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)

The newest cities getting Charter/Spectrum’s gigabit service.

With the latest additions to the list of Charter Communications’ gigabit-capable cities last week, Spectrum’s gigabit internet service is now available to more than 27 million homes, more than half of its 41-state footprint.

The latest cities to receive gigabit upgrades include Charleston, S.C., Bowling Green, Ky., Cleveland and Toledo, Ohio, Erie, Pa., Orlando, Fla. Hartford, Conn., and Springfield, Mass.

Spectrum is calling the occasion “the summer of gig,” with the promise of another wave of newly upgraded cities by Labor Day.

In addition to the availability of gigabit service, which in reality offers speeds up to 940/35 Mbps, customers should see Standard speeds in many of these locations increased to 200/10 Mbps and the introduction of an improved Ultra speed tier of 400/20 Mbps. Some cities have not yet received a free upgrade to 200 Mbps service, but are expected to sometime over the summer.

Gigabit pricing varies, depending on market, with new Spectrum customers paying $104.99/month for the first year. If you already subscribe to Spectrum service, the rate is $114.99 for Spectrum TV customers and $124.99 a month for non-Spectrum TV customers. There is also a mandatory $199 installation fee which cannot be waived.

This company-supplied video celebrates the arrival of gigabit internet for more than four million additional Spectrum customers. (1:10)

MLCC chips

The Trump Administration’s trade war with the global supply chain may worsen an already growing electronic parts shortage that is affecting cable modem production.

Fierce Cable reports smaller cable operators are being warned to expect price increases due to an ongoing shortage of multilayer ceramic chip capacitors (MLCC’s), an important part in cable modems. That warning came in an email message sent by the National Cable Telecommunications Cooperative, a group that helps independent cable companies pool resources to get group discounts on cable television programming and equipment.

“NCTC is continuing to track the impact of this issue on our supply chain, and we will communicate price changes and lead time delays as we learn of them,” the email read. “Member operators should be aware that the order delays and price increases can be significant, so place your blanket orders as soon as you possibly can.”

Some smaller cable operators are already affected, with one midwestern provider telling Fierce Cable his company cannot even place orders with some DOCSIS 3.0 modem vendors.

“Arris and Hitron told us we can’t get 24 or 32 [channel] modems, with no estimated timeframe,” the executive told Fierce. “Only about 20,000 are available, possibly in August, for the whole country from various vendors.”

There are multiple challenges impacting the electronic industry these days:

• increasing demand among manufacturers incorporating more electronic parts into products like appliances, automobiles, monitored medical equipment, and the wireless industry.
• growing concern over the Trump Administration’s escalating trade tariffs on items manufactured in China. The first $35 billion in new tariffs will impact important components like batteries, capacitors and touchscreens.
• increasing lead times to complete orders for electronic components are exacerbating shortages. An order for MLCC chips now takes up to 50 weeks to complete by some manufacturers.

As supplies of electronic components tighten, the first response is to raise prices to curtail demand. As the shortage worsens, buyers face quantity limits and/or refused orders. Some of the worst shortages now affect MLCCs, resistors, semiconductors, and graphics cards.

Last week, President Trump threatened to sharply escalate the trade conflict with China, asking his administration to identify an additional $200 billion in imported goods from China to be penalized with additional tariffs.

AT&T’s ultra-slim TV package WatchTV arrives next week and is free of charge, if you are willing to switch to one of two new unlimited plans that bundle “unlimited” talk, text, and data with your choice of content.

AT&T WatchTV includes more than 30 networks and over 15,000 on-demand movies and TV shows. The lineup:

A&E, AMC, Animal Planet, Audience, BBC World News, BBC America, Boomerang, Cartoon Network, CNN, Discovery, Food Network, FYI, Hallmark Channel, Hallmark Movies & Mysteries, HGTV, History Channel, HLN, IFC, Investigation Discovery, Lifetime, Lifetime Movies, OWN, Sundance TV, TBS, Turner Classic Movies, TLC, TNT, Tru TV, Velocity, Viceland, and WE. The service also promises to add a small suite of Viacom networks: BET, Comedy Central, MTV2. Nicktoons, Teennick, and VH-1 shortly after launch.

AT&T’s new “unlimited plans” appear to add to the confusion over exactly what “unlimited” means. Full details of both plans will be on AT&T’s website next week.

AT&T Unlimited &More

• Option to add WatchTV
• $15 monthly credit toward DIRECTV NOW
• Up to 4G LTE unlimited data

AT&T Unlimited &More Premium

• Option to add WatchTV
• Option to add one of these premium services: HBO, Cinemax, Showtime, or Starz, as well as music streaming from Amazon Music Unlimited and Pandora Premium or gaming service VRV.
• $15 monthly credit toward DIRECTV, DIRECTV NOW and U-verse TV
• 15GB of high-speed tethering
• High-quality video

AT&T has not disclosed pricing, but the fine print does mention: “AT&T may slow data speeds when the network is congested. Video may be limited to SD.”

AT&T’s marketing language suggests customers will have the option of getting these services, which means you may have to opt-in to get them. If you are not interested in changing your wireless plan or if you are not an AT&T customer, AT&T WatchTV will be available shortly on a standalone basis for $15 a month. Details on that option “are coming soon.”

Keep in mind the state sales tax rate in some states does not include local sales and use taxes, which can often double the sales tax in some states. In New York, for example, the 4% state sales tax is joined by an average 4% local sales tax, which effectively means buyers pay an average 8% sales tax, varying with the jurisdiction.

The U.S. Supreme Court has given states a green light to begin imposing state and local sales taxes on all online purchases, regardless of where an internet retailer is located, ending a long-standing competitive advantage for online retailers.

In a 5-4 decision, the court sided with state tax authorities and brick and mortar retailers who argued it was unfair to collect sales tax from businesses with a physical presence while allowing shoppers to effectively bypass those taxes by shopping online. The decision decisively overturned a 1992 landmark ruling that allowed most internet purchases to avoid the automatic collection of sales tax, as long as a company did not maintain any offices or stores in a state where the buyer was located. Despite the earlier ruling, many states including New York never surrendered their right to collect sales tax on all online purchases, but were forced to rely on the honesty of state taxpayers to voluntarily disclose those purchases on tax forms — something few taxpayers did.

The decision is perceived as a significant blow to Overstock.com, Newegg.com, and Wayfair.com — three online retailers that went far beyond other online retailers to avoid charging sales taxes on most purchases. When states threatened to sue to impose sales taxes when retailers maintained commission and referral programs that paid in-state, third-party businesses to refer internet traffic to those retailers, many terminated affiliate relationships in certain states just to continue avoiding the collection of sales taxes.

Amazon.com, among the largest of all online retailers, was an early target of state taxing authorities. After years of fighting, Amazon conceded and gradually began collecting sales taxes for all 45 states that impose them. Amazon Marketplace purchases, sold by third-party vendors, were not charged sales tax. After today’s decision, most expect that will change soon.

The ruling will likely be a boon to state coffers, bringing each state an estimated $8-33 billion annually in new tax revenue and growing, according to one federal report. Research by Barclays found that states that rely the most on sales tax revenue to fund their budgets will benefit the most from the decision. Those states are Louisiana, Tennessee, South Dakota, Oklahoma and Alabama. Because states like New York, Illinois, and California already aggressively collect state sales taxes on many online purchases, the benefits to those states will likely be more modest.

The competitive advantage to online retailers who do not charge sales tax has gradually declined in many instances over the years because of dramatically higher shipping costs. Those shipping costs are not borne by brick and mortar stores, but they have always collected sales tax and face more expenses that online retailers do. Despite that, shortly after the decision was announced, investors punished exposed e-tailers including Overstock, Wayfair, and eBay with lower stock prices.

Some small businesses were relieved the Supreme Court decided to upheld the South Dakota law that exempted retailers with less than $100,000 in sales or 200 transactions annually from collecting that state’s 4.5 percent tax on purchases. Many are hoping state tax authorities will maintain similar exemptions for small internet businesses that would otherwise be faced with dramatic new costs collecting the correct state and local taxes and paying them to the appropriate tax authorities.

The decision was an unusual liberal-conservative split among the justices. Joining Justice Kennedy in the majority were three of his conservative colleagues, Justices Clarence Thomas, Samuel Alito and Neil Gorsuch, as well as liberal Justice Ruth Bader Ginsburg. Chief Justice John Roberts wrote for the dissenters, joined by liberal Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.