Judge Engelmayer

New York Attorney General Eric Schneiderman will have to wait to bring his lawsuit claiming Charter/Spectrum is ripping off New York consumers with false speed claims until the courts can find a judge that isn’t a Charter/Spectrum subscriber.

U.S. District Judge Paul A. Engelmayer recused himself from hearing the case in state court Wednesday because he has a conflict of interest – he’s a Charter/Spectrum customer and could receive monetary damages if the cable company is found culpable.

“I am obligated to recuse,” Judge Engelmayer said, while also apologizing for not doing so earlier. As a former Time Warner Cable customer, he was unfamiliar with the Spectrum brand and only recently realized Charter Communications had acquired Time Warner Cable. “I can barely use a toaster. I have no idea what internet service I subscribe to.”

Charter Communications is trying to get the case heard in a presumably more friendly venue – federal court, and the case is on hold until Schneiderman completes his argument to have the case heard by a New York court. Charter argues that Schneiderman should not be allowed to bring enforcement actions under state law in state courts just because he is dissatisfied with the performance of the FCC.

The New York Attorney General brought the action after allegedly finding extensive evidence Time Warner Cable was not delivering the internet speeds the company promised in its advertising and in some cases left customers with equipment incapable of supporting the higher speeds customers purchased.

If Schneiderman can successfully keep the case in New York, the courts will have to find a judge with Verizon FiOS or no internet at all — a tall order in a state where Charter/Spectrum’s service area covers Buffalo to Manhattan and all points in-between.

President Donald Trump took credit on Friday for Charter Communications’ commitment to hire 20,000 new employees and invest $25 billion on improving cable and broadband service, despite the fact Charter promised to hire those workers more than a year before Trump won the election and its spending commitment may actually represent a reduction in spending.

Today, I was thrilled to announce a commitment of $25 BILLION & 20K AMERICAN JOBS over the next 4 years. THANK YOU Charter Communications! pic.twitter.com/PLxUmXVl0h

— Donald J. Trump (@realDonaldTrump) March 24, 2017

“We are really in the process of announcements and you’re going to see thousands and thousands and thousands of jobs and companies and everything coming back into our country,” Trump told reporters in the Oval Office after meeting with Charter CEO Thomas Rutledge and Texas Gov. Greg Abbott. “They’re coming in far faster than even I had projected.”

Rutledge claimed the company’s promise to spend $25 billion over the next four years was because of Trump’s commitment to cut corporate taxes and further deregulate the cable industry. Rutledge added that he was excited that the time was right in the “regulatory climate and the right tax climate to make major infrastructure investments.”

Unfortunately for both the president and Charter’s CEO, public filings required by the Securities and Exchange Commission show Rutledge’s spending commitment to the president actually could represent a $4 billion reduction in spending over the next four years.

In 2015, Charter, Time Warner Cable, and Bright House collectively spent a combined $7 billion as Charter continued its speed improvements and Time Warner Cable invested in its Time Warner Cable Maxx upgrade initiative. That spending increased in 2016 to $7.1 billion (a figure that excludes merger-related expenses), an amount confirmed in last month’s 4th quarter 2016 financial results:

“Capital expenditures totaled $1.89 billion in the fourth quarter, including $187 million of transition spend,” reported Christopher Winfrey, chief financial officer of Charter Communications. “Excluding transition CapEx, fourth quarter CapEx declined by $81 million year-over-year or 4.5% with tradeoffs between all-digital in the fourth quarter of 2015 in Spectrum pricing and packaging box placement in Q4 2016. For the full-year 2016, our capital expenditures totaled $7.5 billion or $7.1 billion when excluding transition spending.”

Hal Singer, a principal at Economists, Inc., noted Rutledge’s new $25 billion spending commitment could represent a net decrease in spending. That’s because “New Charter” would have spent $28.4 billion over the next four years if it kept combined spending in line with the figures the three companies independently reported in 2015 and 2016.

Rutledge

Charter officials told Ars Technica the spending commitment announced Friday was “specific to broadband infrastructure and technology investment” and claimed it was different from the total capital expenditure figure. Charter claimed spending related to infrastructure and technology was $5.3 billion in annual spending over the last three years, but Charter declined to provide numbers for 2016. It also wouldn’t provide a breakdown adequate to determine if Rutledge’s commitment would result in a spending increase or decrease.

CFO Winfrey told investors in February that a “bigger portion of CapEx” spending in 2017 won’t be for broadband enhancements and expansion, as Mr. Rutledge seemed to tell President Trump. Instead, Charter will spend the money on set-top boxes, cable modems, and network gateways Charter will place in customer homes as a result of an ongoing digital transition, expected to last until 2020.

“When we do an install under Spectrum pricing and packaging, there’s a higher number of devices that we’re placing in the home because of our two-way set-top box strategy as well as our strategy not to charge for modem rental and to have reasonable router fees, which means that you’re going to put more capital into the home on an average transaction and we expect to have [more transactions as a result of increased sales],” Winfrey told investors last month.

Rutledge himself told investors on February’s investor conference call that predicting Charter’s CapEx spending in the future represented an “artificial target.”

“On CapEx, we are not providing CapEx guidance just because we approved a budget internally, which is what we want to operationally deploy this year,” Rutledge explained. “It could be less than that just because of what practically can be done or could be in a position to accelerate. But from our perspective, it doesn’t make sense to release such an artificial target and have the tail try to wag the dog for what’s ultimately right.”

Rutledge agreed with Winfrey’s assessment about what Charter’s spending priorities will be this year: installing more cable boxes and converting customers to all-digital television service. In all, there will be no significant boost in CapEx spending.

“If you think back to what I said, in 2017 we will be spending more on Spectrum pricing and packaging through that higher [cable equipment] placement or connect,” Rutledge said. “We will restart all-digital. We will be insourcing. But offsetting some of that increase will be the benefit of synergies. So without giving specific guidance, 2017 is probably a bit higher in terms of absolute dollars than what we were performing in 2016, but it shouldn’t be a dramatic change in terms of capital intensity or CapEx as a percentage of revenue.”

As for Trump claiming credit for Charter’s commitment to hire 20,000 additional employees, that has been part of Charter’s list of claimed “deal benefits” to win approval of its acquisition of Time Warner Cable and Bright House Networks for at least a year before the election, as Fortune reminds us:

The 20,000 jobs, at least, have been in the works for more than a year. Charter CEO Tom Rutledge said in 2015 that Charter would need to bring on 20,000 additional workers if the company’s merger with Time Warner Cable and acquisition of Bright House Networks went through. A Charter spokesman reiterated the claim in April 2016. The FCC approved the deal last May, and Charter CEO Tom Rutledge said in January that the company had plans to hire 20,000 new employees within three years.

Former Time Warner Cable and Bright House Networks customers in Florida, Ohio, Michigan, and Wisconsin were glad to see the end of modem rental fees, something promoted as a tangible deal benefit of the merger by new owner Charter Communications. But many of those same customers are now upset to discover that up to $10 modem rental fee has been replaced with a $5 monthly fee for “Wi-Fi service.”

LuAnn Summers, a Bright House customer in Tampa, wrote Stop the Cap! in February to complain her new bill from Charter/Spectrum included a $9.99 activation fee and $5 a month for something called “Wi-Fi Service.” The same fees have since appeared on bills for some customers recently switching away from their old Time Warner Cable service plans to new Spectrum pricing and plans.

Rich D’Angelo in Wisconsin recently took Charter up on its offer to switch away from his legacy TWC plan when his promotion expired in January.

“I was able to get a big speed boost and bundle it with Spectrum’s Silver TV package, which includes two of the premium movie channels I was paying TWC $15 each for every month, and my bill was only supposed to go up $10,” D’Angelo tells Stop the Cap! “Instead, it went up $25 and I feel lied to.”

Wi-Fi sticker shock.

D’Angelo retired his old owned Motorola SB6121 modem in favor of a new network gateway supplied free of charge by Charter because his new package didn’t work with his old modem.

“My 6121 modem was a real workhorse and I bought it right after Time Warner started charging modem fees, but it cannot support Spectrum’s fastest speeds in Wisconsin and I didn’t feel like buying a new modem when Spectrum gives them to customers for free,” D’Angelo explained. “This was the device they handed me and I was not offered any other option.”

Champagne Johnson in Columbus, Ohio also took advantage of Spectrum’s new pricing plans thinking she could save her family money and get better internet speeds from the cable operator that advertises it’s a “new day” for Time Warner Cable subscribers.

“New day but the same old lies and deceit,” Johnson writes Stop the Cap! “Do these cable companies only hire thieves? I was told the cable modem was included, but now I am suddenly getting charged for Wi-Fi, which is crazy. I called Spectrum up and they told me there is a charge if I use their modem for my Wi-Fi. I told them I don’t need their Wi-Fi because I have my own router that works fine and they told me it was included inside their modem and I had to pay for something I won’t use.”

Charter assumes if you use Wi-Fi, you want their Wi-Fi Service

We contacted Charter to learn more about this new charge and what customers can do about it.

It turns out the Wi-Fi charge and activation fee applies when you use a network gateway device provided by the cable company. We learned the reason so many customers are finding this charge on their bill comes as a result of slightly deceptive sales practices when customers choose a Spectrum internet service plan.

“Do you use Wi-Fi at home?” a Charter representative asked us when we inquired about pricing for a new Spectrum service plan to replace our existing Time Warner Cable plan. When we answered yes, the representative said they would send our “free equipment” and noted we would no longer pay a modem rental charge (despite the fact we had owned our own modem at Stop the Cap! HQ for years). “You can either pick it up in a cable store or we can ship it direct to you in a self-install kit.” That equipment was a “network gateway,” which bundles a cable modem and router into a single device.

Our readers confirm that Charter representatives did not ask them if they have an existing in-home router, which probably already provides Wi-Fi access in the home. Nor do they disclose that accepting a network gateway, which was also interchangeably referred to as “a modem” means they are agreeing to pay a $9.99 activation fee and $5/mo ongoing fee for “Wi-Fi service.”

We called three times this afternoon as were given identical information, and no disclosure of any Wi-Fi fees.

On the fourth call, we specifically asked about Wi-Fi fees and the representative told us they did not know the answer and left us on hold for 10 minutes before finally disclosing that Charter does charge both fees. When we asked how to avoid them, we were first told we could not waive the fee if we used Wi-Fi in the home, but a supervisor later clarified that it only applied to their gateway and we could specifically request a “basic modem” or have Wi-Fi disabled on a network gateway, and neither charge would apply.

“How are we supposed to know and understand that in advance?” Johnson asked us.

“Considering more than 90% of Time Warner Cable customers were paying $10 a month for a modem without ever realizing or understanding they could buy their own and avoid that charge, how many Spectrum customers are proficient enough to tell Spectrum they want their network gateway set to bridge mode or want a traditional cable modem without router functionality? It’s clear Charter is going to make $5 a month from a whole lot of customers, and it should be disclosed up front. It even got me and I am a network engineer.”

Summers learned about the controversy of the Wi-Fi charge after googling the fee and discovered a Tampa Bay Times story about the fee.

Spectrum spokesman Joe Durkin told the newspaper the fee should not apply to customers Charter inherited from Bright House who already had internet service. He said Spectrum is reviewing cases the Times has brought to its attention to see if the charges were appropriate.

But that isn’t always the case for customers placing orders on Charter’s website or contacting customer service by phone. In both cases, Charter implied if you want to use Wi-Fi at home, you owe them an extra $5 a month:

Charter’s website suggests that you have to pay $5 a month if you intend to use Wi-Fi at home.

Getting the charges off your bill

Luckily, Charter is readily agreeing to customer requests to remove the charge(s) from customer bills and will supply equipment with Wi-Fi disabled (or not present when using a traditional cable modem). You may need to exchange equipment, however. If either charge appears on your bill, call and complain. While we no longer recommend customers invest in their own cable modems as long as Charter is providing them without a rental fee, we do suggest customers buy their own router and avoid ongoing fees for Wi-Fi service.

Also be aware that if you are still on a legacy Time Warner Cable internet plan, Charter will keep collecting that $10 monthly modem fee until you abandon your Time Warner plan for a Spectrum internet plan. You can still avoid the rental fee by buying your own modem. Charter’s list of supported modems is here.

Former Time Warner Cable and Bright House customers, listen up. A veteran Charter Communications customer who cut cable’s cord for good a few months ago reports Charter’s hard-line on extending retention deals to customers threatening to leave lasts only until you turn in your equipment and cancel your service.

DSL Reports reader mmainprize from Houghton Lake, Mich. wrote he dumped his $180/mo Charter Gold TV with Phone package for good after realizing just how much Charter was gouging him for service.

“I just went through my bills, and remember when internet was only $49 in mid-2015 before increasing to $52 in late 2015,” he writes. “So at the now current price of $65 you can see just how much it has gone up.”

When he called to tell them he was canceling service, they briefly tried to keep him as a customer by cutting back on his cable package for a lower price.

“Double play, Flex pack, you pick 20 channels, etc. At first the offer was internet and basic cable for $90 a month, then $74 a month for internet and “limited basic” (an unadvertised package of local channels, public access, educational and government channels, plus home shopping). I canceled all but internet.”

Within days the phone calls and letters started coming advertising discounts Charter wouldn’t dream of offering when he was still a TV customer.

“I get a call every day now (it is harassment) offering the same prices or lower than what I was offered when canceling,” he writes.

The first offer is $80 for a double play package of TV and internet service. But if you turn them down, they eventually pitch a triple play offer of $89 a month with TV, phone, and internet with free HD and DVD service (equipment extra).

The enticing offer on their website, promoting $29 a month for internet, $29 for TV, and $29 for phone service is available only to new customers. Existing Charter, Bright House, and Time Warner Cable customers cannot get those prices. You must pay more.

Those canceling service qualify as a new customer after a 30 day timeout period. Or skip that and sign up as a new customer under the name of another household member. If you are married, your spouse’s maiden name will suffice.

One thing is certain. Charter’s takeover of Time Warner Cable and Bright House is very unlikely to save most customers any money. Almost 90% of Time Warner Cable customers received discounts from a bundled service package or a retention deal. When those packages expire, your bill will skyrocket. This is exactly what Stop the Cap! told regulators in our opposition to the merger. Since 2008, we have shared one sage piece of advice with readers:

When a cable company comes calling promising you a great new deal, watch your wallet and run!

A conservative group funded by corporate interests and the Koch Brothers has asked FCC chairman Ajit Pai to answer its petition and move expeditiously to cancel the prohibition of data caps/usage-based pricing as a condition for FCC approval of Charter Communications’ acquisition of Time Warner Cable and Bright House Networks.

A number of pro-consumer deal conditions were included as part of the merger transaction’s approval, and won the support of a majority of FCC commissioners under the leadership of former FCC chairman Thomas Wheeler, appointed by President Barack Obama.

The Competitive Enterprise Institute (CEI) is hopeful that with Wheeler out of office and a new Republican majority at the FCC under the Trump Administration means the FCC will end requirements that Charter offer unlimited data plans, discounted internet access for low-income consumers, and start allowing Charter to charge fees to Netflix and other content providers to connect to its broadband customers. CEI has every reason to be hopeful, pointing out Chairman Pai is a fan of data caps on residential broadband service, opposes Net Neutrality, and recently effectively killed a Lifeline program that would have extended inexpensive internet access to the poor.

CEI:

As then-Commissioner Pai wrote in 2016, this condition is neither “fair” nor “progressive.” Instead, he called this “the paradigmatic case of the 99% subsidizing the 1%,” as it encourages Charter to raise prices on all consumers in response to costs stemming from the activities of a “bandwidth-hungry few.” Other problematic conditions include the ban on Charter charging “edge providers” a price for interconnection and the requirement that the company operate a “low-income broadband program” for customers who meet certain criteria.

The group is optimistic Pai will oversee the unwinding of Charter’s deal conditions largely pushed by former FCC chairman Thomas Wheeler, after Pai recently led the charge to revoke another condition required of Charter in return for merger approval – a commitment to expand its cable network to pass at least one million new homes that already receive broadband service from another provider.

Pai also opposed the low-income internet program, calling it “rate regulation.” The CEI claimed the requirement will “undermine Charter’s ability to price its services in an economically rational manner.”

“Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand—by granting CEI’s petition,” the group wrote on its blog.