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Tired of not getting customer service call-backs from Charter Spectrum (TWC)?

“Before May 18, 2016, Time Warner Cable, Inc. provided and marketed Internet service under the Time Warner Cable brand to New York subscribers. On May 18, 2016, as a part of a series of transactions that resulted in Charter Communications, Inc. merging with TWC and continuing to operate its business, TWC merged with and into Charter’s subsidiary, Spectrum Management Holding Company, LLC.” Complaint at 8-9, State v. Charter Commc’ns, Inc., No. 450318/2017 (N.Y. Sup. Ct. filed Jan. 31, 2017) (internal definitions omitted) (“New York Complaint”). “Spectrum-TWC is the largest provider of residential Internet services in New York State. It provides Internet service to approximately 2.5 million New York households and earns well over a billion dollars in revenue annually from selling Internet services in New York.” Id.

Even before the merger with Charter, Time Warner Cable (“TWC” or “Spectrum-TWC”) had long used merger and acquisitions as a core growth strategy. For instance, in 2014, Comcast announced an agreement to buy TWC. David Gelles, Comcast Deal Seeks to Unite 2 Cable Giants, N.Y. Times (Feb. 12, 2014), http://dealbook.nytimes.com/2014/02/12/comcast-set-to-acquire-time-warner-cable/. That deal was abandoned in the face of opposition by consumers and regulators. M&A is a savvy business strategy in the cable market, because 64% of American homes have only one or two available broadband suppliers, so consolidation generates pricing power. N.Y. Times Editorial Bd., A Cable Merger Too Far, N.Y. Times, May 27, 2014, at A22, http://www.nytimes.com/2014/05/27/opinion/a-cable-merger-too-far.html. Thus, many TWC customers use it for lack of any viable alternative.

TWC has long held itself out as a reliable and trustworthy merchant of cable and internet services through print, mail, television, and online advertising. See, e.g., iSpot, Time Warner Cable TV Commercials, http://www.ispot.tv/brands/ATC/time-warner-cable. To finance its marketing full-court press, at the time of the Charter deal, TWC was spending over $2 billion on sales and marketing annually. Press Release, Time Warner Cable, Time Warner Cable Reports 2014 Fourth-Quarter and Full-Year Results (Jan. 29, 2015), available at http://ir.timewarnercable.com/investor-relations/investor-news/financial-release-details/2015/Time-Warner-Cable-Reports-2014-Fourth-Quarter-and-Full-Year-Results/default.aspx.

Despite buying all that media, faulty internet service, overbilling and poor customer support have left TWC’s reputation in shambles. For example, The New York Attorney General obtained a $2.2 million refund for TWC customers who had been overcharged “in direct violation of their local franchise contracts.” Press Release, Attorney Gen. Eric T. Schneiderman, A.G. Schneiderman Obtains $2.2 Million in Refunds for 18,000 Time Warner Cable Consumers Upstate (Mar. 7, 2013), http://www.ag.ny.gov/press-release/ag-schneiderman-obtains-22-million-refunds-18000-time-warner-cable-consumers-upstate. Meanwhile, the FTC levied a $1.9 million fine on TWC for its improper use of risk-based pricing. Press Release, Fed. Trade Comm’n, Time Warner Cable to Pay $1.9 Million Penalty for Violating the Risk-Based Pricing Rule (Dec. 19, 2013), http://www.ftc.gov/news-events/press-releases/2013/12/time-warner-cable-pay-19-million-penalty-violating-risk-based.

In 2017, New York State filed an 82-page, 5-count lawsuit against TWC for willfully defrauding hundreds of thousands of New Yorkers in a pattern of “repeated and persistent illegality.” New York Complaint at 74, 76. TWC falsely promised speeds that it knew it could not deliver and falsely promised reliable access to content that it chose not to deliver. Id.

From 2012 until 2017 (the “Relevant Period”), “Spectrum-TWC leased older-generation, single-channel” D1 and D2 modems to 900,000 New Yorkers “despite knowing that such modems were, in its own words, not ‘capable of supporting the service levels paid for.’” Id. at 3, 18. “Spectrum-TWC’s former head of corporate strategy admitted in a February 2015 email that, ‘the effective speeds we are delivering customers in a 20 Mbps tier when they have a D2.0 modem is meaningfully below 20 Mbps.’” Id. at 26. The vast majority of the victims were leased deficient equipment for three consecutive months or longer. Id. at 27-28. Amazingly, TWC deliberately “programmed [customers’] D2 modems to cap their speeds at 20 Mbps, but continued to charge them for higher speed plans.” Id. at 34.

The purpose of TWC’s lies about the speed and reliability of its internet service was to enrich itself at the expense of consumers. “Studies conducted by Spectrum-TWC show that users place a premium on Internet speed and service reliability, and are willing to pay for such attributes because they directly affect the Internet experience.” Id. at 12. Thus, TWC allegedly differentiated pricing tiers exclusively on the basis of speed. Id. at 19. For instance, TWC charged a list price of $109.99 (plus $10 monthly modem fee) for 300 Mbps internet, compared to a list price of $49.99 (plus $10 monthly modem fee) for 10 Mbps internet. An ad for the 300 Mbps “Ultimate Internet” plan trumpeted “a new dimension of reliability and a revolution in velocity for today’s online life.” Id. at 22.

Nothing could have been further from the truth. For instance, Internet Health Tests conducted from August 2015 to January 2016 showed that TWC was not even coming close to its promised speeds. “The average subscriber on the 100 Mbps plan received 24% of the promised speed, the average subscriber on the 200 Mbps plan received 15% of the promised speed and the average subscriber on the 300 Mbps plan received 11% of the promised speed.” Id. at 45.

TWC deceived the FCC and gamed the agency’s speed tests. Id. at 5, 29. In short, TWC tries to be on its best behavior when Big Brother is watching, in violation of the FCC’s Code of Conduct. Id. at 30, 63. For instance, “Spectrum-TWC’s former head of corporate strategy candidly acknowledged the strategic goal in a July 7, 2014 internal email to senior colleagues: ‘We recommend increasing over-provisioning our modem speeds to around 20% to drive our [internet speed test] scores > 100% and then to market that we deliver more than promised speeds.’” Id. at 46.

So what did TWC’s engineers believe about these tactics? An internal engineering presentation characterized the over-provisioning scheme as putting “lipstick on a pig.” Id. at 46. TWC engineers knew what needed to be fixed and told management, but management ignored them. Id. at 29. A TWC engineer recommend to “change [the subscriber’s] tier to speed their modem can handle,” but the company ignored the recommendation. Id. at 34 (alteration in original). Another engineering presentation showed why customers paying for 300 Mbps would actually see single-digit speed test results. Id. at 49. All to little avail.

Some members of TWC’s customer service department tried to blow the whistle, too. One bemoaned: “‘Our customers NEED to be put into the proper packages so that we are conducting business with integrity. It seems as if this is a hustlers job trying to out hustle everyone else trying to make the most money WE can and not doing the right thing . . . By operating like this, customers laugh at our integrity as a company.’” Id. at 24. Regarding TWC’s false promises about wifi service, its Vice President of Customer Equipment warned his colleagues: “we are going to experience a mismatch between what we sell the customer and what they actually measure on their laptop/tablet/etc.” Id. at 36. Rather than heeding these warnings, TWC allegedly instructed its customer service representatives to lie to customers, claiming, for instance, that additional users on the same connection do not slow down a given user’s internet speed.

TWC also tricked consumers into buying its services by falsely promising reliable access to online content. “During the Relevant Period, Spectrum-TWC promised consumers, including its subscribers, that they would receive reliable access to content on the Internet with ‘no buffering,’ ‘no slowdowns,’ [and] ‘no lag,’ ‘without interruptions,’ ‘without downtime,’ and ‘without the wait.’” Id. at 6. In one of many examples, “Spectrum-TWC also promised its customers that they could ‘Stream Netflix and Hulu movies and shows effortlessly’ and ‘Watch YouTube video[s] without waiting.’” Id. at 54. TWC promised, “without qualification, that subscribers could stream high-definition movies with ‘absolutely no buffering.’” Id. at 55. “As a direct result of Spectrum-TWC’s failure to add more ports, its subscribers encountered all of these things – buffering, slowdowns, lags, interruptions, and down times.” Id. at 6. “Spectrum-TWC lined its pockets by intentionally creating bottlenecks in its connections with online content providers, despite knowing that these negotiating tactics would create problems for its subscribers in accessing online content.” Id. at 6-7. “Spectrum-TWC’s subscribers were effectively pawns in the company’s deliberate strategy to extract fees from backbone and content providers in exchange for granting access to Spectrum-TWC’s subscribers.” Id. at 58. “[T]he average peak hour packet loss for traffic carried by [backbone provider] Cogent to Spectrum-TWC subscribers from 2014 through 2015 was [roughly 100 times] higher than the packet loss experienced by subscribers to another major New York-area cable ISP that maintained sufficient port capacity with Cogent.” Id. at 63-64 & chart 5. “Netflix even offered to install for free its own equipment on Spectrum-TWC’s network to ensure smooth content delivery to subscribers. Spectrum-TWC, however, rejected that offer and sought payment from Netflix in exchange for unimpeded access to the last mile connection to Spectrum-TWC subscribers.” Id. at 65.

TWC’s misconduct has not been limited to a particular region or socio-economic group. “An internal Spectrum-TWC presentation from June 2013 observed that 75% of the modems associated with the 20 Mbps plan across the country were noncompliant, but ‘D2 modems are still being deployed due to budget restraints.’” Id. at 28. Citing an American Consumer Satisfaction Index study, CBS characterized TWC as America’s single “most unloved company.” Aimee Picchi, Meet America’s Most Unloved Company, CBS (May 21, 2014), http://www.cbsnews.com/news/meet-americas-most-unloved-company.

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