Charter Communications, the parent of local cable provider Spectrum Media, has just one week to prove to the Public Service Commission that it did not violate its agreement to expand broadband service in both New York City and upstate New York, or the state will collect a $1 million fine against the company.
The PSC initially issued an "order to show cause" in March, in which it challenged the company's claims of compliance with the agreement, and threatened to impose the fine. In the order, it found fault with many of Charter's assertions to date, said it had fallen short in its expansion, and directed the company to justify why it should not be penalized for failing to meet its commitments.
Those commitments were part of the state's January 2016 approval of Charter's $78 billion purchase of Time Warner Cable, which closed in May 2016.
The March order was reaffirmed by the entire Commission last month. The agency said Wednesday that the Stamford, Conn.-based telecommunications giant now has until May 9 to respond to its demands, citing "the serious questions that have been raised about Charter/Spectrum compliance with its franchise agreement."
The governor also joined the drumbeat on Wednesday.
"The State approved Spectrum's acquisition and its ability to operate in New York based on the fulfillment of certain obligations, including providing broadband access to underserved parts of the state and preserving a qualified workforce," said Dani Lever, press secretary to Gov. Andrew M. Cuomo. "The governor believes it is essential that corporations doing business with the state uphold their commitments, and we will not tolerate abusive corporate practices or a failure to deliver service to the people."
Besides the fine, other legal actions against the company could follow, including a re-evaluation of Charter's franchise agreement or license with New York City.
"Large and powerful companies will be held to the same standard as all other businesses in New York," Lever said. "The Spectrum franchise is not a matter of right, but is a license with legal obligations and if those are not fulfilled, that license should be revoked."
Charter rejected the accusations, and said it "will fight these baseless actions vigorously."
"Charter is bringing more broadband to more people across New York state," the company said in a statement. "We exceeded our last build-out commitment by thousands of homes and businesses. We’ve also raised our speeds to deliver faster broadband statewide. We are in full compliance with our merger order and the New York City franchise."
When PSC gave its assent to the Time Warner deal, it imposed several conditions designed to yield a benefit to cable customers and communities statewide. In particular, it cited its "significant concern that there are areas of the state that have no network access even though they are located within current Time Warner/Charter franchise areas."
So the PSC required that Charter expand its broadband network to pass an additional 145,000 homes and businesses across New York, bringing high-speed Internet service to many more consumers, starting after the closing of the transaction on May 18, 2016. The focus was to be on less densely populated areas, or areas where the lines had to be extended. The company was given four years to do so, with the first 36,250 properties due to be completed by May 2017.
The PSC incorporated penalty provisions into the agreement, with a court-ordered fine for each day that the company is out of compliance. Charter has to file updates every quarter.
Progress was slow initially, with just 7,265 "passings" as of November 2016, which the company blamed on the initial ramp-up and mobilization of resources. But it had added only 2,860 more passings as of February, again citing the slow start and problems with the "pole attachment process." And by May 18, it had achieved a total of only 15,164 properties - less than half the required total for the first year.
That led to a settlement agreement in June 2017, in which Charter agreed to pay $1 million into an escrow account within 30 days, and then disburse that within six months as grants to third-party beneficiaries to pay for equipment to provide computer and Internet access to low-income users. The agreement also imposed a new series of deadlines and benchmarks:
- 36,771 properties by Dec. 16, 2017;
- 58,417 by May 18, 2018;
- 80,063 by Dec. 16, 2018;
- 101,708 by May 18, 2019;
- 123,354 by Nov. 16, 2019; and
- 145,000 by May 18, 2020.
Finally, the agreement demanded that Charter file a $12 million letter of credit with the state, which New York could draw upon if the company missed its deadlines.
The company filed a new update on its build-out on Jan. 8, 2018, claiming it had passed 42,889 properties by the December deadline. But PSC staff audited the claims and found that "it appears Charter is now including addresses that are clearly beyond the scope of the Commission’s Approval Order."
Specifically, PSC officials found that 14,522 passings were ineligible to be counted, leaving it short of its target by more than 8,000 properties. It noted that 12,467 of them were in New York City, which already has extensive broadband service and is densely populated. The Commission also questioned if the rapid growth of those numbers "raises concern as to the legitimacy of these passings."
PSC staff also verified that other properties in upstate New York already had broadband service available, even making field visits and taking photos and notes about what they saw onsite. Still other properties had been awarded to other cable providers or programs, representing duplication that the PSC had sought to avoid in its original merger approval agreement.