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Spectrum Complains Competitors Taking Advantage of Its Troubles in New York

Phillip Dampier November 21, 2018 Charter Spectrum, Competition, Consumer News, Public Policy & Gov't, Verizon Comments Off on Spectrum Complains Competitors Taking Advantage of Its Troubles in New York

“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, New York Officials in “Productive Dialogue” to Resolve Disputes

Phillip Dampier September 10, 2018 Charter Spectrum, Consumer News, Public Policy & Gov't, Rural Broadband Comments Off on Charter, New York Officials in “Productive Dialogue” to Resolve Disputes

An attorney for Charter Communications revealed that company officials and New York telecom regulators were engaged in a “productive dialogue” over how to resolve the state’s dispute with the cable operator.

In written requests to extend the deadlines for a rehearing of the decision to revoke Charter’s merger with Time Warner Cable and file an “exit plan” to leave New York State, Helmer revealed the two sides were engaged in substantial talks to resolve their differences.

“Good cause exists to further extend the deadlines [….],” wrote Maureen O. Helmer, counsel for Charter Communications. “Charter and the Department [of Public Service] have been involved over the past few weeks in productive dialogue regarding the July Orders as well as the related special proceeding initiated by the Commission in the Supreme Court.”

Helmer added that Charter has been “assembling additional information” about its criticized rural broadband expansion program for review by the Public Service Commission, which decided in late July to evict Charter/Spectrum from New York for consistently failing to meet its merger obligations with the state.

Charter’s lawyer suggests it is in the Commission’s best interest to accept additional delays in the deadlines to file a rehearing appeal of the July eviction order (requesting an extension until Oct. 10, 2018) and to file an orderly exit plan (requesting an extension until Nov. 8, 2018).

“A further extension would allow additional time for discussions between Charter and the Department before the initiation by Charter of additional Commission or court proceedings. Additional proceedings before the Commission and/or the courts would have the potential to divert the resources of both Charter and the Department from discussions regarding both orders, and could have the effect of making it more difficult to resolve the issues raised by the orders without litigation,” Helmer wrote.

There is an increasing likelihood the Public Service Commission’s July order effectively throwing Charter Communications out of New York State was actually a hardball, last-ditch negotiating tactic, potentially to extract additional conditions and more rigid compliance with the orders of the Public Service Commission.

Charter officials originally claimed the July eviction order was an example of election year politics by the governor and a striking union. New York Gov. Andrew Cuomo, who has repeatedly slammed Charter/Spectrum for its performance in New York, is running for re-election. The International Brotherhood of Electrical Workers (IBEW) also continues to strike Charter in the New York City area, attracting support from local politicians.

A Commission that is amenable to Charter’s request for a second delay in meeting its deadlines to file paperwork would send a clear signal the PSC is no longer intent on throwing the cable operator out of the state.

The PSC’s July order rescinding the approval of Charter’s acquisition of Time Warner Cable was based ironically, in part, on Charter’s frequent failure to meet the state’s deadlines.

Charter CEO Tom Rutledge Tells 11,000 New York Employees Not to Worry

 

Addressing New York State PSC Actions

Sent to all employees in New York State.

On Friday, the New York State Public Service Commission accused Charter of failing to live up to our commitment to deploy broadband across the state. They have threatened a number of actions against us, including revoking our right to operate in New York State. I want you to know we take the comments seriously, but believe the New York Public Service Commission is wrong in multiple respects. We intend to defend our rights to the fullest extent of the law and will pursue all avenues for overturning and preventing implementation of the New York Public Service Commission order. There may be years of litigation before we prove that we have done what we said we would. If we can’t settle this in the meantime, it is important that we continue to live up to our obligations and to perform well.

Charter continues to grow in New York State and across our footprint, providing our customers with world-class products and services. Our day-to-day focus on excellence and craftsmanship remains the same. We are going to continue serving New Yorkers, bringing them faster speeds and in some communities, high-speed broadband for the very first time. Because of your hard work and dedication, Spectrum has extended the reach of our network to more than an additional 86,000 New York homes and businesses since our merger agreement with the PSC. We’ve raised our starting broadband speeds to 100 Mbps across the state (and to 200 Mbps in some markets), and are poised to launch Spectrum Internet Gig across our entire New York State footprint by the end of 2018, which is well ahead of schedule.

We are 11,000 employees working in New York and serve millions of customers in the state every day. Thank you for everything you do, day in and day out, that makes Charter such a great company. You can continue that good work with confidence that there is a Charter team handling the New York PSC matter.

For more information about how Charter is building out New York, please visit https://www.spectrum.com/ny

Tom Rutledge
Chairman and Chief Executive Officer

(Special thanks to Stop the Cap! reader Juanito who passed along a copy of this internal company memo.)

The Consumer’s Guide to Spectrum’s Possible Demise in New York State

Moving on out?

New York’s Public Service Commission on Friday set the stage for ‘an orderly transition’ ending Spectrum’s brief life in New York, to be replaced with a ‘to be announced’ new cable operator to serve the needs of New York subscribers.

Or so the New York Public Service Commission hopes.

Although Friday’s 4-0 unanimous decision to revoke Charter’s merger deal in New York is a public relations and legal nightmare for the country’s second largest cable operator, we suspect top executives are getting a good night’s sleep tonight, not too concerned about the immediate consequences of today’s stunning vote.

Losing New York is what Wall Street would call “a materially adverse event” for any cable operator. New York City is the country’s largest media market. Billions of dollars worth of cable infrastructure, subscriber and advertising revenue, and prestige are at stake. Despite the ‘vote to revoke,’ Charter’s attorneys have signaled for weeks they intend to preserve and protect the cable company’s legal rights, and it is almost certain the PSC’s merger revocation order will meet a court-ordered injunction as soon as next week.

The courts are likely to make the final decision about whether Spectrum can stay or has to go. That aforementioned injunction will stop the clock on any ‘rash action’ and start what could be years of litigation, filled with discovery, endless hearings, stall tactics, blizzards of motions, appeals, more appeals, and then more lawsuits over whatever final exit plan is eventually filed, if one is required by the courts. A judge could also order the cable company and the state to work it out in a court-approved settlement, something the PSC seems loathe to do in its two orders published today which make it clear the regulator is done talking only to feel strung along by the cable company.

For the near term, Spectrum customers won’t notice a thing. Even if the PSC was not taken to court, Charter has 60 days to file a six month transition plan, making the earliest date to waive Spectrum goodbye is sometime in early 2019.

To help readers out, we’ve prepared a short FAQ to address any concerns:

Q. Will I lose my cable and internet service?

A. No. Regardless of what happens, the PSC has ordered a transition plan designed to provide a seamless switch between Spectrum and a future provider. For most customers, it will resemble Charter’s own transition from Time Warner Cable to Spectrum.

Q. Who will replace Spectrum?

Not again.

A. The cable industry often resembles a cartel, whose members go to great lengths to protect each other. Historically, no large cable operator will entertain requests for proposals from cities or states requesting a replacement of a cable company already providing service. In short, if a city is fed up with Comcast and wants to shop around for another provider, it is highly unlikely Charter/Spectrum, Cox, Altice/Cablevision, Mediacom, or other providers will submit a bid to replace Comcast. If they did, Comcast could theoretically retaliate in their service areas. Should the Public Service Commission itself solicit bids to replace Spectrum, it is unlikely any operator will send a proposal unless/until Charter indicates it wants to leave the state. This kind of informal protectionism has proven highly effective limiting the power of towns and cities to play companies off each other to get a better deal for their residents.

Q. If Charter loses its court challenge and has to leave, what happens then?

A. If Charter exhausts its appeals and realizes it can no longer do business in New York, it will seek a private sale or system swap with another provider. Comcast would be the most likely contender, having shown prior interest in serving New York and having contiguous cable operations in adjoining states, especially in northern New England, Massachusetts, Pennsylvania and New Jersey. Comcast could agree to trade its cable systems in states like Texas, Florida, or California in return for its New York State’s Spectrum systems, which cover cities across the state. But that is likely years away.

Q. Isn’t Comcast worse than what we have now with Spectrum?

A. Consumer satisfaction surveys suggest the answer is yes. Comcast is routinely rock bottom in customer satisfaction, customer service, pricing, and service options. Its 1 TB data cap on internet service has not yet reached many of its northeastern customers, but most observers expect it eventually will. In contrast, Charter has agreed not to impose data caps for up to seven years after its 2016 merger. But Comcast has delivered more frequent broadband speed upgrades and has more advanced set-top boxes and infrastructure.

Stop the Cap! would vociferously oppose Comcast’s entry in New York, however, just as we did a few years ago when we participated in the successful fight to stop Comcast’s merger attempt with Time Warner Cable.

Q, What other providers might be interested?

A. Altice, which does business as Cablevision or Optimum, is New York’s other big cable operator, providing service exclusively downstate. Altice had aggressive plans to become a big player in the U.S. cable business, but its acquisition dreams were halted by shareholders, concerned about the European company’s already staggering debt, run up acquiring other companies. Altice is currently scrapping Cablevision’s existing Hybrid Fiber Coax infrastructure and replacing it with direct fiber to the home service, which offers improved service. But the company charges a lot for its advanced set-top box, has bloated modem rental fees, and is notorious for vicious cost-cutting, which stalled service improvements at its mobile and cable companies in France and raised a lot of controversy among employees.

Cox could be another contender, but would have to find a few billion to acquire Spectrum’s statewide system. Wild card players include AT&T and Verizon. Verizon would face extreme regulatory challenges, however, because it is the local phone company for most residents in the state. AT&T sold its U-verse system in Connecticut to Frontier Communications and seems increasingly focused on content, not on the systems that deliver content. A hedge fund or private equity firm could also be contenders, but perhaps not considering the high cost to acquire the systems and New York’s reputation for fierce customer protection. Remember, New York insists that a cable company ownership transfer must meet public interest tests, not simply enrich hedge fund participants.

Q. What happens to Charter’s pre-existing deal conditions on rural broadband and speed increases?

A. Officially, the PSC has ordered Charter to continue abiding by the 2016 Merger Order and its deal commitments. The state will likely continue to fine Charter if it keeps missing rural broadband rollout targets until a court stops them or the company leaves. Charter will probably continue rural broadband expansion to show good faith. Charter has met its merger obligations related to speed increases, so it is not currently out of compliance. But a legal challenge offers the opportunity for a third-party judge to suspend or modify existing deal commitments, at least temporarily. It is unlikely Charter will want to invest large sums in its cable systems if it believes it will lose its case in court. The timetable for an upgrade to 200 Mbps Standard speed will likely now occur on a regional basis. The northeast division will still likely activate these speeds across multiple cities in the region sometime this summer, especially in places where it faces competitive pressure. The 300 Mbps upgrade in 2019 is more likely to be impacted by any forthcoming legal action.

Q. Is this political or about the union striking Charter? It is an election year.

A. All things are political to some degree in an election year in New York. That said, the New York Public Service Commission has the nation’s best track record of protecting consumers from bad actor telecom and energy companies. They take their responsibilities very seriously, and have shown consistent independence from the governor’s office, especially in recent years. The Commission was by far the most responsive of any state, including California, in taking our concerns about the Charter/Time Warner Cable merger seriously, and incorporated several of our suggestions into the final Merger Order. We warned the PSC cable companies have routinely reneged or slipped through deal conditions. We even predicted Charter would attempt to count new buildouts in non-rural areas and business office parks towards any commitment to expand their service areas. The PSC smartly conditioned its Merger Order by defining the goal of Charter’s broadband expansion — serving the unserved and underserved. That is why the company is not getting away with counting New York City buildouts towards this commitment.

Cynthia Nixon and Andrew Cuomo, both running for New York governor, neither fans of Charter Spectrum.

Few voters are likely to tie a PSC decision to the governor’s race, although Gov. Andrew Cuomo has repeatedly taken credit and praised the PSC for not tolerating bad behavior from Spectrum. If it was a purely political play, it would originate in the governor’s office. Gov. Cuomo’s Broadband for All program depends on achieving near-100% broadband penetration, something it may not manage if Charter fails its rural buildout commitments. That would be a PR mess. There is ample evidence that Charter’s own conduct was sufficient to trigger this kind of response, with or without an election looming.

New York is also a union-friendly state, and the International Brotherhood of Electrical Workers (IBEW) Local 3 has held out for over a year in the New York City area striking to preserve important job benefits Charter wants to discontinue. New revelations from the PSC outlining Charter’s increasingly bad safety record has strengthened the union’s case that Charter would rather bring in unqualified replacement workers and put safety at risk than settling with a union that essentially built the cable system serving New York City. There is no credible evidence that the union is involved in the PSC’s decision to revoke the merger agreement, although we suspect most affected members will fully support the decision.

Q. Is the PSC being too harsh? Can’t they work it out with Charter?

A. For New York to revoke a merger and effectively boot the company out of business in the state is remarkable. Utility companies that irresponsibly lack a credible disaster plan or do not comply with industry standards to maintain tree trimming and infrastructure repairs that result in plunging parts of upstate into darkness for up to two weeks after wind storms in two consecutive years were fined, but not ordered to leave. The ongoing scandal of competing private ESCO electric companies that have almost all scandalously overcharged New Yorkers with electric bills higher than their incumbent utility have been threatened with de-certification and fines, but are still conducting business, even though much of their marketing material was misleading.

Is it too late to work it out?

That should tell you the PSC’s move today was a final straw. The two parties have negotiated and debated Spectrum’s performance lapses for nearly a year. Tension was clearly rising by the spring after the PSC uncovered evidence Charter was intentionally counting areas it knew were outside of the spirit and language of the merger order’s rural broadband deal commitments. Charter’s brazen behavior achieved a new low when it questioned the PSC’s authority to oversee the merger agreement Charter signed. At one point, it unilaterally announced it would only honor the deal commitments found in one appendix of the Merger Order, conveniently ignoring the section describing and defining the rural broadband commitment Charter agreed to. The company also continued to air what the PSC declared to be false advertising, promoting Charter’s claimed accomplishments in rural broadband expansion. Charter repeatedly ignored warnings to suspend and remove those ads. In fact, the PSC issued strongly worded warnings to Charter at least twice, specifically outlining the possibility of canceling the merger agreement and forcing Spectrum out of the state. In response, Charter began staking out its legal arguments in filings, obviously preparing for litigation.

The PSC would probably argue it is impossible to work things out with a company that repeatedly breaks its own commitments. The PSC also openly worried what message it would send to other regulated utilities if it did not react strongly to Charter’s behavior. If the company had a corporate agenda to cheat New York out of important rural broadband expansion, negotiating, fining, and sanctioning a company is unlikely to change its behavior at the top.

Stop the Cap! had earlier recommended the PSC adopt new sanctions to force Charter to comply with its commitments, and expand them to bring service to many New Yorkers who were left behind by Gov. Cuomo’s Broadband for All program, suddenly saddled with satellite internet service. A large percentage of those affected are frustratingly close to nearby Spectrum service areas and although it would cost Charter a significant sum to reach them, it would deliver a financial sting for their bad behavior while also bringing much-needed internet access to the leftovers left-behind by the governor’s broadband expansion program. Such a settlement would require the company to actually comply with their commitments, something the PSC had been unable to achieve through no fault of their own. Perhaps a judge might have better luck should a negotiated settlement come up in litigation.

NY City Residents Can Watch Free Streams of 15 Local TV Channels… For Now

If you are a resident of New York City, you can now stream 15 over the air local television stations for free, at least until the station owners send their lawyers after the coalition running the new service.

Locast.org is owned and operated by Sports Fan Coalition NY, a non-profit organization best known for successfully petitioning the Federal Communications Commission to eliminate the Sports Blackout Rule that forced local broadcast stations near stadiums to black out a game if a team did not sell a certain percentage of tickets by a certain time prior to the game.

The group launched Locast to challenge the idea that those unable to receive good reception of over-the-air local stations need to subscribe to a pay television provider to get a clear and reliable picture. Cord-cutters, in particular, often fear the loss of local television stations when they drop their cable subscription. Locast is designed to make sure those relying on streamed entertainment can also get free broadcast television over their internet connection.

The service currently provides 15 channels that broadcast in New York City:

  • WABC (ABC)
  • WCBS (CBS)
  • WNBC (NBC)
  • WNYW (FOX)
  • WNET (PBS)
  • WLIW (PBS)
  • WWOR (MyNetworkTV)
  • WPIX (CW)
  • WPXN (Ion)
  • WNJU (Telemundo)
  • WFUT (UniMás)
  • WMBC (Ind.)
  • WLNY (Ind.)
  • WFTY (Justice Network)
  • WNYE (NYLIFE)

Viewers must live within the New York City television market to receive the service, and Locast enforces this with GPS and other similar location verification tools. Some residents of northern New Jersey complain they are unable to access the service, despite being within the New York City television market, a problem the group recognized and is attempting to fix. Viewers can watch the service on a desktop computer, mobile device, or tablet. There is no DVR service available at this time.

Stream quality is acceptable, but not stellar. In tests, we found the service suffered from occasional artifacts and was somewhat grainy. This would be particularly noticeable on a large screen television, much less so on portable devices. The picture was slightly better than Standard Definition. There were occasions when certain channels were unavailable and others suffered from streaming problems that caused portions of the audio or video to disappear. Remember, however, the service is new and free.

Locast offers a web-based interface.

The biggest challenge to Locast will not be the video quality of its streaming television channels. It will be dealing with lawyers.

Locast, like many similar services that came before it, relies on a novel interpretation of U.S. Copyright Law and the perceived loopholes it offers those who want to attempt to expand the definition of how consumers receive broadcast television signals. In this case, the service compares itself to a digital translator service similar to what some television stations use to distribute their signals to remote low-power translator stations that act as repeaters — providing better reception of stations that have trouble reaching parts of their local market.

Over the past two decades, several companies have tried and failed to offer independent online streams of television stations without the permission of station owners.

In 1999, iCraveTV provided more than a dozen Canadian and American television stations received over the air in Toronto made available to a nationwide online audience. The over-the-air stations (and the networks they affiliated with) in Buffalo, N.Y., promptly launched legal action against the company, challenging its claim it was entitled to offer the service because it was effectively a cable operator. International copyright law claims led to a preliminary injunction against the service and the threat of costly ongoing litigation convinced the owner of iCraveTV to stop the service in return for dropping lawsuits.

In 2011, ivi.tv streamed television signals from Seattle, Los Angeles, New York, and Chicago until a judge signed an injunction forcing those stations off the paid service. Several court actions against FilmOn.com, a similar service operating around the same time, also stripped most of its TV station lineup off the service.

The highest profile attempt to avoid getting permission from TV station owners to stream their programming came in 2012 with the launch of Aereo, which sought to exploit a perceived loophole in what constituted reception of a TV station. Aereo assigned a tiny antenna for each customer to receive over the air stations, starting in the New York City area. Stations received by that antenna were delivered to subscribers over an internet video stream. The idea was that Aereo was not distributing one TV signal for multiple customers. It was merely extending the concept of an ‘antenna’ to include internet delivery of signals to those verifiably living within the New York City television market.

Broadcasters ran up large legal bills to defeat Aereo in two major court cases. In 2014, the U.S. Supreme Court ruled against Aereo, claiming it breached copyright law. The service attempted one last effort to stay up and running, asking the U.S. Copyright Office for a copyright license after the Supreme Court seemed to call the service a “cable system.” Both the Copyright Office and a district court found Aereo was not entitled to a cable compulsory license and granted broadcasters a preliminary injunction that effectively put Aereo out of business.

All of these ventures attempted similar arguments that Locast is now using to justify why it should be allowed to distribute live streams of local television stations without the consent of station owners. The courts have traditionally bowed to the broadcasters and their allied lobbyists, television networks, and pay television providers that would feel threatened if a service like Locast gave away for free what they sell to consumers.

The Sports Fan Coalition’s legal justification comes from an exception Congress made to the copyright law’s insistence that permission from a station owner was required to redistribute their signal, unless one operated a cable system.

“Any ‘non-profit organization’ could make a ‘secondary transmission’ of a local broadcast signal, provided the non-profit did not receive any ‘direct or indirect commercial advantage’ and either offered the signal for free or for a fee ‘necessary to defray the actual and reasonable costs’ of providing the service. 17 U.S.C. 111(a)(5),” the group argues. “Sports Fans Coalition NY is a non-profit organization under the laws of New York State. Locast.org does not charge viewers for the digital translator service (although we do ask for contributions) and if it does so, will only recover costs as stipulated in the copyright statute. Finally, in dozens of pages of legal analysis provided to Sports Fans Coalition, an expert in copyright law concluded that under this particular provision of the copyright statute, secondary transmission may be made online, the same way traditional broadcast translators do so over the air.”

Traditionally, ‘secondary transmission’ has meant a building or complex owner receiving a station over the air from a rooftop antenna and providing it to tenants or residents over a Master Antenna TV coaxial cable connection (or similar technology). College campuses, hospitals, and other multi-dwelling unit owners often provide similar wired reception of over the air stations as well, to assure quality reception.

Translator stations that pick up and repeat a television station on an adjacent channel to offer better reception in difficult-to-reach viewing areas typically run with the full consent, or are owned by, the television station they rebroadcast.

Locast attempts to broaden the definition of ‘secondary transmission’ to include distribution over the internet through video streaming. Although their expert in copyright law believes this is permissible, there are multiple court cases where judges have ruled against these types of services when a broadcaster objects. Locast will likely face time in a courtroom arguing for its right to exist, something the venture readily admits is likely to happen.

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