New York’s Department of Public Service (DPS) has granted Charter Communications an unprecedented additional 18-day extension to file its threatened appeal of the Commission’s decision to boot the cable company from the state and its six-month exit plan.

“Charter and DPS Staff state in their request for a limited 18-day extension of time that discussions are ongoing, that Charter and DPS Staff have established a framework for how a settlement agreement might be structured, and that any final agreement would necessarily address: issues relating to the inclusion of certain categories of addresses and whether they are valid ‘passings’ under the Merger Approval Order; penalty actions and amounts under dispute in Supreme Court; and a schedule for compliance (including enforcement mechanisms) going forward,” the order granting the extension reads.

Despite last week’s filing from Charter’s attorneys excoriating the Public Service Commission for its decision to remove Spectrum from the state, the DPS claimed this week that because of Charter’s “continued obligations to comply with the Public Service Law and regulations, good cause exists […] to allow for further discussions while both sides reserve their respective legal rights.”

But some consumer groups, including Stop the Cap!, are wondering exactly when patience will run thin at the Commission.

“When the latest deadline arrives in January 2019, it will be nearly six months since the Commission voted to strip approval of Charter’s merger with Time Warner Cable,” said Phillip M. Dampier, founder of Stop the Cap! “While we can appreciate the benefits of negotiation and dialogue, these conversations are taking place behind closed doors with no public input and no formal ability for groups like ours to intervene and offer our own views.”

Stop the Cap! has advocated that Charter Communications be allowed to remain in business in New York, but only with their agreement to meet some additional terms and conditions:

1. Further extend Spectrum service to additional customers in rural New York scheduled to receive satellite internet service;
2. Increase entry-level broadband speed to at least 200 Mbps immediately and further extend availability of Everyday Low Price Internet service ($14.99/mo);
3. Settle the ongoing labor dispute with striking Spectrum workers in downstate New York.

“At present, it appears the DPS/PSC is only negotiating to get Spectrum back in compliance with the original terms of the Merger Order they have been ignoring, which is hardly a concession,” Dampier said. “Charter’s arrogance and blatant disrespect for the terms of the merger deal and its flippant adherence to those terms should cost the company more than just a monetary fine lost in the state’s coffers. Visible benefits to New York consumers must be part of the equation.”

The state seems mostly focused on keeping Charter in compliance with the agreement while the lawyers talk.

“As the Commission noted in prior extensions, however, this limited extension should not be viewed as an indefinite grant of time for discussions to continue between DPS Staff and the Company,” DPS officials wrote. “Many Upstate New Yorkers living in Charter’s franchise areas are understandably frustrated by the lack of modern communications infrastructure. The Compliance and Revocation Orders were designed to deal with very serious consumer issues presented by Charter’s conduct related to the company’s network expansion. As such, the processes envisioned therein must continue in the absence of an agreement.”

The current extension resets the deadlines to file an appeal to Dec. 14, 2018 and the six-month exit plan to Jan. 11, 2019. Both are just the latest in a series of extensions.

Important Dates:

• July 27, 2018: The PSC votes to rescind approval of the Charter/Time Warner Cable merger in New York, effectively disallowing the company to continue to do business in the state.
• August 17, 2018: Charter files a 60-day extension request, which is granted on Aug. 20.
• September 7, 2018: Charter files a 30-day extension request, which is granted on Sept. 10.
• October 9, 2018: Charter files a 60-day extension request. The DPS grants a 45-day extension instead on Oct. 10.
• November 21, 2018: Department of Public Service (DPS) Staff and Charter filed a joint letter stating that they had not yet been able to reach a fully executed settlement agreement, but that they had established a framework for how a settlement agreement might be structured and that discussions remain ongoing. A limited 18-day extension is granted.
• December 14, 2018: Deadline for Charter to file its appeal with the Commission.
• January 11, 2019: Deadline for Charter to file a six-month exit plan showing the Commission how the company intends to orderly transfer its Spectrum cable operation to another provider.

“Charter Spectrum has been kicked out of the state of New York and has a 60 day transition period to allow those customers time to find a new provider,” a sales representative told a Charter customer in New York recently. “[She] would love to be the first to put together a proposal.”

That sales pitch was part of two exhibits offered by Charter Communications to back its claims it is being treated unfairly in New York because regulators have asked the company to make preparations to leave the state and competitors are taking full advantage.

“Although highly sophisticated entities familiar with regulatory litigation may understand that there will be legal proceedings regarding the Revocation Order and that it may ultimately never take effect, the potential for confusion among other current and prospective customers who lack such experience with the legal and regulatory process is significant,” company officials argued. “Charter’s competitors have already attempted to take advantage of the Revocation Order. For example, Verizon has already begun reaching out to several of Charter’s significant customers, including residential management companies in New York City. Verizon representatives have asserted that Charter will no longer be permitted to operate in New York State as a result of the Revocation Order, and have offered Verizon’s services as a substitute.”

Charter also claimed Verizon representatives were suggesting Charter was leaving the New York market and that customers had to (falsely) disconnect their Charter service.

“Such exploitation by Charter’s competitors is likely to increase and be amplified if Charter is required to file a public wind-down plan for exiting the state,” the company added.

Charter Communications ‘productive negotiations’ with New York’s Public Service Commission have deteriorated.

On Monday, Charter Communications filed a Motion for Stay to block the regulator’s July order revoking Charter’s merger with Time Warner Cable and requiring the cable company to file an orderly exit plan with the state no later than Dec. 24.

“Discussions have, so far, not resulted in a settlement,” the company admitted in the legal filing.

Get Out of New York

Calling the order “draconian” and against the public interest, Charter all but accused the Commission of being petty for throwing the country’s second largest cable company out of the state over what it called “the Commission’s revisionist interpretation” of the agreement to expand cable broadband service to unserved parts of the state. It called the Commission unreasonable for not giving the company due process, setting an unreasonable deadline to formulate an exit from the state, and violating the company’s 1st Amendment rights.

“The Revocation Order imposes a draconian penalty on Charter’s New York operations, commanding Charter to undo a significant portion of a multi-billion dollar merger the Commission approved over two-and-a-half years ago and purporting to evict Charter from the State where Charter serves 3.1 million customers and has more than 11,000 employees,” the company’s lawyers argued. “To top it off, the Order, as extended, gives Charter only until December 24 to formulate an exit plan, and six months thereafter to accomplish the exit, timing that would (as the Commission knows) effectively insulate the Commission’s actions from any judicial review. The Commission’s actions reflect not reasoned decision-making directed to the public interest, but rather retaliation against Charter because Charter challenged the Commission by advocating for its good-faith reading of the expansion condition.”

“The Revocation Order is unprecedented in its scale and represents a unique and extremely unusual penalty that, to Charter’s knowledge, no other major cable or telecommunications provider has ever faced in New York,” the company added. “Merely developing an exit plan to meet the December 24, 2018 deadline would force Charter to divert significant resources from its business operations in order to explore what an exit plan might look like, if it is feasible at all. Already, business executives in various departments of Charter have had to take time away from overseeing the business in order to explain the impacts of the Revocation Order and expected impacts of any exit plan. Continuing to divert resources to such an effort, including the time of Charter’s management teams, will necessarily impact Charter’s ability to focus on its core operations.”

The 25-page attack on the Public Service Commission suggest negotiations have strained between the company and regulators, despite several deadline extensions and often-repeated claims from both sides that “productive negotiations” were underway. In a footnote, Charter attempts not to burn all of its bridges with the Commission, noting, “Charter is filing this petition to preserve its substantial and compelling legal rights. Nothing in this application is intended to foreclose the possibility of further discussions with the Commission to resolve this dispute without the need for judicial review.”

The company wants the Commission to stop the clock it imposed on Charter to get its affairs in order in preparation of leaving New York. It is requesting a stay that will drop the deadlines until the courts wrangle over what Charter is calling an “unprecedented and unlawful action.”

Scrambled Eggs

Charter argues the Commission has no right to insist on much of anything, because much of its business operation is unregulated and attempts to interfere with it would cause the company “clear and substantial irreparable harm,” and violate the company’s constitutional rights.

The harm from Charter’s actual departure from New York roughly seven months from now would itself be massive and irreparable, as there would be no way for Charter to restore its position by “re-entering” the State in a commercially reasonable way if Charter later prevailed on judicial review. The eggs here are scrambled—the merged companies’ national operations are fully integrated, and there is no obvious way to separate them. Any obligation to do so would require a massive commitment of time and resources—starting immediately—to navigate the complex business, legal, and regulatory requirements needed to implement the Commission’s order to unscramble the eggs. Moreover, the preparation of an exit plan would itself negatively impact Charter’s reputation with employees, customers, and suppliers in highly competitive markets and require Charter to expend substantial effort, resources, and money that could not be recovered if Charter ultimately prevails in challenging the Revocation Order.

The filing does not acknowledge that Charter was informed of the Commission’s decision in late July and that multiple deadlines have already been extended on the company’s behalf by regulators. Charter also does not mention there is a long history of cable companies separating, spinning off, selling, or trading parts of the business to other cable operators when business or regulatory conditions warrant. Several cable industry mergers have required spinoffs of certain cable properties which have been accomplished with little protest from the cable companies involved.

Charter also argues that the very idea New York’s PSC would demand the company leave the state is irreparably harming the company’s good reputation with its customers — a contention long in dispute with many of those customers and customer satisfaction surveys which have rated the company among the worst in the country. But that did not stop Charter’s attorneys from trying:

[…] The Revocation Order has negatively affected Charter’s reputation and goodwill, and will continue to do so unless stayed. The Revocation Order unfairly paints Charter as an irredeemable bad actor, and the Revocation Order’s unwarranted requirement that Charter exit the State within a matter of months has damaged Charter in the general public’s eye. Indeed, Charter’s goodwill was already harmed by the initial media attention the Revocation Order received, and this harm is likely to be exacerbated by the filing of an exit plan that will spur a second round of news stories and public speculation regarding the dispute.

Bad Faith

Charter claims the Commission changed the terms of the Merger Order after it was approved. In Charter’s view, the company’s expansion effort to reach unserved parts of New York State should include New York City, one of the most wired metropolitan areas in the United States. That the Commission took offense to Charter’s interpretation of the Merger Order should not mean the company should face the ultimate consequence — being asked to leave the state.

“The unprecedented revocation of the Commission’s approval of a merger that closed over two years ago is grossly disproportionate to any conduct at issue here,” Charter argues. “Although the parties dispute the meaning of the expansion condition in the merger order, the revocation of the merger approval serves no legitimate Commission interest when other remedies are available and when the Commission has no reason to doubt Charter’s readiness to comply with any authoritative judicial construction. Nor can the Commission’s unprecedented action be justified by any finding of “bad faith.” What the Commission inappropriately labels bad faith is simply Charter’s reasonable effort to challenge the Commission’s new interpretation, exhaust administrative remedies, and prepare its case for judicial review. There is no reasonable justification for the punishment the Commission imposed.”

Charter also takes issue with the way the Commission met and voted to throw the company out of New York, calling it “the paragon of procedural irregularity.”

“The Commission issued the ‘revocation’ penalty […] at a rump session of the Commission, without providing Charter with an opportunity to comment or present any argument on the availability of the remedy itself, or upon most of the grounds on which the penalty was predicated,” the company argued. “The Commission also denied the public—including Charter’s customer base, who would be required to switch to a new provider, and the local governments that are parties to Charter’s franchise agreements that the Order purports to vacate—an opportunity to comment on the unprecedented proposal to force Charter to exit New York.”

Charter Sets Its Own Deadline – Nov. 26

Charter expects the PSC to rule on its motion within a week of filing it, demanding a stay before the start of business on Monday, Nov. 26. If the company does not get what it wants, it will seek a stay from the Supreme Court in Albany County instead.

But the company also suggests the PSC is bluffing.

“The Commission is currently pursuing an action to enforce its interpretation of the Expansion Condition in the Supreme Court, suggesting that the Commission itself intends for the condition to remain in effect rather than for Charter to actually discontinue operations and leave the State,” the attorneys wrote. “And even if the Commission truly intended to revoke Charter’s merger approval and require it to leave New York, there is no reason the Commission needs Charter to do so—and to submit a plan to that effect—immediately, before Charter has had an opportunity to seek rehearing and obtain judicial review.”

Cable companies continue to dominate the U.S. broadband marketplace, and the gap between cable broadband and telephone company DSL continues to widen.

Leichtman Research Group reports the top seven cable companies together added 728,423 internet customers in the last three months, an increase of 35% over 2017. One of the biggest gainers was Comcast, which grew 363,000 subscribers during the third quarter. At the same time last year Comcast added 213,000 customers. Charter Spectrum grew by 308,000 customers in the third quarter, bolstered by speed upgrades in select areas and more aggressive promotions. At the same time in 2017, Spectrum added 285,000 customers.

Cable’s gains are phone company losses. AT&T, Frontier, CenturyLink, and Consolidated (formerly FairPoint) saw 159,974 customers disconnect service in the last three months. Phone company losses were buffered in part by government-funded rural broadband expansion campaigns, which typically introduce broadband service in rural areas for the first time. Where customers have a choice, they are increasingly choosing cable companies to supply internet service because speed and reliability are often better, especially compared to DSL service still prevalent in a lot of areas.

Sources: The Companies and Leichtman Research Group, Inc.

*LRG estimate
^CenturyLink only reported residential subscribers in 3Q 2018.  LRG estimate including non-residential subscribers
^^Consolidated includes a minor sale of a local exchange carrier
^^^Cincinnati Bell does not include the acquisition of Hawaiian Telecom
Company subscriber counts may not solely represent residential households. Top cable and telephone companies represent approximately 95% of all subscribers.

Charter Spectrum customers across Ventura County, Calif., are reporting significant outages of TV, internet, and phone service as a result of the region’s ongoing wildfires, which have caused significant damage to Spectrum’s fiber optic lines.

“Our fiber lines have been damaged or destroyed by the fire in multiple areas,” said Spectrum spokeswoman Pamela Yu in an e-mailed statement. “Our technicians will be working to restore service as soon as it is safe to do so, and we get approval from the fire department to go into those areas. We are repairing fiber where we have been given access and crews are restoring services.”

Stop the Cap! reader Juan Hidalgo, who lives outside of Camarillo, told us he lost service late last week, saw it briefly restored on Monday, and is out of service once again.

“I waited on hold 49 minutes before a representative confirmed there was additional damage to their fiber optic service lines, which are spread across the county and have affected Spectrum and other providers,” Hidalgo said. “I know it is not their fault, but I wish they had redundancy in their network so they could transfer service to another cable not affected by the fires.”

Hidalgo and his family are safe, although they could see smoke from the Woolsey fire last weekend. Things have calmed down since then, and Hidalgo says he realizes that his inconvenience pales in comparison to the losses some Californians are experiencing.

“My heart goes out to them and their families, and I am aware that in comparison having your cable out doesn’t really seem that important, but considering how serious fires are becoming in California, finding ways to maintain service to get important messages out seems more urgent than ever,” Hidalgo said.

The fires have also caused disruptions to other service providers, especially fiber-fed cell towers in fire areas. As customers drop landline service, most depend on their cellphones to get urgent alert messages and stay in touch with friends and family, as well as emergency services like 911. Those who escaped from the devastating Camp Fire in northern California reported significant problems making and receiving calls during the peak of the fire and the resulting evacuation. Most reported text messaging was the most reliable service when calls did not go through and internet service was spotty.

Some attempts by volunteer groups and competing ISPs to bring up publicly accessible internet hot spots had mixed results, according to the Ventura County Star.