
  • Auto-pay with a credit or debit card is required.

Charter Unconditionally Accepts New York’s 2016 Merger Order… Conditionally

Two weeks ago, New York State’s telecommunications regulator gave Charter Communications 14 days to fully and unconditionally agree to the terms and condition of the 2016 Merger Order that granted the cable company permission to acquire Time Warner Cable. On the last day, hours before the deadline expired, Charter agreed, sort of.

“This replacement letter hereby clarifies that Charter ‘unconditionally accept[s] and agree[s] to comply with the commitments set forth in the body of [the Merger Order] and Appendix A’ as set forth in Ordering Clause 1 of the Merger Order,” wrote Adam E. Falk, senior vice president for state government affairs at Charter Communications.

Unwilling to stop there, Falk decided to make the unconditional acceptance… conditional.

“While Charter’s acceptance of these commitments is unconditional, this acceptance remains subject to applicable law,” Falk wrote. “Charter does not waive its positions as to the meaning or proper interpretation of its commitments (including Charter’s position that the negotiating history of Appendix A must guide such interpretation), or any of its legal rights including its right to seek review of the Commission’s June 14, 2018 Orders and the Commission’s interpretation and application of the January 8, 2016 Order.”

That final paragraph signals the Public Service Commission/Department of Public Service that Charter intends to continue insisting that the language in Appendix A governs, defines, and characterizes the entire Merger Order — an argument the Commission had refused to accept because it gave a foundation for Charter officials to claim they were in full compliance with their commitment to roll out service to an additional 145,000 unserved New York residents. Appendix A omits the purpose and intent of the expansion commitment, explained elsewhere in the Merger Order as providing broadband service in New York’s unserved rural areas. Charter had attempted to count as “new passings” any new expansion of its cable lines, including those in wealthy gated communities and upscale condos, refurbished apartments in New York City, and new housing developments — all likely to receive service without the Merger Order.

N.Y. Regulator Hammers Spectrum for Fake Ads, Intentionally Deceptive and Misleading Conduct

New York’s top telecommunications regulator has called Charter Communications a purveyor of fake ads, deception, and broken promises and has again called into question how much longer the company should be allowed to do business in New York State.

The New York State Department of Public Service/Public Service Commission today sent a letter to Charter Communications CEO Thomas Rutledge condemning Spectrum’s false and misleading advertising campaigns and the ongoing deception of New York consumers about its expansion efforts. The letter warned Rutledge Charter must immediately cease and desist airing fake ads about the company’s efforts to expand critical broadband service across the state. The letter also warns that if the misrepresentations and unacceptable way Spectrum conducts its business in New York does not stop, the company could find itself out of business in New York State.

“The situation regarding Charter/Spectrum is getting more serious with each passing day,” Department CEO John B. Rhodes said. “Not only has the company failed to meet its obligations to build out its cable system as required, it is now making patently false and misleading claims to consumers that it has met those obligations without in any way acknowledging the findings of the Public Service Commission to the contrary. Access to broadband is essential for economic development and social equity. Charter/Spectrum’s intentional deception of New Yorkers must end now.”

So far, Charter has ignored the Public Service Commission’s June 14 order demanding Charter indicate full and unconditional acceptance of the 2016 merger agreement and the terms it contained. The deadline for Charter or its attorneys to respond is this Thursday, June 28, 2018. If the deadline passes with no response, the Commission warned it may rescind, modify, or amend the approval order granting the merger, file a lawsuit in the Supreme Court of New York to potentially cancel the merger, and fine Charter for being out of compliance with state law.

Letter from New York regulators to Charter Communications (click image to download or view complete letter).

Charter’s Fake Ads

Rhodes

The letter accuses Rutledge of knowingly misleading New York customers in its advertising and printed materials that claim Charter has fully complied with — and exceeded — its commitments to New York under a merger agreement with the state allowing Charter to acquire Time Warner Cable systems. The letter emphatically states these representations are demonstrably and materially false.

State regulators pointed to Charter’s historic and systematic pattern of false advertising, noting a 2017 lawsuit filed by New York’s Attorney General over the company’s inability to provide advertised speeds has survived several company challenges in court and is moving forward.

The Merger Itself is in Peril

Charter will face the possibility of additional legal troubles as the PSC refers Spectrum’s latest conduct to the Attorney General’s office for possible further legal action. State regulators also suggested Charter was materially deceiving investors in violation of federal securities laws by not disclosing the company’s failure to honor its commitments to New York and warning investors the merger itself was now in significant peril if it is revoked in New York.

Regulators have also put Charter executives on notice that in advance of a possible penalty action by the Commission against the company directly, it further demanded that Spectrum produce records regarding its false representations and preserve all documents, including email, text messages, voice mail, recordings, and other documentation relating to its advertising claims.

A Record of Failure in New York

According to a PSC investigation and a Public Service Commission order, Spectrum missed its required December 16, 2017 build-out commitment to extend its network to pass additional residences and businesses by 12,245 passings. Spectrum also failed to cure, as required, its earlier failure by March 16, 2018. For these two failures, Spectrum was ordered by the Public Service Commission to forfeit $2 million. These failures came on top of earlier failures by Spectrum to meet its commitments. The PSC argues Spectrum has not met a single build-out deadline since the approval of its acquisition of Time Warner Cable in 2016.

The PSC stated that, instead of working to meet its commitments to New York, Charter executives have ignored state regulators as Spectrum knowingly continued to advertise and publish false claims that the company is exceeding its mid-December 2017 commitment made to New York by more than 6,000 locations and is on track to extend the reach of advanced broadband network to 145,000 unserved or underserved locations by May 2020. Both claims are patently false, claims the PSC.

“Spectrum’s failure to meet its build-out commitments hurts unserved and underserved New Yorkers, leaving them without a key public utility service crucial to their future success and well-being,” the regulator wrote.

“Spectrum’s publication of claims that it knows are false harm all consumers who rely on honest and accurate information in choosing suppliers from among competitors,” the PSC wrote. “And when Spectrum continues to advertise and publish false claims even after being directed not to by its governmental regulator, it demonstrates deliberate disregard and lack of respect for the Public Service  Commission, the rule of law, and regulation in New York State. Accordingly, in the name of customers and potential customers, the Department called on Spectrum to set the record straight by advertising and publishing the truth that the company has been found by the Public Service Commission to have failed to keep its buildout commitment to New York State.”

Charter Communications produced this video incorporating similar elements used in its advertising targeting New York consumers. Charter does not mention its investment in rural broadband in New York is not altruistic. It was a core condition the company agreed to as part of a settlement with the New York Public Service Commission to approve the acquisition of Time Warner Cable in 2016. (1:36)

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