New York City’s cable franchise territories

A proposal to replace Charter Communications’ Spectrum cable systems in New York with a workers co-op, owned and self-managed by its workers, would offer a bundle of television, phone, and broadband service price-capped at $100 a month for residential customers.

Developed by several dozen striking Charter/Spectrum workers, the 18-page proposal, “New York City Communication July 2018 Business Plan” would, for now, address only the five boroughs of New York City and nearby Bergen, N.J. But Troy Walcott, a striking member of the International Brotherhood of Electric Workers (IBEW) Local 3, says the current proposal was written as “a proof of concept” that can be adopted across New York State.

“The best time is now,” Walcott told LaborPress, noting that if the city (or state) decided not to renew Charter Communications’ franchise agreements in the city, there will still be a few years left before it expires, giving the proposed co-op time to develop its own network or plan to overhaul what was originally Time Warner Cable’s system in places like Manhattan.

A citywide co-op would also introduce competitive service in boroughs presently serviced by Altice, formerly Cablevision. The group would have to build its own network in those areas. If New York revokes Charter’s franchise, the cable system would likely take the city and/or state to court, setting up years of litigation. Past precedent has shown that cable systems abandoning or forced from an area are exceptionally rare, and usually involve a friendly sale of the existing system to another provider. One example was Adelphia Communications Corporation, which ran the fifth largest cable company in the country until it filed bankruptcy in 2002 after investigators revealed internal executive corruption. Adelphia systems were sold to Comcast and Time Warner Cable in most areas, although the communities of Mooresville, Davidson, and Cornelius, N.C., acquired the bankrupt Adelphia system serving parts of the three communities in 2007 for $80 million, relaunching it as a community-owned cable provider with mixed results.

A workers co-op is owned and run by its workers in the public interest.

If New York does strip Charter of its Spectrum cable franchises in the state, and if that effort survives the inevitable court challenges, Charter would likely sell its systems in New York to Comcast, an obviously motivated buyer. Another possible, but less-likely buyer is Altice, which acquired Cablevision and already provides service in parts of downstate New York, New Jersey, and Connecticut.

Charter is facing multiple investigations in New York over its business conduct. In New York City, where its franchise agreement is set to expire July 18, 2020, the company is under fire for its creative interpretation of “located in New York City” — language in Article 17 of the franchise agreement which requires Charter to use vendors registered to do business in New York, have a long-term commercial lease in New York, and more than 50% of its workforce living in New York.

With a substantial amount of its workforce on strike in the area for the last year and a half, and the industry’s trend to shift work to third-party contractors as a cost saving measure, the IBEW has been documenting instances of Charter-badged commercial vehicles parked overnight behind a Far Rockaway florist shop or in residential neighborhoods, often with out-of-state license plates.

Charter officials deny those accusations, and claim at least 75% of its vendors and contractors are located within New York City.

When Kate Blumm, assistant commissioner of the New York City Department of Information Technology & Telecommunications (DoITT) confronted Charter officials about its possible use of out-of-state vendors, the response from Charter was less than reassuring.

“Once we started to probe, we realized that Charter was essentially making the argument that if you are a worker and you are doing work in the city, therefore, you are located in the city,” Blumm said during the March 13 episode of the “Blue Collar Buzz” podcast. “They pointed us to a Macmillan online dictionary definition of what the word ‘located’ means — and we kind of looked at ourselves and were scratching our heads — this is not the spirit and intent of this provision. This provision says that Charter has to use best efforts to use vendors located in the city.”

As a result, the DoITT has pushed its franchise agreement audit one year earlier than normal, now scheduled to begin Sept. 1. The city’s concerns about Charter’s performance have been amplified at the state level by the New York Public Service Commission, which has hammered Charter executives for months about the company’s inability to meet its obligations under the 2016 Merger Order approving the takeover of Time Warner Cable.

Tell us what you think about your cable TV service – whether it’s @verizon , @Altice or @GetSpectrum – send us your comments so we can make sure New Yorkers get the best service possible 📺👉https://t.co/ic2cx3sAjW

— NYC IT & Telecomm (@NYCDoITT) July 11, 2018

“Not only has the company failed to meet its obligations to build out its cable system as required, it continues to make patently false and misleading claims to consumers that it has met those obligations without in any way acknowledging the findings of the Public Service Commission to the contrary,” said PSC Chairman John B. Rhodes. “Our patience with Charter has come to an end and now we must move to take much stronger actions.”

Mayor de Blasio

Backers of the cable co-op note many of those on their business plan development team have direct experience designing, surveying, building, and maintaining the existing Spectrum cable system originally owned by Time Warner Cable.

“We know the system because we built it,” Walcott said. “The system was already crumbling and the infrastructure needed to be redone. This is something that’s going to have to get done anyway. We’re saying, instead of letting them do it, let’s start doing it and rebuilding it ourselves — the people that are actually going to build it anyway.”

Finding enough money to proceed will be the co-op’s biggest challenge. New York City officials, like Mayor Bill De Blasio, are in favor of more cable competition in spirit, but are careful not to commit themselves, or the sizable sums required if the group decides to begin building a competing system or bid to acquire the current Spectrum system. So far, the New York City Council has committed to gradually increasing financial support for the development and cultivation of worker cooperatives, starting with $1.2 million in 2015 and increasing to $2.2 million last year. A full-scale acquisition of the existing infrastructure owned by Charter in New York would likely run into the billions of dollars.

The group hopes public demand and dislike of Charter/Spectrum will force elected officials to get involved in the effort.

For the last year and a half, while Charter/Spectrum has been accused of dragging its feet on rural broadband rollouts across New York State and is now threatened with franchise revocation, the company had plenty of time to spare waiting out the International Brotherhood of Electrical Workers Local 3, who have been on strike to protest a pay-and-benefits-race-to-the-bottom in the New York City.

The strike has attracted attention and support from many high-profile downstate politicians, particularly New York City Mayor Bill de Blasio and Gov. Andrew Cuomo, but so far the dramatically enlarged Charter Communications, which acquired Time Warner Cable in 2016, seems comfortable waiting out the union and hoping to force workers to give up and accept to the cable company’s less generous basic benefits package.

The cost of the strike has hurt average middle class Spectrum employees far more than Charter’s top executives — particularly CEO Thomas Rutledge, who had no objections to accepting a take-home bonus and pay package worth $98 million after overseeing the company’s merger. In contrast, many striking workers have depleted their family’s savings and have sold their homes to relocate to less expensive apartments as they struggle to holdout against the nation’s second largest cable company. A few others were reportedly homeless. The union’s emergency fund has been depleted.

The David vs. Goliath battle has also put enormous strain on some affected families. Some have quit the company and looked for employment elsewhere, some others have returned to work and abandoned the strike, leaving holdouts hoping for a breakthrough.

Instead, Charter appears to have won a mysterious ally in the form of a Spectrum employee hired after the strike began in 2017. Initially the worker  had a supervisory role in the company with a salary to match, but late last year strangely accepted an apparent demotion to a level three technician, while retaining his very generous managerial salary. That worker, on his own, managed to navigate a complicated procedure and cumbersome process to file a petition to decertify the union with the National Labor Relations Board. If his effort is successful, IBEW Local 3 would lose the right to negotiate for their members, which is another way of saying “break the union.”

“The guy was brought in – he’s a front, pretty much,” Staten Island mom Sanela Djencic told LaborPress. “He was brought in to bust the union.”

Not so, claims Charter.

“Charter had no involvement in the filing of the decertification petition,” Charter/Spectrum spokesperson John Bonomo flatly told LaborPress in an email. “We don’t have any further comment.”

The NLRB ruled the employee’s petition to decertify the union was valid, finding insufficient evidence to prove the worker was actually serving in a managerial capacity at the time.

In a June 27 letter to employees, John Quigley, Charter’s regional vice president of New York City field operations, was considerably less neutral about the union’s involvement in Charter’s business.

“This ruling clears another hurdle in the decertification process that will allow employees to determine their future,” Quigley wrote. “It is a common tactic for unions to delay and/or block decertification efforts as long as possible […] instead of allowing the voice of employees to be heard. We believe that employees should have the right to vote in a secret ballot election to determine their future. It is the fair and right thing to do.”

Quigley

Quigley did not comment on Charter’s own role erecting hurdles to settle the strike action, something that would also allow employees to determine their future. In fact, strikers complain companies like Charter often prefer to stall and block a fair settlement in hopes the union and its members will run out of funds before it is forced to the table to sign a new agreement.

The company’s efforts to reject union demands come at the same time it is under pressure to deliver the merger-related cost savings it promised shareholders and Wall Street as an outcome of the multibillion dollar merger deal. Cutting back on employee benefits is one way to manage that. Bringing in independent contractors, traditionally paid less and offered fewer benefits, is another. But Charter has consistently claimed it is not trying to hurt its workforce.

Scabby the Rat

“Charter did not want this strike and made multiple attempts to resolve it,” a company spokesman said. “But the union has not been a true partner in negotiations. With Local 3 refusing to even discuss the terms in Charter’s offer, we moved forward last summer and implemented wage increases and other worker benefits. Today we are putting more money into our employees’ pockets, providing them with excellent benefits, and making substantial investments to shore up their retirement benefits that are in jeopardy.”

Charter’s declarations of what is ‘fair and right’ have irritated some members of New York City government.

“Charter Communications has betrayed the public trust and is not deserving of the right to do business with our City,” said Councilman I. Daneek Miller (D-St. Albans). “Charter has an established pattern of deceit against its own workers and consumers in the name of boosting its profit margin, and it must be held accountable for its deception. Well-paying middle class jobs, healthcare and the generational security that is best achieved through union membership are core principles of our city, for which the company has demonstrated no appreciation. If Charter continues to engage in bad faith negotiations with Local 3 or sponsors any attempts to break the union, it’ll be hard pressed to persuade the council to renew its franchise agreement.”

In June, Councilman Rory Lancman (D-Hillcrest) told The Tribune, “Charter Communications has spent the past 15 months doing everything in its power to break Local 3 and boost its own bottom line. Charter’s complete disregard for its own workers and unwillingness to negotiate in good faith are beyond shameful and will not be tolerated in New York City.”

New York’s Public Service Commission is drafting additional fines and sanctions on Charter Communications, as well as possibly stripping the company’s ability to continue providing cable service in New York State.

PSC Chair John Rhodes on Friday accused Charter, which offers service under the Spectrum brand, of “gaslighting its own customers,” with false claims it exceeded its obligations to New York State, while actually shortchanging customers and dragging its feet on promised service expansion.

“Not only has the company failed to meet its obligations to build out its cable system as required, it continues to make patently false and misleading claims to consumers that it has met those obligations without in any way acknowledging the findings of the Public Service Commission to the contrary,” said Chair Rhodes. “Our patience with Charter has come to an end and now we must move to take much stronger actions.”

The PSC is currently developing a number of enforcement actions, including additional penalties/fines, injunctive relief, sanctions, and/or revocation of Spectrum’s ability to continue offering cable service in New York State.

Rhodes’ complaints largely focus on Charter’s ongoing failure to commit to the State’s 2016 Merger Order which approved Charter’s acquisition of Time Warner Cable as long as Charter completed service improvements, rural broadband expansion, and reduced customer complaints. Rhodes is particularly upset that Charter has failed to meet its rural broadband obligations on a timely basis, leaving many of the 145,000 unserved and underserved homes and businesses promised Spectrum internet service waiting through lengthy delays.

That may come as a surprise to many Spectrum subscribers in New York, who have seen saturation advertising for several months from Charter promoting its statewide rural broadband expansion program and the company’s claims it is ahead of schedule.

The PSC previously ordered Charter to cease “its misleading campaign” and has referred the matter to the New York Attorney General’s office for possible civil action. As of this week, the advertisements continue to air.

Charter has denied the allegations made by the state’s regulators and notified the PSC it intends to seek judicial review and/or bring legal action against the state.

This isn’t going to be your parent’s HBO much longer.

In a recent town hall attended by 150 employees, AT&T laid out its new vision for the premium network it recently acquired. one almost similar at times to the business plan of a drug pusher.

“We need hours a day,” said John Stankey, a recent transplant from AT&T’s executive suites now tapped to run WarnerMedia — AT&T’s new name for what used to be Time Warner (Entertainment) and owner of HBO. Stankey was complaining that HBO was out of touch with the times, attracting too few viewers to its multiplex of premium channels only a handful of times a week, if that. In a world shared by Netflix, that was not nearly good enough.

HBO, which began life as Home Box Office in November, 1972 is by far America’s oldest cable television channel. Originally a venue for high profile, unedited, commercial-free movies, along with sports and specials, HBO grew into a well-respected producer of high budget (often millions of dollars per episode), cutting-edge original movies and series, showcased to loyal audiences on Sunday nights for years. Series like The Wire, The Sopranos, Sex in the City, Oz and Game of Thrones are well-known across the country, but fewer than half of Americans subscribe to HBO to watch them. HBO has also been the critics’ choice for original content, showering awards on the network in unprecedented numbers for almost 20 years.

Now that AT&T is in charge, that is all about to change, as executives prepare to shift HBO away from “quality over quantity” towards “quality and quantity.” Stankey also made it clear the changes are first and foremost about making money — a lot of it earned by keeping subscribers on HBO property so their viewing habits can be studied and sold.

Stankey

“It’s going to be a tough year,” Stankey warned. “It’s going to be a lot of work to alter and change direction a little bit.”

“It’s not hours a week, and it’s not hours a month,” Stankey said of how long he expects HBO subscribers to spend time watching the service. “It’s hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes. I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”

That will be a major shift for a network overseen top to bottom since 1992 by Richard Plepler, HBO’s chief executive. Plepler expanded on HBO original movies by launching expensive scripted series in the late 1990s that stood out by escaping broadcast television network censorship. But Plepler was very selective about the number of shows on HBO’s schedule, with some series taking years to develop. Under Stankey’s leadership, HBO will now be expected to dramatically expand original content, much like Netflix has done to keep viewers coming back for more.

“As I step back and think about what’s unique about the brand and where it needs to go, there’s got to be a little more depth to it, there’s got to be more frequent engagement,” Stankey said, adding HBO’s brand has to broaden its appeal to new audiences.

That will require a big boost to HBO’s budget. The pay movie channel is already extremely profitable, making almost $6 billion in profits over the last three years. It invested $2 billion in programming development, much less than the $8 billion Netflix is investing in less costly, but more prolific programming. HBO’s business plan depends heavily on American cable subscribers paying $10-15 a month for the network. It also earns money selling its original shows to television outlets in other countries. Its high monthly cost has always limited subscriber numbers, especially these days with cord-cutting and bill shaving. Premium movie channels are often the first networks to be dropped in return for a lower bill.

Plepler

To monetize its subscriber base, HBO either has to cut the cost of the network, transform it into must-have television, or a combination of both. Stankey is unhappy HBO has wavered around 40 million subscribers (out of 142 million American potential households) for years. He told audiences the network has to find ways to move the network beyond its perpetual 35-40% penetration “to have this become a much more common product.”

There was a clear sense of tension between Plepler, who is part of the New York City entertainment scene, and Stankey, a business-focused Texan with decades of experience in the Bell System — later AT&T. Plepler’s deference to Stankey’s new vision seemed uncomfortable at times, as Stankey made it clear who was now in charge:

Stankey: “We’ve got to make money at the end of the day, right?”
Plepler: “We do that.”
Stankey: “Yes, you do, just not enough.”

Plepler’s clearly defined tenure and vision at HBO had not wavered much since taking over in the early 1990s. But that vision was nervously discarded almost immediately as Stankey looked on.

“I’ve said, ‘More is not better, only better is better,’ because that was the hand we had,” Plepler explained. “I’ve switched that, now that you’re here, to: ‘More isn’t better, only better is better — but we need a lot more to be even better.’”

As a result, HBO, which used to be the darling of critics and well-to-do viewers in big cities on the east and west coast is getting a radical makeover. Onlookers can expect a much more aggressive marketing effort and free samples of the service to attract and hold new customers. It will have to keep its pricing closer to the competition, particularly as many consumers already subscribe to 1-2 different streaming services. Then it will have to give people a reason to subscribe to just one more service.

Whatever pleasantries were exchanged between Charter Communications and the New York Department of Public Service (Public Service Commission) earlier this year are now gone as the relationship between the cable company and state officials continues to deteriorate.

The first shot across the bow this summer came in Charter’s June 28th letter in response to a demand by the state to unconditionally accept the state’s terms of its 2016 Merger Order granting the acquisition of Time Warner Cable by Charter Communications. Except the cable company did not actually agree unconditionally to those terms. As part of a dispute over Charter’s fulfillment of its responsibilities in the Merger Order regarding rural broadband expansion, one section seemed to predict future litigation:

“While Charter’s acceptance of these commitments is unconditional, this acceptance remains subject to applicable law. Charter does not waive its positions as to the meaning or proper interpretation of its commitments (including Charter’s position that the negotiating history of Appendix A must guide such interpretation), or any of its legal rights including its right to seek review of the Commission’s June 14, 2018 Orders and the Commission’s interpretation and application of the January 8, 2016 Order.”

On July 3rd, Charter’s attorneys sent another letter to the telecommunications regulator doubling down on this language:

“Charter fundamentally disagrees that the Commission’s June 14th Order accurately reflects the agreement that was reached with Charter with respect to the Merger Order. The company intends to appeal the Order….”

That notification was included in a letter requesting an extension of the deadline to file a revised rural buildout plan to replace disqualified addresses with other New York addresses where broadband service is not currently available. Charter warned it would pursue “administrative and legal appeals” and did not want to take the time update its buildout lists until those challenges (and appeals) are exhausted. The company’s lawyers made sure to reserve all of Charter’s rights in an even lengthier footnoted disclaimer:

“Certain subjects discussed in this filing pertain to non jurisdictional products and services. Discussion of nonjurisdictional products and services is not intended as a waiver or concession of the Commission’s jurisdiction beyond the scope of Charter’s regulated telecommunications and cable video services. Charter respectfully reserves all rights relating to the inclusion of or reference to such information, including without limitation Charter’s legal and equitable rights relating to jurisdiction, compliance, filing, disclosure, relevancy, due process, review, and appeal. The inclusion of or reference to non jurisdictional information or to the ordering clauses or other requirements of the Order as obligations or commitments to provide non jurisdictional services shall not be construed as a waiver of any rights or objections otherwise available to Charter in this or any other proceeding, and may not be deemed an admission of relevancy, materiality, or admissibility generally. The requests discussed herein should not be construed in any way as a waiver by Charter of any of its legal rights, including (without limitation) Charter’s right to seek review of the June 14th Order or otherwise seek review of the Commission’s interpretation and application of its January 8, 2016 Merger Order.”

The key takeaway from this legal word salad is “non jurisdictional products and services” — code language from Charter to the state suggesting New York regulators have no legal authority to stand on imposing rules, regulations, and requirements on deregulated services like broadband. Charter’s lawyers defended the company against accusations it failed to meet the agreed-on schedule for rural broadband buildout to 145,000 unserved/underserved New Yorkers using similar language. Charter only began suggesting the state’s broadband expansion plan violated federal law after the state declared the company was out of compliance and fined.

Any legal action by Charter will likely rest on claims the federal government deregulated much of the cable business, including broadband service. Therefore, the state lacks enforcement power to compel Charter to offer broadband service to any unserved area, much less on a timetable. Remember, however, Charter was only too happy to agree to the terms of the merger agreement, with all its terms and conditions, to get the merger finished, without any complaints. Now it seems to have second thoughts.

“Charter finds that the task of revising the detailed Buildout Plan and the other requirements is far too large an undertaking to be accomplished with the necessary care and diligence required within the 21-day timeframe mandated in the Commission’s June 14th Order,” the cable company’s lawyers wrote, asking for an extension of the deadline.

Today, the Department issued a terse response to Charter’s legal team, authored by Kathleen Burgess, secretary of the Public Service Commission:

“Your request for a stay of the revisions of Charter’s Buildout Plan and the other provisions required by the Commission’s Order is not a matter for the Secretary. Your request for a 60-day extension is excessive and not adequately justified. Therefore, your request for an extension is denied.”

Two things seem clear: New York will continue to fine Charter for further missed deadlines, and it seems likely this matter is headed for court.