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.

JPMorgan “still believes in the potential of an eventual merger of Charter Communications with Altice USA, despite a cool-down in tie-up talk,” according to a short piece in Seeking Alpha.

The Wall Street bank favored a Charter merger with Altice, which owns Cablevision and Suddenlink, because Altice has proven its ability to ruthlessly cut costs out of the cable business, potentially bringing $2.7 billion in synergy savings from layoffs, outsourcing, and killing off employee perks.

JPMorgan analyst Philip Cusack believes the biggest merger prize would be a combination of Cablevision’s footprint in downstate New York, Connecticut and New Jersey with Charter-Spectrum, which serves almost all of New York State and already has a presence in Manhattan and other boroughs in New York City. Cusack also argues Cablevision’s Optimum business would be well served by a familiar executive. Rutledge was Cablevision’s chief operating officer before moving to Charter.

Two years ago, Altice considered acquiring Time Warner Cable, before investors forced Altice to pull back on further acquisitions that would result in even more debt for the European telecom company.

Among the likely challenges would be antitrust and regulatory roadblocks, particularly if Charter is the lead company. Charter is still in hot water with New York’s Public Service Commission and its own merger with Time Warner Cable was decertified by the regulator last summer. It could be a long leap from antagonizing New York’s telecom regulator and the attorney general to winning a green light for yet another cable merger.

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)

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

New York City officials are giving Charter Communications 10 days to send $6 million in unpaid franchise and royalty fees or make a strong and credible case for why it shouldn’t pay, with likely litigation and the possible non-renewal of Spectrum’s contract to supply cable service on the line if the mayor isn’t satisfied.

In a letter addressed to Charter CEO Thomas Rutledge, New York Mayor Bill De Blasio accused the company of deliberately shorting the city’s share of revenue from Spectrum’s advertising sales, calculating the city’s cut based on the lower net amount collected after expenses, instead of on gross revenue, as the contract requires. The mayor also claims Charter is withholding royalty revenue from an ancillary business Charter partly owns.

“Charter Spectrum has proven time and time again that they’re unwilling to play by the rules,” the mayor told the Daily News. “This is money that can be reinvested in our communities instead of going into Charter’s coffers as they continue to hike rates for New Yorkers. [This latest] default is another thing we’ll take into consideration when their contract expires in 2020.”

Charter’s Endless Labor Problems Upset New York Officials

Charter is already in hot water with New York officials over its treatment of workers represented by the International Brotherhood of Electrical Workers (IBEW) Local 3, which have been on strike since March 2017. The highly skilled technicians were incensed when they learned hard-fought benefits were being clawed back by Charter, even as the company paid its CEO a record-breaking $98 million in compensation.

Mayor de Blasio

Over 1,800 middle class workers represented by IBEW Local 3 have suffered greatly over the past two years, according to labor reports. Many have had to cash in retirement savings, some have lost their cars or homes to foreclosure, others face mounting medical bills, in addition to family pressure at home. The union argues it is one of the last bastions to protect all middle-income earners from a race to the bottom mentality that is reducing wages and benefits. When a union worker is replaced with a less-skilled contractor, the pay and benefits Charter offers are significantly lower. Those technicians, regardless of their intentions, are also often poorly trained and risk alienating customers when repairs are incomplete or fail.

Many politicians in New York City have sided with the union strikers and have deplored the seemingly endless strike. Time Warner Cable, in contrast, had reasonably good relations with its unionized workforce. Prior to the merger, the biggest cable vs. labor union friction in the city was between the Communications Workers of America and Cablevision, which began after the CWA started organizing workers in Brooklyn and the Bronx in 2012.

With the Charter dispute approaching its second anniversary, the cable company has been spending subscriber dollars on a slick effort to convince its replacement workers to team up with the cable company to vote for decertification of IBEW Local 3 with the National Labor Relations Board.

Ironically, the same company that has dragged its feet settling the dispute has sent email to replacement workers claiming the union has done a lousy and ineffective job… of wearing down Charter.

In a Jan. 31 internal email obtained by In These Times, Charter Communications regional vice president of New York City operations, John Quigley, told workers, “In my opinion, Local 3 has not earned the right to represent you. Over the past several years they have misled their members, led them out on a strike without a clear plan, mishandled almost every aspect of the strike, made it very clear what they think of employees who are working with us today, and continue to make empty threats about harming our business. We hope that you vote ‘no’ and give us a chance to continue to make Charter a great place to work together.”

Race to the Bottom for Workers, Higher Rates for You

If Charter is successful in organizing replacement workers to side with the cable company and vote in larger numbers than the strikers, the current union representation will essentially end, along with the strike, handing total victory to Charter Communications. The cable company will likely impose its own terms on workers shortly afterwards. Critics claim that should be a familiar story for Spectrum subscribers.

“The company is basically union busting in New York City, and they’ve come in, raised rates on people and set their own terms because they hold a monopoly right now and there’s really no one to stop them from doing what they’re doing,” Troy Walcott, a striking worker, told In These Times.

With ongoing controversies with Charter on both the state and local levels, the company is likely to face increased scrutiny if the cable operator applies for a franchise renewal with the city next year, assuming state regulators do not move to enforce their own July 2018 decision to effectively kick Charter Communications out of New York State.

Brindisi, as he appeared in an ad slamming Charter Spectrum in the summer of 2018.

Rep. Anthony Brindisi (D-N.Y.) today introduced a bill in Congress to force cable operators fined by a state telecommunications regulator to publicly reveal the actual performance of their internet services, subscriber counts, and a complete price listing including all fees and surcharges.

The Transparency for Cable Consumers Act comes in response to New York’s experiences with Charter Communications, which was fined for failing to meet its commitments under a 2016 merger agreement allowing Charter to acquire Time Warner Cable. Brindisi made the cable company’s performance a core issue in his 2018 campaign, brazenly buying commercial time on Spectrum cable systems for 30-second ads slamming the cable company.

“I’ve heard from thousands of Upstate New Yorkers who are sick and tired of dealing with frequent rate hikes, poor customer service, and failed promises,” said Brindisi. “This is more than just an inconvenience. For families on fixed incomes, an unexpected rate hike could wreck their budget. And for people in rural communities, crawling internet speeds can take away their connection to jobs, health care, information, and important online services. When a company enters into an agreement, it should be required to hold up its part of the bargain.  We can’t keep giving these companies a free pass. If we don’t hold them accountable, nothing will change.”

Brindisi has bristled over the New York State Public Service Commission’s decision to repeatedly extend the deadline given to Charter to file an orderly exit plan winding down its cable operations in the state. The most recent extension was approved on Wednesday, now giving Charter Communications until April 5, 2019 to appeal the Commission’s decision and until May 9, 2019 to file its six-month exit plan.

Brindisi complains Spectrum is being allowed to linger even as consumers continue to contact his office with complaints about frequent rate hikes, slow internet speeds, and poor customer service. His December 2018 letter to the PSC asking the Commission to stop giving Charter additional time extensions has gone unanswered, according to Brindisi.

Brindisi’s bill attempts to walk a fine line around the federal government’s wholesale deregulation of the cable industry. Various deregulation measures stripped federal, state, and local officials of most of their powers to oversee the internet and Voice over IP telephone service. Cable television remains subject to some local oversight and regulation, but not in all areas. Many states also have so-called “state franchise” laws in place, which gives blanket authority for cable operators to offer cable television in the state without seeking a separate agreement with each community.

The Transparency for Cable Consumers Act, would require a cable or internet company to disclose information about its operations if it is fined by a state regulator:

• The number of cable and broadband internet customers in each county;
• The average cable bill and broadband internet bill amounts in each county;
• A full accounting of all fees charged customers in each county; and
• The average broadband internet speeds delivered in each county.

Rep. Anthony Brindisi (D-N.Y.) appeared on the House floor this afternoon to introduce the Transparency for Cable Consumers Act. (1:18)