Why New York Kicked the Country's Second-Biggest Cable Company Out of the State

New York State regulators say they are fed up by Charter Spectrum Cable's empty promises, poor service, and misleading claims.

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Jul 31 2018, 12:00pm

Image: Shutterstock

New York State voted to kick Charter Communications (which operates as Spectrum) out of the state for repeatedly failing to meet the modest conditions affixed to its merger with Time Warner Cable and Bright House Networks.

Charter Communications has long been the poster child for broadband industry dysfunction, with some of the worst customer satisfaction ratings of any company in any industry in America. But customers say things deteriorated after the 2016 merger, with users in many areas seeing even worse service and price hikes ranging from 20 percent to as much as 35 percent in the wake of the deal.

Company CEO Thomas Rutledge, the highest paid executive in America in 2016, publicly stated that customers paying a lower rate were simply “mispriced” and that the cable giant was moving them “in the right direction.”

State regulators also say that Charter not only failed to adhere to broadband expansion conditions affixed to the deal, but it routinely misled regulators into whether those tasks had been completed. $3 million in previous fines and numerous warnings didn’t appear to work, so the state took the unprecedented step of threatening to kick the cable giant out.

In a unanimous 4-0 vote last Friday, the New York State Public Service Commission told Charter it has 60 days to cement the company’s exit plan from the state, and to sell the assets previously belonging to Time Warner Cable it acquired in the deal.

“Charter's repeated failures to serve New Yorkers and honor its commitments are well documented and are only getting worse,” the PSC said in a statement. “Charter’s non-compliance and brazenly disrespectful behavior toward New York State and its customers necessitates the actions taken today seeking court-ordered penalties for its failures, and revoking the Charter merger approval.”

As part of the merger agreement with the state, Charter had promised to expand broadband service to an additional 145,000 homes in New York State. But state regulators previously stated the company not only failed to do so, it routinely attempted to mislead regulators about how much of the work had actually been completed, and where.

Charter is also the subject of an ongoing lawsuit by New York’s Attorney General accusing it of advertising broadband speeds the company couldn’t provide, and attempting to manipulate an FCC system (consisting of custom-firmware-embedded routers in customer homes) designed to help track whether the ISP actually delivered advertised speeds to consumers.

Charter has been trying to wiggle out of that lawsuit by claiming the FCC’s net-neutrality repeal prohibits states from stepping in to protect consumers, something the courts have yet to agree with.

For its part, Charter was quick to try and claim that the state’s latest action was simply an election-year stunt by New York Governor Andrew Cuomo.

“In the weeks leading up to an election, rhetoric often becomes politically charged,” the company said in a statement provided to Motherboard. “But the fact is that Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC. Our 11,000 diverse and locally based workers, who serve millions of customers in the state every day, remain focused on delivering faster and better broadband to more New Yorkers, as we promised.”

Charter says the company will challenge the PSC’s decision, meaning that little should change for impacted customers in the foreseeable future as the legal fight shakes out. It remains entirely possible that Charter agrees to settle with the state and deliver the broadband expansion originally promised.

“While the most likely outcome is for Charter to settle, it is not impossible for New York to decide that Charter is simply not trustworthy to fulfill its obligations, and demand they sell off their systems,” said Harold Feld, senior vice president of consumer-advocacy group Public Knowledge.

What a post-Charter landscape would look like in New York State isn’t clear. The company’s assets could be offloaded to Comcast, whose reputation as an apathetic monopoly isn’t much better. Charter union employees have also proposed shifting the assets to a worker-owned cooperative that benefits everyone in the state.

New York State’s move comes in part as a state-level response to federal apathy regarding broadband-consumer issues, most recently exemplified by the extremely unpopular dismantling of net-neutrality protections at the FCC.

Historically, state regulators and lawmakers often act as a rubber stamp for entrenched ISP interests, a major reason why little is done to actually improve broadband competition in many states. In fact, more than 21 states have passed ISP-written laws preventing towns and cities from building and running their own broadband networks as an alternative to terrible service.

In that context, consumer groups argue that New York State’s decision to do its job shouldn’t be seen as particularly remarkable.

"It definitely would be unusual to see the merger approval within the state undone based on the merged entity’s failure to keep its promises,” argued Matt Wood of consumer-advocacy group Free Press. “But maybe it shouldn't be all that uncommon for companies to face consequences for broken commitments and underwhelming performance.”

The combination of limited competition and apathetic regulators is generally why American broadband continues to struggle in over-priced mediocrity. But should New York State succeed, it would be the first time in history a state regulator has driven a cable giant out of business in a state for being exceptionally terrible and uncooperative.