Charter Communications faces $1M penalty over speed of expansion

PHOTOGRAPHER: The New York Times

The Charter Communications logo at the company’s office in Stamford, Conn., May 28, 2015.

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ALBANY — State regulators are going after Charter Communications again, seeking to penalize it $1 million and possibly revoke its franchise in New York City.

The two actions by the Public Service Commission against the cable television and internet provider are separate:

The PSC charges that Charter may not be paying New York City the 5 percent of gross video revenue its franchise agreement calls for. It notes that these payments have been decreasing since the merger. PSC also says Charter may not have extended cable service as extensively as required under its franchise agreements.

The other proposed action against Charter stems from Charter’s commitment to extend high-speed internet access to 145,000 new addresses across the state as a condition of Charter being allowed to acquire Time Warner Cable in 2016.

The PSC in June 2017 extracted a $1 million penalty from Charter, which by its own admission was reaching new addresses more slowly than called for in its timetable. Now Charter is reporting that it’s ahead of schedule, but the PSC alleges that Charter is artificially inflating its count. PSC wants another $1 million.

Charter called both allegations spurious. It said in a statement:

“We are in full compliance with our merger order and the New York City franchise, and we will fight these baseless and legally suspect actions vigorously.”

In the order seeking the $1 million penalty, the PSC lays out a case against Charter with a series of allegations about the 145,000-address high-speed internet buildout, which Charter is supposed to meet in incremental milestones. After missing its first milestone by a wide margin in May 2017, Charter said in January 2018 that it had exceeded its December 2017 target: 42,889 addresses instead of 36,771.

But the PSC said Charter wrongly counted 14,522 addresses, and actually hit only 28,367. It suggested that 11,979 more addresses should be removed from Charter’s planned future buildout list.

PSC staffers physically visited 6,389 addresses in upstate New York to check on Charter’s progress. They recommended that 1,762 be disqualified, mostly because those addresses previously had access to a cable network and Charter therefore should not have claimed to have extended service to them.

The PSC on Monday would not say whether it was standard procedure for its staff to visit 6,389 addresses, nor say how many hours it took the staff to accomplish the task.

The PSC also charged that Charter wrongly was counting 12,467 addresses in metropolitan New York City — one of the most-wired places in the world — toward the quota. (PSC staff visited 462 addresses in New York City as part of the parallel action it is undertaking against Charter there, and said all 462 should be disqualified because they had already had high-speed internet service.)

Also cropping up in Monday’s PSC filing was the state Broadband Program Office, which is leading an effort to provide high-speed internet access to every New Yorker by December 2018. It is a priority of Gov. Andrew Cuomo, who will stand for re-election in November 2018.

This initiative is being accomplished through the New NY Broadband Program, which is funded to the tune of a half-billion dollars by state taxpayers and private industry — but not Charter, which has declined to participate.

The third and final phase of New NY Broadband is underway, but its Dec. 31 goal seems impossible to meet. Even if everything else works as planned and as scheduled, Charter won’t be done with its 145,000-address buildout until mid-2020.

Charter considers the addresses on its buildout list a trade secret and won’t publicly disclose them, but the Broadband Program Office is in possession of the list, so that it can make its own list and be sure every address in the state has internet service without duplicated efforts.

Meanwhile, PSC is in possession of both lists and can compare them. It alleges that Charter is counting nearly 7,000 addresses it won’t be reaching as counting toward the list of 145,000 addresses it is supposed to reach.

After missing its quota on May 18, 2017, Charter agreed to a settlement with New York that the PSC called the largest in the history of the state and possibly the nation. Each time it misses one of its revised milestones (36,771 addresses 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) Charter may be penalized with a forfeiture from a $12 million letter of credit it posted as it paid the first $1 million penalty for missing the May quota.

Charter reported $41.6 billion in revenue and $9.9 billion in net income for 2017. It also reported $8.7 billion in capital expenses, to which the New York state internet buildout presumably contributed.

“Charter is committed to bringing more broadband to more people across New York state,” the company said in its statement Monday. “We exceeded our last buildout commitment by thousands of homes and businesses. We’ve also raised our speeds to deliver faster broadband statewide.”