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Stop the Cap! Analysis: Charter Spectrum and New York State Reach Tentative Deal

Charter Communications and the New York Department of Public Service announced a tentative settlement Friday that would allow Spectrum to continue providing cable TV, phone, and internet service in New York in return for a renewed commitment from the cable company to meet its 145,000 new passings rural broadband buildout agreement, commit to an expansion of that rural buildout, and in lieu of fines, pay $12 million in funds deposited in two escrow accounts to be used to help defray the costs of further broadband service extensions apart from Charter’s original commitments.

“Today the New York Department of Public Service jointly filed a proposed agreement with Charter Communications to resolve disputes over the network expansion conditions imposed by the Public Service Commission,” said Department of Public Service CEO John B. Rhodes in a statement issued Friday. “This proposed agreement will now be issued for a 60-day public comment period and remains subject to review and final action by the Public Service Commission.”

The agreement reinforces the state’s desire that Charter’s broadband expansion commitment be met by expanding service to homes and businesses in areas unlikely to get cable service otherwise, namely areas in Upstate New York. The state originally objected when Charter tried to count new passings in the highly populated New York City area as part of its expansion commitment. The new agreement requires the 145,000 homes and businesses newly passed be entirely Upstate, and completed no later than Sept. 30, 2021.

Only 64,827 new passings have been recognized by both parties as “completed” as of December, 2018

The proposed settlement gives insight into just how badly Charter failed to meet its original broadband expansion commitments, noting “Charter shall be deemed successfully to have completed 64,827 passings qualifying towards the Total Passings requirements of the Settlement Agreement and the 2019 Settlement Order, as of December 16, 2018.”

Charter’s record of failure on its rural expansion commitment is stark.

The original 2016 Merger Order required Charter to expand service to:

  • 36,250 premises by May 18, 2017
  • 72,500 by May 18, 2018
  • 108,750 by May 18, 2019
  • 145,000 by May 18, 2020

Charter did not even come close. Department Interim CEO Gregg C. Sayre said in 2017 that as of May 18 of that year, Charter had only extended its network to pass 15,164 of the 36,250 premises it was required to pass in just the first year after the merger.

In June 2017, New York fined Charter and required a $13 million ($12 million refundable to Charter if it complied) deposit be placed in escrow in an effort to get the company to comply with its buildout commitments. But Charter also failed to meet its commitments under that settlement as well:

  • 36,771 premises by Feb. 16, 2017
  • 58,417 by June 18, 2018
  • 80,063 by Dec. 16, 2018
  • 101,708 by May 18, 2019
  • 123,354 by Nov. 16, 2019
  • 145,000 by May 18, 2020

With just shy of 65,000 premises recognized as completed as of December, 2018 — almost three years after the merger — Charter was 15,236 premises short, based on the December 16, 2018 deadline. Within a few weeks from today, the company should have completed its 101,708th new passing. That seems extremely unlikely to actually happen.

Charter itself claimed in July, 2018, “Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC.” That number is also suspect.

The company did not say if the expansion numbers it reported met the terms of the 2016 Merger Order, but Charter obviously thought those should be counted as legitimate new passings for the purpose of meeting its merger obligations. New York regulators clearly thought many of those expansions did not, and were infuriated when Charter began airing advertisements promoting its rural expansion in New York with what the state believed to be inflated numbers.

The Settlement

A review of the proposed legal settlement shows the Commission accepted many of the recommendations made by Stop the Cap! regarding the terms of any deal that would rescind last summer’s order revoking approval for the merger of Time Warner Cable and Charter Communications in New York State. We recommended the settlement focus on requiring an even greater expansion of rural broadband than originally envisioned, particularly in areas the state designated for HughesNet satellite internet access. We also recommended that any monetary fines be directed to further expansion of rural broadband, instead of being sent on to Albany to be added to the state’s general fund.

We noted that although Charter flagrantly violated the terms of the 2016 Merger Order, successfully removing the company from New York would likely result in years of litigation, and the likely entry of Comcast, which in our view is anti-consumer, and a much worse choice in terms of pricing and the quality of customer service. Comcast also imposes data caps in many of its service areas, a concept which Stop the Cap! obviously fiercely opposes. In our view, given a choice between Charter and Comcast, which would be the highly likely outcome, New York consumers would benefit (slightly) by keeping Spectrum service.

The terms

Reach 145,000 unserved/underserved New Yorkers with at least 100 Mbps internet access

  • Charter is recommitted to expand rural internet service to 145,000 New Yorkers qualified as unserved (download speeds less than 25 Mbps available) or underserved (download speeds of 25-99.9 Mbps) entirely within Upstate New York.

Schoharie, NY

To ensure Charter does not simply choose “low-hanging fruit” to wire, such as new housing starts or urban business parks, the agreement limits Charter expansions to no more than 9,500 addresses in the urban and suburban areas adjacent to Albany, Buffalo, Mt. Vernon, Rochester, Schenectady, and Syracuse.

Additionally, Charter is restricted from expanding service to no more than 9,400 addresses that are scheduled to get (or already have) access to another wired provider because of a grant from the New NY Broadband Program.

But Charter is allowed to expand service to reach not more than 30,000 customers stuck on New York’s list of addresses designated to get HughesNet satellite internet. Stop the Cap! strongly recommended the Commission do all it can to require or encourage Charter to reach as many satellite-designated New Yorkers as economically feasible. The proposed agreement takes our recommendation into account, but we will urge the Commission to strike the 30,000 cap and allow Charter to reach as many of these disadvantaged customers as possible, and have it count towards their broadband expansion commitment. Those addresses designated to receive satellite service are the least likely to be reached by any commercial provider because of the costs to reach them, and they are too scattered across the state to make a public broadband alternative feasible.

Charter gets to include some ‘already-in-progress new passings’ towards its 145,000 new passings commitment: 5,993 passings located within Upstate Cities Charter would likely have serviced anyway; 4,388 wired overlap passings (where an existing telco or cable provider already offers service), and 9,397 addresses where wireless or satellite service was the only option.

A new “milestones” schedule is included for new buildouts, which partly explains why so many rural New Yorkers expecting to receive service by now are complaining about delays:

  • 76,521 new premises by Sept. 30, 2019
  • 87,934 by Jan. 31, 2020
  • 99,347 by May 31, 2020
  • 110,760 by Sept. 30, 2020
  • 122,173 by Jan. 31, 2021
  • 133,586 by May 31, 2021
  • 145,000 by Sept. 30, 2021

If Charter again fails to stay on schedule, it must pay $2,800 for each designated-as-missed passing address into an escrow fund. If it chooses not to appeal that decision, or loses an appeal, those funds will be added to an Incremental Build Commitment fund described below.

Rural Broadband Expansion Fund #1 ($6 million) — Incremental Build Commitment

The first rural broadband expansion fund will contain $6 million dollars that Charter will pay into escrow and will be dedicated to defray Charter’s costs of constructing additional broadband passings above and beyond the 145,000 noted above. Charter itself or the state can designate the unserved addresses either want serviced, and Charter will be permitted to withdraw funds to pay for materials, construction, labor, licensing, and any permits required for these incremental expansion efforts. This money will be reserved for Charter to use for its own projects.

Rural Broadband Expansion Fund #2 ($6 million) — Incremental Broadband Fund

Although New York Gov. Andrew Cuomo promised broadband service for any New Yorker that wants it, his New NY Broadband Program left more than 80,000 New York homes and businesses behind because the program relied on private companies to bid to serve each unserved/underserved New York address. In especially rural areas, no company ultimately bid to reach those addresses because the subsidy funding offered by the state was too little to make the expansion investment worthwhile. In the end, those addresses were designated to be served by HughesNet, a satellite internet service provider. But HughesNet cannot guarantee its internet speeds, has draconian usage caps, and is very expensive. Customer satisfaction scores are also generally poor. For most, a wired internet solution is far preferable. To get one, New York would need to launch a new round of broadband funding, with a more generous subsidy to make construction costs to reach those unserved customers financially worthwhile.

The second $6 million rural expansion fund is more or less exactly that — an additional source of funds to try to reach those missed by earlier funding rounds. Most of the money in this fund would be awarded after a bidding process starting on or after Sept. 30, 2021. Any provider capable of offering customers at least 100 Mbps service will be qualified to participate in the first round of bidding to receive a portion of this money. The areas under consideration would be in existing Charter franchise areas or outside of a Charter-franchised area if both Charter and New York’s Broadband Program Office (BPO) agree. In most cases, for reasons of simplicity, we expect most this money will end up financing expansion projects just outside of Charter’s existing service area. So if you happened to live within a mile or two of an existing Charter customer, this money could be used by Charter to extend its network in your direction. Charter also enjoys the right of first refusal, an important advantage for the cable company. Charter could agree to service a designated address before it becomes open to a competitive bidding process.

The terms are generous to providers, who only have to agree to pay 20% of their own money to submit a cost-sharing bid. The fund would cover the remaining 80%, which would be particularly useful where the cost to extend a fiber connection to a rural neighborhood or development would run into the tens of thousands of dollars. The downside is that $6 million will not go very far in these high cost areas, where a single project could easily exhaust $50,000-100,000 just to reach a handful of homes and businesses. Assuming there are any funds left, the BPO will entertain bids in later rounds from wireless providers delivering at least 25 Mbps service, assuming no wired provider submits a bid. But it is just as likely the funds will be long gone before that happens. The state needs to choose the wording of its terms carefully. Charter could easily apply for funds to buildout new housing tracts or large development projects and business parks the company would have reached anyway. We recommend restricting these funds exclusively to projects that would otherwise fail a bidder’s own Return On Investment formula.

Stop the Cap! intends to be a participant in the comment round and we will share with readers our formal comments as they are submitted.

Comcast: Rural Broadband Must Make Good Business Sense Or You Won’t Get It

If your home or business is more than 150 feet from the nearest Comcast cable, the company will think twice before providing you with service.

Pat Ulrich and her 50 neighbors in a rural subdivision in Arkansas have waited more than 15 years for Comcast or AT&T to extend broadband service to no avail, not unless they are willing to pay an installation fee of almost $50,000.

“When we evaluate prospective new build opportunities, we take into account such factors as distance from where our nearest network exists, costs associated with a proposed build-out, and number of homes and businesses that could be served. … This subdivision is many miles from our nearest plant.” Alex Horwitz, vice president of public relations for Comcast, told Arkansas Business. A nearby neighbor of Ulrich was quoted $46,000, mostly to install over 6,400 feet of fiber optic cable to connect the subdivision to Comcast’s network.

Pulaski County, Ark.

AT&T is no help either, because the homes are too far away from the phone company’s central switching office to deliver adequate internet service.

The FCC’s Connect America Fund (CAF) and other broadband funding initiatives normally might offer Ulrich and her neighbors some help, except for the fact the FCC’s broadband availability maps falsely claim the subdivision is already getting broadband service, which disqualifies it from receiving broadband expansion subsidy funding.

“We built a house in 2004 and never imagined it would take this long to get reliable broadband service,” Ulrich said.

Comcast and other cable operators did, however. Unlike phone companies that are mandated to provide basic telephone service to any customer seeking it, cable companies are allowed to choose the areas they service, typically based on population density and the costs associated with providing service. For Comcast, service extensions must meet the company’s return on investment test, and Ulrich’s subdivision failed. Horowitz claimed extending service would require Comcast to route a fiber extension through an area that “is almost all rock.”

Comcast is investing in some buildouts in its service area, but mostly to serve business parks. For residential areas, the company wants to limit the amount of cable it must install to reach a prospective customer to under 150 feet. If service is not available on your street, chances are the company will quote an installation fee running into the thousands of dollars.

Unfortunately for Ulrich, even if she managed to have the FCC correct their broadband availability map, Horwitz said Comcast has not bid for any of the FCC’s CAF projects in Arkansas.

Cable ONE Acquires Fidelity Communications in $525.9 Million Cash Deal

Cable ONE today announced it has acquired family owned cable operator Fidelity Communications, in a $525.9 million cash deal.

Fidelity serves 134,000 residential and business customers in smaller communities in Arkansas, Louisiana, Missouri, Oklahoma, and Texas. Cable ONE showed interest in Fidelity because many of its small cable systems are not too far away from existing Cable ONE systems that also target smaller communities.

Fidelity systems typically sell broadband at speeds of 50 Mbps ($64.99) and 100 Mbps ($89.99).

Fidelity does not usage cap its customers, Cable ONE does.

Cable ONE has also been criticized for charging the highest price residential broadband service in the country.

Fidelity currently serves customers in:

Arkansas
Alexander
Bauxite
Beebe
Benton
Bryant
Cherokee Village
Hardy
Haskell
Hensley
Highland
Little Rock
Mabelvale
Mammoth Springs
Maumelle
North Little Rock
Pulaski
Shannon Hills

Louisiana
Erwinville
Glynn
Jarreau
Lakeland
Morganza
New Roads
Oscar
Rougon
Ventress

Missouri
Adrian
Buffalo
El Dorado Springs
Gerald
Harrisonville
Lebanon
Nevada
New Haven
Owensville
Rolla
Salem
Sullivan
Thayer
West Plains

Oklahoma
Lawton

Texas
Atlanta
Carthage
Hallsville
Jefferson
Marshall
Queen City

Charter Spectrum Falsely Denies It Offers Best Prices to Competitive Service Areas

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

Bradford, N.Y. – The Poster Child of America’s Rural Broadband Crisis (Updated)

The Kozy Korner Restaurant is one of the local businesses in Bradford, N.Y.

Bradford, N.Y. is an unassuming place, not atypical of communities of under 1,000 across western and central New York. It’s too far south to benefit from the tourist traffic and affluent seasonal residences of the Finger Lakes region. It isn’t next to a major interstate, and the majority of travellers heading into the Southern Tier of New York are unlikely to know Bradford even exists. Nestled between the Sugar Hill State Forest, Coon Hollow State Forest, Goundry Hill State Forest, and the Birdseye Hollow State Forest, the largely agricultural community does offer some nearby tourist opportunities for outdoor hiking, camping, boating, and horseback riding.

Ironically, just 25 miles further south of Bradford is the headquarters of Corning, Inc., a world leader in the production of optical fiber. Both communities are in Steuben County, but are miles apart in terms of 21st century telecommunications technology.

Corning residents can choose between Verizon and Charter Spectrum. Bradford has a smattering of cable television and internet service from Haefele TV, a tiny cable company serving 5,500 customers in 22 municipalities in upstate New York — towns and villages dominant provider Charter Spectrum has shown no interest in serving. Verizon barely bothers offering DSL service, and has shown no interest in improving or expanding the service they currently offer. As a result, according to the Bradford Central School District, approximately 90% of student households in the district do not have access to broadband internet speeds that meet or exceed the FCC’s minimum standard of 25 Mbps.

“Connectivity is sporadic throughout the community,” the district told state officials.

Some residents suffer with satellite internet, which has proven to be largely a bust and source of frequent frustration. Slow speeds and frequent application disruptions leave customers with web pages that never load, videos that don’t play, and cloud-based applications far too risky to rely on. Others are sneaking by using their mobile phone’s hotspot for in-home Wi-Fi, at least until their provider throws them into the penalty corner for using too much data.

Governor Andrew Cuomo’s 2015 Broadband for All initiative was supposed to end this problem forever. Gov. Cuomo promised that his program would offer high-speed internet access to any New Yorker that wanted it. New Yorkers want it, but still can’t get it, and now comes word the all-important third round of funding to reach some of the hardest areas of the state to serve may now on “indefinite hold,” according to Haefele TV, with no explanation. That means providers that would otherwise not expand service without the state’s financial assistance are shelving their expansion plans until the money arrives, if it ever does.

This week, the Democrat and Chronicle toured broadband-challenged Bradford. Reporter Sarah Taddeo sends word the status quo is not looking good for the people of the spread-out community. In fact, the internet challenges Bradford faces are all too familiar to long-time readers of Stop the Cap!:

  • Stalled funding: Haefele TV has shown an interest in expanding service in Bradford, and New York State awarded the company $5,150,612 to connect 1,303 homes and businesses in upstate New York. The money now appears to be on hold, according to a Haefele spokesperson.
  • Poor broadband maps: Bradford residents without service are hopelessly dependent on the broadband service maps offered voluntarily by incumbent providers. Those maps are inaccurate and typically unverified. Even worse, many Bradford residents are falling victim to the scourge of the “census block,” a granular measurement of an area showing who has service and who does not. In suburban areas, a census block is usually part of a neighborhood. In rural areas, it can encompass several streets containing random houses, businesses, and farms. Most broadband funding programs only award funds to “unserved” census blocks. If any provider delivers service to a single home or business within a census block, while ignoring potentially dozens of others, awards are typically not available because that area is deemed “served.” Bradford has several examples of “served” census blocks that are actually not well-served, as well as at least one that was skipped over altogether.
  • Politics and bureaucracy: Politicians are usually on hand to take credit for broadband expansion programs, but leave it to the bureaucrats to dole out funding. That is typically a long and arduous process, requiring a lot of documentation to process payments, which are usually provided in stages. Some providers do not believe it is worth the hassle of participating. Others do appreciate the funding, but do not appreciate the delays and paperwork. Politicians who declare the problem solved are unlikely to be back to explain what went wrong if lofty goals are ultimately unachieved.
  • Relying on for-profit providers: Some portions of Bradford will eventually get service from Haefele, while others will be officially designated as served by Hughes’ satellite internet service — one of two satellite providers that already earn low marks from local residents sharing scathing reviews from paying customers. Haefele won’t break ground without state dollars, and nothing stops Bradford residents from signing up for satellite internet today.
  • Homework Hotspots: Impacted families often have to drive to a community institution or public restaurant or shopping center that offers reliable Wi-Fi to complete homework assignments, pay bills, and manage the online responsibilities most people take for granted. Their children may be left at a permanent disadvantage not growing up in the kind of digital world kids in more populated areas do.

With funding for the area seemingly “on hold,” the Bradford’s school district stepped up and found $456,000 from the community’s share of the state’s Smart Schools bond fund, which supplied $2 billion for school districts to spend on technology products and services. Instead of buying iPads or more computers, school officials announced an initiative that would spend the money on an 18-mile fiber network strung through the community’s most student-dense neighborhoods. The school district claims “50-75% of student households will be covered” by the initial phase of the project, with plans to eventually reach everyone with a fiber-fed Wi-Fi network. The proposal has been cautious about staying within the guidelines of the bond initiative, such as limiting access exclusively to students, at least for now.

So far, the proposal has survived its first major review by state officials, but there is still plenty of time for large cable and phone companies serving the state to object, not so much because they want to punish the people of Bradford, but because they may not like a precedent established allowing school districts to spend state funds on broadband projects that could expose them to unwanted competition.

Updated 3:50pm ET: We received word from a credible source denying that the third round of broadband funding was on hold across New York, so we are striking through that section of the story. We anticipate receiving a statement for publication shortly and will update the story again when it arrives.

The Star Gazette visited Bradford, N.Y., to learn more about the broadband challenges faced by the community of nearly 800 people in southwestern New York. (1:47)

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  • Ed: On the money that was just bragging rights. Later this year when 5G home equipment is released and in Q1 2020 when they roll out dynamic spectrum sha...
  • TJ: I called on 4/22/19 to cancel services because my bill was too high. They sent me to the cancellation department and the guy just said ok the service ...
  • Michelle D Loewy: No internet service at the home all day Tuesday and still none today. No reason given just that the Western North Carolina area is down. Has anything ...
  • william carter: got my spectrum bill yesterday. It went up $16 per month. I called CS and they said my 1 yr promotion is gone on my internet and i have to pay full ...
  • New Yorker: Sold a penny puppet-show to appease us (We The People) and then sold out for millions/billions. F**k this country already....
  • Dorairaj Isaac: I would like to return the products for a refund...
  • EJ: I hope they are ready to do this all over again when Charter does basically nothing again. Hopefully they will use this extension to come up with a Pl...
  • Phillip Dampier: Public Comments: http://documents.dps.ny.gov/public/Comments/PublicComments.aspx?MatterCaseNo=15-M-0388...
  • Phillip Dampier: The reason they are lumping the two together at this point is because there are not a lot of attractive territories left to bid on. Even when the stat...
  • Paul Houle: For me the $60,000 question is this: how do I submit comments to NYS about this plan? I went looking on the PSC web site and it wasn't clear at all....
  • Phillip Dampier: ELP is still being left intact by Spectrum, but they keep raising the price to discourage people from using it. Unfortunately, since the violations pe...
  • Wayne Martin: From the beginning I have disagreed with the lumping together the "underserved" with those of us who have nothing. The underserved already have speeds...

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