Spectrum workers on strike march in the 2017 Labor Day parade in New York City. (Image courtesy: IBEW/Local 3)

Charter Communications’ list of addresses of some of its “locally based contractors” turned out to be self-storage locations, leading to accusations the company could potentially be in default of its franchise agreement with New York City.

Charter agreed to use city-based contractors wherever possible to maintain and upgrade its expansive cable system in the Big Apple. But an audit by the Department of Information Technology and Telecommunications found only seven of 26 vendors Charter uses are in the city, despite claims by Charter that 77% of its vendors are NYC-based.

On its own, the violation might seem minor, except for the fact Charter Communications has left 1,800 of its best-trained workers in New York and New Jersey out on strike for 11 months, the longest unresolved labor action of 2017.

Workers’ demands, presented by the International Brotherhood of Electrical Workers (IBEW) Local 3, have been largely ignored by Charter, in part because the company can find replacement workers outside of the area.

Charter’s denial of the accusation it was in violation of its agreement to use local labor included an attempt to broaden the definition of “located,” followed by an effort to change the subject to what the company alleges are more than 100 acts of vandalism committed by striking workers or those sympathizing with them.

“We continue to meet our franchise obligations, and our response to their findings is included in the report,” a Charter spokesman told the New York Daily News over the weekend.

Although union resources supporting the striking workers have been tested to their limits, the union and most of its members persevere. But it remains a difficult struggle, with some members on the verge of losing their apartments, and many more now relying on food banks and public assistance.

The dispute began after the former Time Warner Cable employees were transitioned to Charter Communications. Charter announced it wanted to pull out of the union’s pension and healthcare plans and replace them with a company-sponsored healthcare offer and a 401(k) retirement plan.

“They basically said that until we agree that they don’t have to contribute to our pension and health plan, they won’t talk about anything else,” Chris Erikson, business manager of Local 3, told the Daily News last fall. “That’s a gun to our head, they said ‘Take it or leave it.’ And our membership understands the value of what’s at stake here, and they decided to leave it.”

Efforts by large corporations to abandon employee care and retirement plans administered by the unions themselves is part of a broader national attack to make unions irrelevant, argue union defenders. The replacement plans offered by Charter are greatly reduced from what Local 3 fought for and won from Time Warner Cable.

“The practical side of the medical plan that the members have is: my son had a kidney transplant and I got the bill from Columbia Presbyterian hospital and it was $96,000. My share of that was 200 bucks. If I was in Charter’s medical plan I’d probably have to take a loan to pay the hospital bill – that’s with coverage,” Erikson told The Guardian.

Charter can certainly afford to cover its workers’ needs. The company’s CEO was the highest paid in the country in 2016, earning $98 million. The impact of the Trump tax cuts also delivered soaring profits for Charter Communications as a whole.

Profits for the fourth quarter of 2017 hit $9.6 billion, compared with $454 million during the same period in 2016. Profits for the year reached $9.9 billion, compared with $3.5 billion in 2016. Charter earned $41.6 billion in revenue in 2017.

New York Mayor Bill de Blasio thinks the strike has gone on for too long.

“It’s been almost a year that Local 3 workers have been on strike. It’s far past time for management to come to the table with a fair deal,” he said.

The Trump Administration is seeking billions in new “user fees” charged to broadcasters, cable and satellite providers that would likely be passed along to consumers as a new surcharge on their cable, wireless, and broadband bills.

The White House, at the request of the Federal Communications Commission, backs increasing user fees to help fund the $4.8 trillion 2019 federal budget. The new fees would be in addition to FCC-imposed “regulatory fees” that are already passed on to customers by most providers.

The fee, vaguely called a “spectrum management tool,” in the FCC’s 2019 budget request, includes few details. Broadcasters have seen similar proposals before, and have attacked them as a way to get TV stations to give up valuable channel holdings. Various administrations have proposed user fees designed to encourage license-holders to abandon less valuable spectrum so it can be repurposed for other uses. But the powerful broadcaster lobby — the National Association of Broadcasters, has successfully appealed to strike similar proposals in the past.

Other mandatory fees, including franchise and regulatory fees, special tax levies, and mandatory surcharges have traditionally been passed along to individual subscribers, often at a markup by the provider. It seems unlikely this fee would not be passed along as well.

Allegedly independent Cunningham Broadcasting’s headquarters are located at 2000 West 41st Street in Baltimore, coincidentally the same address as Sinclair-owned WBFF-TV, the city’s FOX affiliate.

An analyst warns Sinclair Broadcasting’s willingness to part with WPIX-TV in New York and WGN-TV in Chicago may amount to transferring control of the stations on paper from one hand to the other.

Broadcasting & Cable reports an unnamed source told the trade publication Sinclair is considering “selling” the stations to Cunningham Broadcasting, which is effectively Sinclair in all but name.

Cunningham and Sinclair are more than a little close. The majority of Cunningham-owned stations are run by Sinclair under local marketing agreements, and Sinclair’s founding family controls more than 90% of Cunningham’s stock. That has led to repeated accusations Cunningham is nothing more than a shell corporation used by Sinclair to circumvent the FCC’s TV station ownership caps, something both companies strenuously deny. But observers note some remarkable coincidences, starting with the Cunningham name itself. Cunningham Farms, on a 200-acre estate, Cunningham Manor, are both owned by Sinclair executive chairman David Smith.

Cunningham Broadcasting’s corporate headquarters are inside the studios of WBFF-TV, Sinclair’s FOX affiliate in Baltimore. Cunningham owns WNUV, Baltimore’s CW affiliate, which is also run from the same building as WBFF.

WNUV was originally planned to be a direct Sinclair acquisition, but FCC rules prohibited that. So Sinclair guaranteed loans allowing Glencairn Ltd., (later to be renamed Cunningham Broadcasting), to acquire WNUV instead. At the time, Carolyn Cunningham Smith, the mother of Sinclair’s current executive chairman David Smith, had voting control of Cunningham. That control has since passed to a trust run for the benefit of Smith’s children after Carolyn died in 2012.

After Glencairn/Cunningham won control of the station, it immediately signed a local marketing agreement with Sinclair. That agreement merged WNUV’s operations under the control of Sinclair-owned WBFF. Most employees at WNUV report to Sinclair management. Many of the Cunningham-owned stations also offer options to Sinclair to acquire the stations outright should deregulation of ownership limits permit.

A shell corporation is essentially an entity in name only, usually quietly controlled by someone else seeking to keep their true identity secret.

Should WPIX-TV and WGN-TV end up in the hands of Cunningham, it would be unprecedented for a company its own president admitted in 2013 was dependent on Sinclair to help program their stations, noting Sinclair is “a smart company, and they certainly have a lot more experience.” WPIX is in the nation’s number one television market, WGN is in the third largest market. The majority of Cunningham’s 20 stations are FOX, CW, or MyNetworkTV affiliates in small and medium-sized markets. A few are so small, they don’t even have websites.

Craig Aaron, president and CEO of Free Press, suspects Sinclair could once again be thumbing its nose at the FCC’s ownership caps, and the planned divestiture may be in name only.

“It’s not clear to me who the new owner is going to be from the documents filed, but it sure looks like business as usual for Sinclair, which has long specialized in propping up shell companies to evade FCC rules,” Aaron told The Baltimore Sun. “The idea that Armstrong Williams [owner of another side entity that also owns stations that Sinclair runs] or Cunningham or whoever they are setting up as the ‘owner’ of these stations is independent from Sinclair, at least if the past is any guide, is a complete fiction. Sinclair should not be allowed to set up shady front companies to evade the congressionally mandated ownership caps. But Ajit Pai’s FCC is aiding and abetting this ruse in every way.”

The FCC’s inspector general is reportedly now investigating whether Pai improperly pushed through ownership cap rule changes to directly benefit Sinclair’s efforts to grow even larger.

Should Sinclair successfully acquire Tribune Media’s television stations, Sinclair will control 233 television stations that reach 72 percent of U.S. households. The FCC’s media ownership cap now limits an single owner’s reach to 39% of the nation’s audience.

While the FCC has shown little interest in slowing down Sinclair, the Justice Department has previously blocked some of Sinclair’s moves. When Sinclair was forced to divest WSYT-TV, the FOX affiliate in Syracuse, N.Y., it first hoped to sell the station to Howard Stirk Holdings, owned by conservative commentator Armstrong Williams.

Williams coincidentally has served as a longtime commentator for Sinclair, which forces its owned and operated stations to carry conservative messages in local newscasts. Sinclair believed so much in Armstrong, it guaranteed his company’s acquisition loans in similar deals. Sinclair may also benefit from the fact that Armstrong, a minority, gets extra consideration and relaxed rules from the FCC to promote minority station ownership. In other deals, after taking ownership, Armstrong promptly signed contracts with Sinclair to run the stations for him.

The Justice Department was not convinced by explanations of the close relationship between Armstrong and Sinclair. It objected to the sale, writing “it wouldn’t work” because “it would still be like a duopoly.” Sinclair also couldn’t persuade the Justice Department to believe Sinclair and Cunningham were completely independent companies either, eventually forcing Sinclair to abandon efforts to sell WSYT to Cunningham. Today WSYT is owned by Northwest Broadcasting, which owns a handful of stations in the rural Rocky Mountain west and has no ties to Sinclair.

Anderson admitted what was behind the maneuvering to sell WSYT in a 2013 Wall Street Journal story.

“They [The Justice Department] were not comfortable yet,” Anderson said, “and in the interest of time, Sinclair went to Plan B [selling the station to Northwest Broadcasting].”

“It’s a scandal,” Aaron told CNN in 2017. “Trump-favoring mega-chain [Sinclair] gets rules changed — and expects others to be erased — so it can put its cookie-cutter newscasts in nearly 70 percent of local markets across the country. I feel terrible for the local journalists who will be forced to set aside their news judgment to air Trump administration talking points and reactionary commentaries from headquarters. This deal would have been DOA in any other administration, but the Trump FCC isn’t just approving it; they’re practically arranging it.”

Sinclair Broadcast Group has told the Federal Communications Commission it is willing to sell two well-recognized TV stations in Chicago and New York owned by Tribune Media if it will help win approval of its $3.9 billion acquisition of Tribune-owned stations by the Justice Department and FCC.

The move is a sign Sinclair may be concerned its blockbuster acquisition might not get approved if the deal remains mired in the regulatory review process.

The filing is effectively a new application because it fundamentally changes the structure of the deal and its impact on several TV markets where Sinclair could own multiple stations in a single city.

Few expected Sinclair would offer to divest WGN-TV Chicago and WPIX-TV in New York, which are major market stations with major advertising revenue. Sinclair also offered to sell off KSWB-TV, San Diego’s FOX affiliate, to keep Sinclair under the FCC’s theoretical 39% nationwide audience cap, which was watered down in 2017 by FCC Chairman Ajit Pai’s plan to count UHF stations at only 50% of their actual viewing audiences — a direct benefit to Sinclair, which already owns and controls an enormous station group that had been constrained from getting much larger.

As part of the revised proposal, Sinclair will sell one or more stations in the following markets, with FOX often mentioned as a potential buyer:

1. Seattle, Washington;
2. St. Louis, Missouri;
3. Salt Lake City, Utah;
4. Oklahoma City, Oklahoma;
5. Greensboro-High Point-Winston Salem, North Carolina;
6. Grand Rapids, Michigan;
7. Richmond, Virginia;
8. Des Moines-Ames, Iowa.

But Sinclair is seeking a waiver to continue to own two of the top four stations in Greensboro-High Point-Winston Salem, N.C., Harrisburg-Lancaster-Lebanon-York, Pa., and Indianapolis, Ind.

Selling WPIX and WGN will likely make a significant dent in Sinclair’s acquisition expenses, if the deal is approved.

WPIX and WGNhave been owned by Tribune since both stations first signed on in 1948.

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.