Rutledge and Trump 230Charter CEO Tom Rutledge was paid US$98 million in 2016. For that kind of money, most of us would lie, cheat, or steal. Charter has just agreed a fine of US$170 million for consumer fraud. Working pro bono, Columbia Professor Tim Wu made crucial contributions to the case. The court decisions made clear telcos and ISPs must obey ordinary laws on fraud and false advertising. The national FCC does not pre-empt consumer law.

Marcelo Claure of Sprint is on track to make $61 million from Sprint. They have just been fined $330M for cheating New York State on taxes. The FCC is investigating Verizon and T-Mobile for false claims on coverage, which affect US$billions of subsidies.

Charter/Time Warner ripped off New York consumers for hundreds of millions, as I reported last February.

They charged for 200 megabit service then gave customers a box that could only do half that. They actually rigged the FCC AskSAM tests to hide what they had done. Several inside the company pointed management to the problem but it was ignored. The evidence published by New York State was damning. 

Charter claimed they were exempt from U.S. State law on consumer fraud and that only the federal FCC could challenge them. Which effectively meant no one would enforce the law. It took 20 lawyers to match the near unlimited budget of Charter, a US$75 billion company. The FCC doesn't have the resources to do something like that for fraud in New York, less than 5% of the U.S.

Rutledge is a very effective executive who is doing everything he can to goose the stock the next few months. He's 64. If the company is sold before he retires next year, his windfall would be huge and probably related to the stock price. That gives him incentive to get legal problems out of the way. He's been buying back stock and cutting investment.  Wall Street analyst Richard Greenfield is fed up. "Charter’s Board of Directors must act and bring in new senior leadership to replace a management team that appears disconnected from reality."

Verizon and AT&T/SBC continually broke the law to disable the competition at the turn of the century. In 2000, there were 6 carriers rapidly building DSL networks across the United States. Four years later, three were bankrupt and the fourth crippled. Getting rid of competitors was worth far more to the Bells than any fine that wasn't measured in the billions. SBC/AT&T and Verizon abandoned plans to compete with each other, after earmarking billions to go nationwide.  

Both were fined time and again, but continued to abuse competition. Everyone knew they were just ignoring the fines; US$100 billion companies can treat a $10 million fine as an ordinary cost of doing business. 

The EU understands why larger fines are necessary. Google could get a fine of 4% of annual earnings for breaching competition law. (US$5,000,000,000.) Nigeria fined MTN a billion for refusing national security registration. 

Tom Rutledge should not get a bonus this year, but he will.

 

The FCC on Verizon and T-Mobile and the important precedent-setting New York result.

 

FCC LAUNCHES INVESTIGATION INTO POTENTIAL VIOLATIONS OF MOBILITY FUND PHASE II MAPPING RULES WASHINGTON,

December 7, 2018—Federal Communications Commission Chairman Ajit Pai announced that the agency has launched an investigation into whether one or more major carriers violated the Mobility Fund Phase II (MF-II) reverse auction’s mapping rules and submitted incorrect coverage maps. The investigation comes after a preliminary review of the 20,809,503 speed tests filed with the agency in connection with the MF-II challenge process; the window for initial challenges closed on November 26. The Commission has suspended the next step of the challenge process—the opening of a response window—pending the conclusion of this investigation. “My top priority is bridging the digital divide and ensuring that Americans have access to digital opportunity regardless of where they live, and the FCC’s Mobility Fund Phase II program can play a key role in extending high-speed Internet access to rural areas across America,” said Chairman Pai. “In order to reach those areas, it’s critical that we know where access is and where it is not. A preliminary review of speed test data submitted through the challenge process suggested significant violations of the Commission’s rules. That’s why I’ve ordered an investigation into these matters. We must ensure that the data is accurate before we can proceed.” Mobility Fund II would allocate up to $4.53 billion over the next decade to advance high-speed mobile broadband service in rural areas that would not be served without government support. To formulate the eligibility map, mobile providers were required to submit current, standardized coverage data, which was used in conjunction with data from the Universal Service Administrative Company (USAC). The Commission then initiated a challenge process, where interested parties had an opportunity to challenge initial determinations that an area was ineligible for MF-II support. After being extended to accommodate additional input, the challenge process for the map closed on November 26, with 20,809,503 speed tests filed across 37 states.

A.G. Underwood Announces Record $174.2 Million Consumer Fraud Settlement With Charter For Defrauding Internet Subscribers

Settlement Includes Largest-Ever Consumer Payout by Internet Service Provider in U.S. History

As Part of Settlement, Charter Required to Implement Major Precedent-Setting Marketing and Business Practice Reforms; Charter has also Made Substantial Network Enhancements Following AG Investigation

NY Consumers to Receive $62.5 Million in Direct Refunds, Plus Over $100 Million in Premium Channels and Streaming Services  

NEW YORK – Attorney General Barbara D. Underwood announced a record $174.2 million consumer fraud settlement with Charter Communications, Inc. and Spectrum Management Holding Company (together “Charter”) for defrauding internet subscribers. The $62.5 million in direct refunds to consumers alone are believed to represent the largest-ever payout to consumers by an internet service provider (ISP) in U.S. history.

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.”

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 over $100 million, at no charge for approximately 2.2 million active subscribers.

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.

Attorney General’s Lawsuit 

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 WiFi connection – even though, in real-world use, internet speeds are routinely slower via WiFi 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. 

Record Settlement Agreement 

As part of today’s settlement, Charter agrees to a financial settlement of $62.5 million in refunds plus streaming services and premium channels to subscribers with a retail value of over $100 million. The direct customer refunds alone are believed to constitute the largest consumer relief payout ever paid by an ISP in U.S. history. The direct restitution serves to compensate subscribers who Charter equipped with outdated modems and routers and with premium speed plans that consistently failed to deliver the advertised speeds. The streaming benefits serve to compensate subscribers for Charter’s historic failures to faithfully deliver third-party internet content that it had advertised.

Charter is also required to implement a series of precedent-setting marketing and business reforms, establishing a new model for the broadband industry.

The key financial terms of the agreement and the marketing and business reforms are set out below.

Financial Terms

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.

Marketing and Business Reforms

The settlement also includes the follow key injunctive terms:

1) Affirmative Advertising Obligations: Charter is required to (a) describe internet speeds as “wired”; (b) disclose that wireless speeds may vary; and (c) disclose the factors that might lead actual experience to vary, including based on the number of users and device limitations. This applies to all advertising and marketing of speeds, including television and other commercials, website and website communications, print ads, bill inserts, emails, and more.

2) Substantiating Internet Speeds: Charter must substantiate internet speeds using an industry-accepted testing methodology, and discontinue any speed plan that cannot be substantiated.

3) Advertising prohibitions: Charter is prohibited from making unsubstantiated claims about (a) the speed required for particular internet activities like streaming; (b) the reliability of the internet service (e.g., no buffering, no slowdowns); or (c) the availability of the promised speed over WiFi.

Charter is also prohibited from describing internet speeds as “consistent” without fully satisfying the FCC Consistent Speed Metric and must make commercially reasonable efforts to deliver access to all online content and services featured in its advertisements. 

4) Equipment Reforms: Charter is required to: (a) provide subscribers with equipment capable of delivering the advertised speed under typical network conditions when they commence service; (b) promptly offer to ship or install free replacements to all subscribers with inadequate equipment via at least three different contact methods; and (c) implement rules to prevent subscribers from initiating or upgrading service without proper equipment for the chosen speed tiers. 

5) Sales and Customer Service Training: 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 WiFi.

The case was handled by Assistant Attorneys General Mihir Kshirsagar, Marc Montgomery, and Johanna Skrzypczyk of the Bureau of Internet & Technology, Senior Advisor and Special Counsel Simon Brandler of the Executive Division, Assistant Attorneys General Kate Matuschak and Joseph Mueller of the Consumer Frauds Bureau, and Assistant Attorney General Jeremy Kasha of the Antitrust Bureau, with supervision from Bureau of Internet & Technology Chief Kim Berger, Executive Deputy Attorney General for Economic Justice Manisha M. Sheth, Chief Deputy Attorney General Janet Sabel, and Chief of Staff and Deputy Attorney General Brian Mahanna.  The appeal was handled by Assistant Solicitor General Ester Murdukhayeva, under the supervision of Deputy Solicitor General Steven Wu.

Director Jonathan Werberg, Deputy Director Megan Thorsfeldt, and Data Scientist Gautam Sisodia of the Research and Analytics Department, paralegal Richard Borgia of the Bureau of Internet & Technology, IT Specialists Paige Podolny and John Roach, and Chief Economist Peter Malaspina provided invaluable technical, analytic, and administrative assistance.

Also making significant contributions to the case were Special Counsels Laura Wood and David Nachman of the Executive Division, Assistant Attorney General Zach Beisanz of the Antitrust Bureau, Consumer Frauds Chief Jane Azia, and Tim Wu of Columbia Law School, who served the agency on a pro bono basis as a senior enforcement counsel and consultant.

NY Governor Lashes Out at Charter

 

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It’s been more than 18 months since a group of Charter Spectrum NYC-based workers and members of IBEW Local 3 went on strike, and it doesn’t feel like a resolution is near.

Both sides have been outspoken, with Charter posting a blog Wednesday that it described as the “truth” about its attempts to end the talks. The union resumed picketing at various NYC locations this week and hosted a rally Wednesday on East 23rd Street alongside NY Gov Andrew Cuomo. Talks between the two sides appear to have broken down last week.

“What Charter Spectrum has done is a gross injustice… How dare you abuse the hard-working men and women that built that company and put the money in your pocket,” Cuomo shouted from the podium Wednesday. He also touched on NY PSC’s decision to rescind its order approving Time Warner Cable’s purchase. “Charter lied to the people of NY… They got a franchise agreement from the state and they promised to do certain things. They promised to keep the customer friendly workforce that was trained and they turned around and kicked you to the street. They promised to serve underserved households. And the state of NY… wants to fine them $20mln for violating that agreement,” Cuomo said as the crowd gathered chanted “kick them out.”

Charter was recently granted another extension to present a plan to exit the state, with the MSO and PSC staff revealing they’ve established a framework for a possible settlement agreement. The operator disagrees with the state over whether it has met buildout requirements and other conditions of the Time Warner Cable acquisition.

The labor dispute caused NYC mayor Bill de Blasio to cancel his regular appearance on Charter-owned NY1 this week and some guests scheduled to appear on its “Inside City Hall” Tuesday night also declined to cross the picket line Tuesday. Charter maintains that it has made “substantial” concessions, including continuing to fund the union’s medical and benefit plan and allowing many strikers to come back to work.

“While Charter still believes that the [union’s medical and benefits plan] is not in the best interests of our employees and diverts money from wages to support less ideal benefits than the wages and benefits Charter provides, we made this concession in an effort to end the strike,” read Charter’s blog post. “In addition, Charter also agreed to bring back on an expedited basis and make eligible for the [benefit plan] an agreed to number of employees. Other employees would also be able to return over time through priority reinstatement.”

Charter added that during this dispute it has settled collective bargaining agreements with unions representing employees in Hawaii, with the union in the Aloha State accepting terms similar to those rejected by Local 3. The dispute’s impact has stretched beyond Charter, with the city’s Department of Information and IT & Telecommunications informing franchise-holders in the city this week that it will consider the state of labor relations going forward when assessing whether to grant or renew a franchise agreement.

Asked about the change in regards to the franchise process, a Charter spokesperson said “the quality of service Charter is delivering to New York City customers is at an all-time high. Charter continues to meet its franchise obligations and we will address franchise renewal at the appropriate time.”