In the largest-ever consumer payout by an internet service provider, Charter Communications, Inc. and Spectrum Management Holding Company (together “charter”) agreed to pay a record $174.2 million in consumer fraud settlement for defrauding internet subscribers.
According to the New York State Attorney General’s Office, the settlement includes direct restitution of $62.5 million for over 700,000 active subscribers, who will each receive between $75 and $150, as well as streaming services and premium channels, with a retail value of more than $100 million, at no charge for approximately 2.2 million active subscribers.
The landmark agreement settles a consumer fraud action alleging that the state’s largest ISP, which operated initially as Time Warner Cable and later under Charter’s Spectrum brand name, denied customers the reliable and fast internet service it had promised. This is the first settlement to result from the Attorney General’s major investigation of broadband internet service in New York.
“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” said Attorney General 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.”
Additionally, under the settlement, Charter is required to implement a series of precedent-setting marketing and business reforms, including the requirement to describe internet speeds as “wired” and to substantiate them through regular speed testing. These reforms set the stage for major marketing and business reforms across the broadband industry. Following the Attorney General’s investigation, Charter has also made substantial network enhancements to improve its internet service in New York.
In a statement, Charter said:
We are pleased to have reached a settlement with the Attorney General on the issue of certain Time Warner Cable advertising practices in New York prior to our merger, and to have put this litigation behind us. Charter has made, and continues to make, substantial investments enhancing internet service across the state of New York since our 2016 merger, as acknowledged by the Attorney General in this settlement. We look forward to continue providing the best TV, Internet, Voice and Mobile products to our customers, and to bringing broadband to more homes and businesses across the state.
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.
1) Consumer Relief (Direct Refunds): $62.5 million
a. Charter to award a $75 refund to each of over 700,000 active subscribers based on:
(1) Leasing an inadequate modem;
(2) Leasing an inadequate WiFi router; OR
(3) Subscribing to a Time Warner Cable legacy speed plan of 100 Mbps or higher.
b. Charter to award an additional $75 refund to each of over approximately 150,000 subscribers who had an inadequate modem for 24 months or more.
Charter will notify subscribers of their eligibility for refunds and disburse them within 120 days.
Note: Charter has already disbursed over $6 million in refunds for inadequate modems to date, separate from today’s settlement. Because these subscribers received full compensation, they are ineligible for a further payment.
2) Consumer Relief (In-Kind Video and Streaming Benefit): Worth over $100 million
In addition to the direct refunds detailed above, Charter will offer free streaming services to approximately 2.2 million active internet subscribers:
a. Charter will offer all subscribers currently receiving internet and cable television from the company a choice of either three free months of HBO or six free months of Showtime. (Note: This benefit is available to subscribers who do not already subscribe to both of the offered networks through Charter.)
b. All other active Charter internet subscribers 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.
3) Substantial Network Investments
Following the Attorney General’s investigation, Charter made significant investments to address the problems identified in the complaint and improve internet service in New York. This includes network enhancements, modem replacements, and upgraded WiFi routers.