A $174.2 million consumer fraud settlement has been reached between outgoing New York Attorney General Barbara D. Underwood and Charter Communications, delivering $62.5 million in direct refunds to some customers in former Time Warner Cable Maxx territories in New York State and free premium and streaming services for all current New York customers.

The settlement, likely the largest ever reached with an Internet Service Provider (ISP), comes in response to a 2017 lawsuit filed by former Attorney General Eric Schneiderman, accusing Time Warner Cable of short-changing customers on broadband speed and reliability, by knowingly advertising internet speeds it could not deliver. Time Warner Cable was acquired by Charter Communications in 2016.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” said Underwood. “Not only is this the largest-ever consumer payout by an internet service provider, returning tens of millions of dollars to New Yorkers who were ripped off and providing additional streaming and premium channels as restitution – but it also sets a new standard for how internet providers should fairly market their services.”

The settlement allows Charter to admit no wrongdoing, but the company is required to compensate Spectrum customers in New York and reform its marketing practices. Going forward, Spectrum must offer evidence through regular speed testing that the company can actually deliver advertised speeds. Charter is also required to continue network investments in New York to improve its internet service.

Lawsuit History

Schneiderman

In 2017, the Attorney General’s office filed a detailed complaint in New York State Supreme Court, alleging that Charter had failed to deliver the internet speed or reliability it had promised subscribers in several respects. That includes leasing deficient modems and wireless routers to subscribers – equipment that did not deliver the internet speeds they had paid for; aggressively marketing, and charging more for, headline download speeds of 100, 200, and 300 Mbps while failing to maintain enough network capacity to reliably deliver those speeds to subscribers; guaranteeing that subscribers would enjoy seamless access to their chosen internet content while engaging in hardball tactics with Netflix and other popular third-party content providers that, at various times, ensured that subscribers would suffer through frozen screens, extended buffering, and reduced picture quality; and representing internet speeds as equally available, whether connecting over a wired or Wi-Fi connection – even though, in real-world use, internet speeds are routinely slower via Wi-Fi connection.

The Attorney General’s office prevailed at every major stage of the court proceedings. After Charter sought to move the case to federal court, the Attorney General’s office won a federal court decision returning it to state court. Charter then moved to dismiss the action on various grounds, including federal preemption; the Attorney General’s office successfully opposed that motion, which the trial court denied in full. When Charter appealed parts of that ruling, the Attorney General’s office prevailed again at the Appellate Division.

Underwood

The Settlement

Under the settlement, New Yorkers will be qualified to receive different levels of compensation as a result of the settlement. Here is what customers can expect:

Only current Charter Spectrum internet customers (including those on legacy Time Warner Cable internet plans) can receive benefits under this settlement. If you do not have service today, but had it in the past, you do not qualify for relief.

Cash Refunds

Only customers living in areas upgraded to Time Warner Cable Maxx service can receive cash compensation. At the time of the lawsuit, this included much of New York City area, the Hudson Valley, parts of the Capital Region, and Syracuse-Central New York. Additionally, the customer must have subscribed to a Time Warner Cable legacy speed plan of 100 Mbps or higher. (Customers in non-Maxx areas including Buffalo/WNY, Rochester-Finger Lakes Region, Binghamton, and the North Country will not receive financial compensation.)

If you did subscribe to 100+ Mbps Time Warner Cable service and still subscribe to either your original legacy plan or have since upgraded to a Spectrum plan, you may qualify for:

• a $75 refund (700,000 subscribers) if you were supplied an inadequate cable modem or Wi-Fi router by Time Warner Cable.
• an additional $75 refund (150,000 subscribers) if you were leasing an inadequate cable modem for 24 months or longer.

You do not need to take any action to get these refunds. Charter Spectrum will notify eligible subscribers about the settlement and provide refunds within 120 days. (If you previously received a refund for being supplied with an inadequate modem, you are ineligible for this cash refund).

Free Services

Only former TWC Maxx customers qualify for cash refunds.

In addition to the direct refunds detailed above, Charter will offer free streaming services to approximately 2.2 million active internet subscribers (both Spectrum and legacy Time Warner Cable plans qualify):

If you currently subscribe to both Spectrum Internet and TV service, you qualify for three free months of HBO or six free months of Showtime. (If you already subscribe to these premium movie channels, you are ineligible for this part of the settlement. If you subscribe to one, but not both of these networks, select the one you do not currently receive.)

If you currently subscribe to internet-only service from Spectrum, you will receive a free month of Charter’s Spectrum TV Choice streaming service—in which subscribers can access broadcast television and a choice of 10 pay TV networks—as well as a free month of Showtime.

Charter will notify subscribers of their eligibility for video and streaming services and provide details for accessing them within 120 days of the settlement. Receiving the video and streaming services as restitution will not affect eligibility for future promotional pricing.

Pro-Consumer Reform

New York also secured groundbreaking reforms in how Charter Spectrum conducts business. Underwood believes these guidelines could serve as a guide for other states to eventually adopt, delivering consumer benefits to cable subscribers everywhere. For now, New York consumers can expect:

• Internet Speed Proof of Performance: Charter must describe internet speeds as “wired,” disclose wireless speeds may vary, and mention that the number of concurrent users and device limitations will impact your actual internet speed. These disclosures must be made in all marketing materials and ad campaigns. Additionally, Spectrum must regularly certify through actual speed testing that it can deliver the speeds it advertises or discontinue any speed plan that cannot be substantiated.
• Truth in Advertising: Charter Spectrum cannot make unsubstantiated claims about the speed required for different internet activities (eg. streaming, gaming, browsing). It also must not advertise internet service as reliable (eg. no buffering, no slowdowns), or guarantee Wi-Fi speed without proof.
• Equipment Reforms: Charter must provide subscribers with equipment capable of delivering the advertised speed under typical network conditions when they commence service, promptly offer to ship or install free replacements to all subscribers with inadequate equipment via at least three different contact methods, and implement rules to prevent subscribers from initiating or upgrading service without proper equipment for the chosen speed tiers.
• Sales and Customer Service Retraining: Charter must train customer service representations and other employees to inform subscribers about the factors that affect internet speeds. Charter must also maintain a video on its website to educate subscribers about various factors limiting internet speeds over Wi-Fi.

Today’s settlement has no bearing on the well-publicized dispute between the New York Public Service Commission and Charter that led the Commission to cancel approval of Charter’s acquisition of Time Warner Cable. Last summer, the Commission voted to throw Spectrum out of the state, but ongoing negotiations between the PSC and Charter are also likely to culminate in a similar settlement including cash fines and new commitments from the cable operator.

The telecom industry wants a new tax on broadband services to pay for rural broadband expansion.

Nearly two years after FCC Chairman Ajit Pai announced the formation of a new federal advisory committee on broadband development, the telecom industry-stacked panel has recommended implementing a new tax on websites and online subscription services like Netflix, Hulu, and Amazon Prime Video and turning over the proceeds to many of the same companies dominating the Committee.

The proposal is part of a large set of recommendations from the Broadband Deployment Advisory Committee (BDAC) designed to promote and streamline broadband expansion, especially in rural areas. If adopted by the states, the new tax would create a large broadband deployment fund that could be accessed by telecommunications companies like AT&T and Comcast to expand service without having to pay back the funds or give up part ownership of the taxpayer-funded expansion.

What caught many by surprise was the sweeping impact the new tax could have on the internet economy, because online businesses, streaming services, and even many website owners could be subject to the tax, if enacted:

Entities that financially benefit from access to a broadband system located in the state, including advertising providers, shall contribute to the Broadband Deployment Fund.

A comprehensive piece by Jon Brodkin on Ars Technica points out defining the meaning of “entities” and “advertising providers” will be crucial to determine who will have to pay the tax and who won’t:

Article 11 of the BDAC’s model state code would create a Rural Broadband Deployment Assistance Fund, paid for by contributions from broadband providers and “Broadband Dependent Services.”

The definition of “Broadband Dependent Services” is where things get interesting. An earlier version of that definition—available in this document—reads as follows:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee which requires the capabilities of the Broadband Service which the consumer has purchased and shall also include entities that financially benefit from access to a broadband system located in the state, including advertising providers.

The BDAC met on December 7 and pared that definition back a bit to exclude “entities that financially benefit from access to a broadband system.” Video is available here; the discussion on the definition starts around 2:04:45.

BDAC Chair Elizabeth Bowles, who also runs an Arkansas-based wireless Internet service provider called Aristotle, expressed concern that the original version of the definition “was including every small business in America,” potentially forcing them all to pay the new tax.

Nurse

AT&T has been one of the strongest advocates for the new tax, and argued it should be as expansive as possible.

“It basically is everybody [that should be taxed] because this is a societal objective,” said Chris Nurse, assistant vice president for state legislative and regulatory affairs at AT&T. “Universal service is a societal objective. We want to spread that $20 or $30 billion burden more broadly so the tax is low on everybody.”

Google Fiber policy chief John Burchett objected, claiming under AT&T’s vision, everyone who has an internet connection would be taxed. In his view, AT&T’s proposal was “absurd.”

As the debate raged on, it became clear AT&T was once again looking for a way to be compensated by companies like Amazon and Facebook — using its ‘pipes’ without contributing towards the cost of the network.

“Who are we cutting out and who are we leaving in?” Nurse asked. “Today it’s basically the telephone companies [who pay] and not Google and not Amazon and not Facebook, right? And they’re gigantic beneficiaries from the broadband ecosystem. Should they contribute or not? Someone has to pay.”

Burchett

In the end, the BDAC settled on adopting a compromise over what broadband entities will be subject to the new tax:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee, and shall also include advertising-supported services which requires the capabilities of the Broadband Service which the consumer has purchased.

This compromise definition primarily targets the new tax on streaming video services — the ones AT&T itself competes with. But it will also cover any websites sponsored with online advertising — like Facebook and Google, ISPs, subscription services delivered over the internet, as well as AT&T’s broadband competitors.

The proposal also seeks to guarantee that rural residents be granted access to affordable broadband, but the industry-dominated Committee chose to define “affordable” as the cost of internet access in urban areas, which some would argue isn’t affordable at all.

The draft proposal has been criticized by many stakeholders, including the National Rural Electric Cooperative Association, representing electric cooperatives. The group implied the new proposal was just the latest attempt to get the telecom industry’s wish list enacted.

“Instead of focusing on solutions for unserved and underserved rural communities, many of the recommendations focus on issues specific to urban areas where broadband is already available,” said NRECA CEO Jim Matheson. “Ignoring the precedent of federal law and laws in 20 states, the state model code would treat co-op poles like those belonging to large investor-owned utilities. The state model code would also cap pole attachment rates in state statute, effectively making those rates permanent. This code, in effect, increases regulatory burdens while giving co-ops less time and less money to comply with those regulations.”

The National Multifamily Housing Council also objected to another proposal approved in the draft.

“Article 8 of the MSC grants broadband providers the unilateral right to install facilities in all multifamily residential and other commercial buildings and mandate construction of broadband facilities at the property owner’s expense without regard to the rights and concerns of the owner,” the organization claimed. “NMHC/NAA and its real estate industry partners argued that Article 8 of the MSC is riddled with many practical and legal problems. Among the most serious issues with the MSC is that it interferes with private property rights, disrupts negotiations and existing contracts between property owners and communications service providers and will lead to costly regulation and litigation at the state level without any assurance of actually spurring broadband deployment.”

AT&T would be among the biggest beneficiaries of the tax fund, already receiving $428 million annually from another rural broadband fund to expand wireless internet access in rural areas. If Nurse’s predictions are correct, the tax could collect $20-30 billion, far more than has ever been spent on rural broadband before.

Liccardo

Critics also contend the BDAC’s industry-friendly proposals are predictable for a Committee created by FCC Chairman Ajit Pai and well-stacked with telecom industry executives and lobbyists. The former head of the BDAC was arrested by the FBI on fraud charges, and San Jose Mayor Sam Liccardo quit the Committee in January, writing, “the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public” in his letter of resignation.

Whatever the BDAC ultimately decides, the final proposal has a long road to travel before becoming law. Each state can choose to adopt the proposal, part of it, or none of it. In the end, it is just a “model code” for states to consider. But it will be part of the argument made by the telecom industry that laws must be streamlined to prevent delays in deploying service, and that those benefiting from broadband should cover more of the costs to provide it.

Ironically, the person most likely to be embarrassed by the model code could be FCC Chairman Ajit Pai, who has almost universally rejected new taxes and fees on broadband services. But his approval is not required to advance the argument and the model code to the states, where the telecom industry’s lobbyists are waiting to begin advocating the passage of new state laws enacting its recommendations.

A new union-sponsored website promises consumers they can find a better deal with a different video provider.

(Courtesy: Cut the Cord on Spectrum)

Many of the more than 1,800 Charter/Spectrum workers in the New York City area, on strike since early 2017, have teamed up in a new campaign to encourage customers to cut cable’s cord and disconnect service.

“We all know a typical cable/internet bill with Spectrum runs about $164 – 194 (can’t forget those equipment rental fees, DVR fees & random bill increases!),” the Cut the Cord on Spectrum website says. “By cutting the cord on Spectrum and signing up for streaming services – many of which offer Live TV options including all your favorite cable network and sports channels – you can cut your bill down to as low as $57.99/month!”

The website offers basic advice on alternative providers that stream video programming over the internet, including general pricing and included features. The website implies choosing any other provider is probably better than sticking with Spectrum.

“Spectrum customers – along with the N.Y. Attorney General’s office – have a long list of gripes with Spectrum Cable,” the site claims. “With an income over $490 million and CEO Tom Rutledge earning a salary of $98.5 million, it’s clear that Spectrum Cable is fleecing its customers, overcharging for horrible service while raking in huge profits.”

The International Brotherhood of Electrical Workers Local 3 is behind the latest digital effort to make life difficult for Charter Communications. The union plans to spend “tens of thousands of dollars” on online ads targeting zip codes where Spectrum provides cable service, according to union officials.

The union is getting significant support from politicians downstate, including New York Gov. Andrew Cuomo, who blasted Charter at a well-attended union rally in front of Charter’s headquarters on Wednesday in Manhattan.

“[Spectrum’s] CEO in 2016 made $100 million. The COO of Charter Spectrum, $50 million. The company made $15 billion,” Cuomo told the audience. “How dare you abuse the hardworking men and women that built that company and put the money in your pocket?”

The governor also continued his ongoing attack on NY1 – Spectrum News, a company-owned 24-hour news channel. Many union-supporting politicians have refused to appear on NY1, accusing the channel of bias.

“You want to know what’s interesting about their news organization? It has a very selective memory, their news organization,” Cuomo said. “You know what their news organization never covered? The fact that the state of New York is trying to take away their franchise and kick them out of New York. You know what their news organization failed to cover? The fact that 2,000 Local 3 members were kicked to the street and they’re rallying for two years for fairness and decency.”

Gov. Andrew Cuomo blasted Charter Spectrum at a rally held Wednesday in front of Spectrum’s corporate headquarters in New York City. (15:19)

Canadian Netflix subscribers will pay up to $3 more a month in the coming weeks for streaming video as the company raises prices to produce more original Canadian content.

The latest rate increase is the largest ever for the service in Canada.

New Rates for Netflix Canada

• Netflix Basic increases $1 to $9.99 a month. No 4K video and one-stream only
• Netflix Standard increases $3 to $13.99 a month. No 4K video and up to two streams at a time viewing
• Netflix Premium increases $3 to $16.99 a month. Includes 4K ultra HD video and up to four streams at a time viewing

The new rates take effect today for new customers. Existing customers will be notified by e-mail about the rate increase and when exactly it will be applied to their account.

Netflix Canada has taken over distribution of the long running mockumentary filmed in Nova Scotia.

The last rate increase in 2016 raised the price of Netflix by $1.

Netflix Canada spent $3.3 billion on original content in 2017. That is more than any of Canada’s English language commercial networks or broadcasters spent on scripted productions. Netflix also films many of its original productions in Canada, which is less expensive than many American filming locations.

Netflix Canada appears to have found a formula that works for the streaming service: participating in co-productions with entities like the CBC (at least for English productions) and asking subscribers to pay more to cover the company’s costs. This has spared Netflix from having its service subject to the federal GST, which would come out of subscribers’ pockets.

The company has had a much more difficult time dealing with the provincial government in Quebec, which protested loudly that Netflix Canada failed to make specific French language content commitments. As a result, Quebec has slapped its 9.975% sales tax on Netflix and all other streaming services.

Canada is gradually catching up to the United States in cord-cutting options. Netflix Canada’s offering is just a few hundred titles behind Netflix’s catalogs in the United States and Japan.

Other services have entered Canada in the last year or so, including CBS’ All Access, Acorn TV, and BritBox.

In response, Canadian broadcasters and telecom companies are beefing up their own services, which include CTV Movies/CTV Vault and Citytv Now/FX Now (which are only for authenticated cable/satellite subscribers) and Bell’s Crave TV (which just launched CraveTV+, offering more movies and original HBO shows).

Altice USA is upgrading the firmware powering its much-promoted Altice One set-top box to introduce new functionality and integrate popular web services into the viewing experience.

Altice One v2.0 is rolling out to about 200,000 customers that have the advanced box. Among the new features:

• Recorded DVR content stored in the cloud can now be played back anywhere using the Altice One mobile app.
• YouTube Kids and a variety of streaming services will enhance viewing options beyond YouTube, Netflix, and a few other supported streaming services.
• More 4K content will be available, including Premier League soccer, available on channel 200.
• Remote control voice search will be available for the YouTube app.
• Show restart feature expanding to 20 extra channels, including A&E, History Channel, Lifetime, Viceland, Fox News, Fox Sports 1, FX and National Geographic.

The Altice One box, which carries a higher rental fee than traditional cable set-top boxes, has now been rolled out to about 80% of its Cablevision/Optimum and Suddenlink service areas. But only a minority of subscribers choose the box, and it gets poor reviews from customers because of bugs and other unexpected behavior.

Altice One v2.0 promotional video, courtesy of Altice. (0:30)