New York State’s Attorney General alleges a years-long scheme to defraud consumers.
Time Warner Cable, now called Spectrum, is not exactly a paragon of customer service.
That much is well known to the millions of long-suffering consumers who have endured years of sky-high prices, chronic service outages, bait-and-switch plan offerings, lower-than-advertised internet speeds and other indignities at the hands of their local cable company.
Now, thanks to New York State Attorney General Eric Schneiderman, consumers may finally get an explanation, and potentially, restitution, for years of allegedly fraudulent conduct perpetrated by the cable giant.
In a blockbuster lawsuit filed Wednesday in New York State Supreme Court, Schneiderman accused Time Warner Cable, which last year was absorbed by telecom titan Charter Communications, of conducting a years-long "systematic scheme" to defraud and mislead consumers by promising internet service that the company knew it could not deliver.
The complaint alleges that Time Warner Cable executives were well aware that the company could not fulfill advertised claims about a variety of offerings, including high-speed internet service, in-home wireless connectivity, and reliable access to services like Netflix and online gaming platforms.
"Time Warner Cable has been ripping you off."
"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 statement. "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."
The scope of Time Warner Cable's alleged fraud is not surprising—but it is shocking.
A 16-month-long investigation conducted by Schneiderman's office found that Time Warner Cable executives allegedly knew that the hardware devices the company leased to its customers, including "deficient" modems and wireless routers, were incapable of delivering the promised speeds—and yet the company promoted the services anyway.
For example, the investigation found that Time Warner Cable leased wireless routers to over 250,000 subscribers who had been promised speeds of 200 Mbps and 300 Mbps, despite knowing that these routers were incapable of delivering internet speeds faster than 100 Mbps.
"Even now, Spectrum-Time Warner Cable continues to offer internet speeds that we found they cannot reliably deliver," said Schneiderman.
The lawsuit seeks civil penalties, restitution for New York consumers, and "injunctive and equitable relief appropriate to redress" the company's fraudulent conduct.
"It's good that lawmakers are holding these companies to their promises about broadband speeds and quality of service," said Tim Karr, senior campaign director at DC-based public interest group Free Press. "It's time we knew whether these companies are actually delivering in exchange for the high costs people pay for internet access. Hopefully the New York AG will force Spectrum-Time Warner Cable to be more transparent in that regard."
The lawsuit alleges that in an effort to cut costs, Time Warner Cable failed to make necessary network and infrastructure upgrades in order to deliver the advertised service. The cable giant even went so far as to allegedly "deceive" the Federal Communications Commission by "manipulating" the agency's speed tests.
A spokesperson for the FCC did not immediately return a request for comment on the lawsuit.
The lawsuit further alleges that Time Warner Cable took advantage of its effective monopoly power in many parts of the state in order to perpetuate the alleged fraud.
"Capitalizing on the fact that its subscribers had few, if any, other choices for an ISP, Spectrum-TWC placed profits ahead of the interests of its subscribers, and collected billions of dollars in fees from New York subscribers for providing internet service," according to the lawsuit.
John Bergmayer, Senior Counsel at Public Knowledge, said that extreme market concentration in the cable and broadband industry provides a fertile breeding ground for corporate misbehaviour. "In uncompetitive markets like consumer broadband, it's too easy for companies to offer customers a substandard service, year after year, including tricking them into upgrades that are never delivered," Bergmayer said in a statement.
Last year, Charter bought Time Warner Cable for $80 billion, in a deal that created the second largest cable company in the country after Comcast. (Charter has since rebranded Time Warner Cable as "Spectrum.") As part of the deal, former Time Warner Cable CEO Rob Marcus received a golden parachute of approximately $80 million—after serving as CEO for only six weeks.
In a statement emailed to Motherboard, Charter said that it is "disappointed that the NY Attorney General chose to file this lawsuit regarding Time Warner Cable's broadband speed advertisements that occurred prior to Charter's merger."
"Charter has already made substantial investments in the interest of upgrading the Time Warner Cable systems and delivering the best possible experience to customers," the company added. "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."