Charter Communication agrees to record settlement for fraud in its internet services

Charter Communications and Spectrum Management Holding Co. have agreed to pay $174.2 million for defrauding internet subscribers. About $62.5 million of the funds will go to refunds for consumers, making it, regulators say, the largest-ever payout to consumers by an internet service provider, or ISP, in U.S. history.

Charter Communications merged with Time Warner in 2016 and has rebranded the internet, phone, and cable service as Spectrum Cable. Providing services to more than 26 million customers in 41 states, it’s the second-largest cable operator in the United States by subscribers, after Comcast.

The Tuesday agreement settles a fraud allegation that New York state’s largest ISP denied customers the reliable and fast internet service it had promised.

“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 Barbara 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.”

Under the settlement, more than 700,000 subscribers will each receive between $75 and $150. In addition, about 2.2 million subscribers will receive streaming services and premium channels, valued at more than $100 million, at no charge.

Charter also is required to carry out marketing and business reforms, including describing internet speeds as “wired” and to verify them through regular speed testing.

Attorney general’s lawsuit 

In 2017, the New York Attorney General’s Office filed a lawsuit, alleging that Charter had failed to deliver the internet speed or reliability it had promised subscribers. That includes:

• Leasing deficient modems and wireless routers to subscribers – equipment that didn’t deliver the internet speeds they’d paid for.
• Aggressively marketing, and charging more for, 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 internet content while engaging in hardball tactics with Netflix and other third-party content providers that, at times, ensured that subscribers would experience frozen screens, extended buffering, and reduced picture quality.
• Representing internet speeds as equally available, whether connecting over a wired or WiFi connection – even though internet speeds are routinely slower via WiFi connection. 

Charter sought to move the case to federal court, but the Attorney General’s Office won a decision that returned it to state court.

Charter tried to have the case dismissed but lost its argument in an appeals court.

Charter will notify subscribers of their eligibility for refunds and issue them within 120 days.  

Charter has already paid more than $6 million in refunds for inadequate modems, separate from Tuesday’s settlement. Because these subscribers received compensation, they aren’t eligible for another payment.