Schneiderman on lawsuit: “Spectrum-Time Warner Cable has been ripping you off”

NEW YORK CITY, N.Y. — Stamford, Connecticut–based Charter Communications Inc. (NASDAQ: CHTR) and its subsidiary Spectrum Management Holdings, LLC are facing a lawsuit, accused of “promising Internet service that they knew they could not deliver.”

Spectrum Management Holdings is formerly known as Time Warner Cable, Inc., and together with Charter are known as Spectrum-TWC.

New York State Attorney General Eric Schneiderman on Wednesday morning announced the lawsuit, saying Charter and its subsidiary conducted a “deliberate scheme to defraud and mislead New Yorkers.”

The complaint alleges that since January 2012 Spectrum-TWC’s marketing promised subscribers who signed up for its Internet service that they would get a “fast, reliable connection” to the Internet from anywhere in their home.

But Schneiderman’s office conducted a 16-month investigation that found Spectrum-TWC subscribers were getting “dramatically short-changed” on both speed and reliability.

The probe included reviewing internal corporate communications and hundreds of thousands of subscriber speed tests, Schneiderman’s office said.

“The allegations in today’s lawsuit confirm what millions of New Yorkers have long suspected — Spectrum-Time Warner Cable has been ripping you off,” Schneiderman said in a news release. “Today’s action seeks to bring much-needed relief to the millions of New Yorkers we allege have been getting cheated by Spectrum-Time Warner Cable for far too long. Even now, Spectrum-Time Warner Cable continues to offer Internet speeds that we found they cannot reliably deliver.”

Charter Communications on Wednesday issued the following statement in response to the lawsuit.

“We are disappointed that the [New York] Attorney General chose to file this lawsuit regarding Time Warner Cable’s broadband speed advertisements that occurred prior to Charter’s merger. Charter made significant commitments to [New York] State as part of our merger with Time Warner Cable in areas of network investment, broadband deployment and offerings, customer service and jobs. In addition, Charter was among the highest rated broadband providers in the 2016 FCC Broadband Report. Charter has already made substantial investments in the interest of upgrading the Time Warner Cable systems and delivering the best possible experience to customers. We will continue to invest in our business and deliver the highest quality services to our customers while we defend against these allegations involving Time Warner Cable practices.”

FCC is short for Federal Communications Commission, the federal agency that regulates interstate and international communications by radio, television, wire, satellite, and cable in all 50 states, the District of Columbia, and U.S. territories.

Investigation background

The suit alleges that subscribers’ wired Internet speeds for the premium plan (100, 200, and 300 megabits per second) were up to 70 percent slower than promised; WiFi speeds were even slower, with some subscribers getting speeds that were more than 80 percent slower than what they had paid for.

As alleged in the complaint, Spectrum-TWC charged New Yorkers as much as $109.99 per month for premium plans that “could not achieve speeds promised in their slower plans,” Schneiderman’s office said.

The attorney general’s investigation also found that Spectrum-TWC executives knew that the company’s hardware and network were “incapable” of producing the speeds promised to subscribers, but “nevertheless continued to make false representations about speed and reliability.”

The investigation further revealed that while Spectrum-TWC earned billions of dollars in profits from selling its high-margin Internet service to millions of New York subscribers, it “repeatedly declined to make capital investments necessary to improve its network or provide subscribers with the necessary hardware.”

As the complaint alleges, Spectrum-TWC “continues to underserve” their subscribers by failing to make the capital investments necessary to live up to their promised speeds. These investments would include “substantially upgrading” Spectrum-TWC’s network capability and replacing large numbers of deficient modems and wireless routers that subscribers currently pay Spectrum-TWC up to $10 per month to rent.

Spectrum-Time Warner Cable currently has about 2.5 million subscribers across New York State.

Contact Reinhardt at ereinhardt@cnybj.com