Charter/Spectrum to pay record $174.2M fine for consumer fraud

Charter Communications Inc. and Spectrum Management Holding Co. will pay $174.2 million for denying its customers the fast internet service it had promised.

As a result of a deal negotiated with New York Attorney General Barbara D. Underwood, the internet service provider (ISP) will pay $62.5 million to about 700,000 active subscribers in the state, 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.

The money serves to compensate subscribers who Charter equipped with outdated modems and routers and with premium speed plans that consistently failed to deliver the advertised speeds.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,” the Attorney General”™s Office said.

The payout of direct refunds to consumers alone is believed to represent the largest-ever payout to consumers by an ISP in U.S. history. Charter, the state”™s largest ISP, operated initially as Time Warner Cable and later under Charter”™s Spectrum brand name.

As part of the settlement announced Dec. 18, Charter is required to implement a series of marketing and business reforms, including “the requirement to describe internet speeds as ”˜wired”™ and to substantiate them through regular speed testing.”

Underwood said these reforms set the stage for major marketing and business reforms across the broadband industry.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” she said. “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 financial terms of the settlement are:

Consumer relief (direct refunds): $62.5 million

• Charter will award a $75 refund to each of over 700,000 active subscribers based on: leasing an inadequate modem; leasing an inadequate WiFi router; or subscribing to a Time Warner Cable legacy speed plan of 100 Mbps or higher.
• An additional $75 refund will be awarded to each of over approximately 150,000 subscribers who had an inadequate modem for 24 months or more.
• The company will notify subscribers of their eligibility for refunds and disburse them within 120 days. The Attorney General”™s Office noted that the company has already disbursed more than $6 million in refunds for inadequate modems to date, separate from today”™s settlement. The subscribers are ineligible for a further payment.

Consumer relief via video and streaming benefits: $100 million

• Charter will offer free streaming services to about 2.2 million active internet subscribers.
• All subscribers currently receiving internet and cable television from the company will be offered a choice of either three free months of HBO or six free months of Showtime.
• 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.