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Charter Reaches $174 Million Settlement on Internet-Throttling Fraud Suit

Charter Communications agreed to a settlement valued at $174.2 million to resolve a lawsuit alleging the U.S.’s second-biggest cable operator defrauded broadband customers by failing to deliver promised internet speeds.

According to the terms of the settlement with the New York Attorney General’s Office, Charter will pay $62.5 million in direct refunds to 700,000 active broadband subscribers in New York, who will each receive between $75 and $150. In addition, Charter has agreed to offer free streaming services and HBO and Showtime premium channels with a retail value of over $100 million to approximately 2.2 million active subscribers in the state.

The New York Attorney General’s Office said it’s believed to be the biggest-ever payout to consumers by an internet service provider in U.S. history.

“This settlement should serve as a wake-up call to any company serving New York consumers: fulfill your promises, or pay the price,” New York Attorney General Barbara D. Underwood said in announcing the settlement Tuesday.

The agreement settles the NY Attorney General’s 2017 lawsuit, filed in New York State Supreme Court, alleging Charter failed to deliver the internet speed or reliability it had promised subscribers in several respects. The fraud allegations covered services initially operated by Time Warner Cable, which was acquired by Charter in 2016.

According to the complaint, Charter (and Time Warner Cable before it) leased “deficient modems and wireless routers” to subscribers that didn’t deliver the internet speeds they had paid for. The operator also did not maintain enough network capacity to reliably deliver advertised speeds to subscribers, and Charter engaged “in hardball tactics with Netflix and other popular third-party content providers” that resulted in degraded streaming video quality.

In a statement, Charter said: “We are pleased to have reached a settlement with the Attorney General on the issue of certain Time Warner Cable advertising practices in New York prior to our merger, and to have put this litigation behind us. Charter has made, and continues to make, substantial investments enhancing internet service across the state of New York since our 2016 merger, as acknowledged by the Attorney General in this settlement. We look forward to continue providing the best TV, internet, voice and mobile products to our customers, and to bringing broadband to more homes and businesses across the state.”

Under the settlement, Charter’s Spectrum Internet subscribers in New York will have 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, which lets customers access broadcast TV stations and a choice of 10 pay-TV networks, along with one free month of Showtime.

In addition, Charter is required to implement a series of “marketing and business reforms,” according to the New York AG, including the requirement to describe internet speeds as “wired” and to “substantiate them through regular speed testing.”

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