New York State Attorney General Eric Schneiderman has filed a lawsuit (PDF) against Time Warner Cable, accusing the company of lying to both its customers and the FCC. The suit alleges that TWC “Systematically And Knowingly Failed To Deliver The Reliable And Fast Internet Access It Promised To Subscribers Across The State” (capitalization original) and seeks to compensate all New York State TWC customers for their trouble. (Disclosure: The author is a TWC customer because he viewed the company as a better bet than Verizon.)
The suit alleges that TWC (now operating as Spectrum) has been defrauding customers for at least five years. Spectrum-TWC is accused of conducting ” a systematic scheme to defraud and mislead subscribers to its Internet service by promising to deliver Internet service that it knew it could not and would not deliver. As described below, this scheme had two separate components: first, Spectrum-TWC promised Internet speeds that it knew it could not deliver to subscribers; second, Spectrum-TWC promised reliable access to online content that it knew it could not deliver to subscribers.”
First, Spectrum-TWC promised consumers high performance, but leased them modems and routers that were incapable of delivering the performance they were paying for. Several years ago, cable companies began rolling out high-speed Internet services that required the use of a cable modem compatible with the DOCSIS 3.0 specification standard. Older modems that were limited to DOCSIS 1.0 or 2.0 compatibility can still operate on DOCSIS 3.0 networks, but at significantly reduced speeds.
The suit alleges that Spectrum-TWC aggressively upsold 900,000 customers on DOCSIS 3.0 performance, yet failed to provide hardware that could deliver it. Considering that customers are currently charged a $10 monthly fee for modem rental, that’s an estimated $108 million per year in fraudulent revenue collected from New York State residents. The company is accused of leasing substandard wireless routers that were incapable of providing 802.11n performance to 250,000 customers who were paying a rental fee for those devices as well.
Even high-end customers didn’t receive the service they were owed. I’ll quote the lawsuit directly on these points:
Spectrum-TWC failed to provide the promised Internet speeds to even those subscribers who leased current-generation modems and wireless routers from Spectrum-TWC. This was because Spectrum-TWC managed its cable network in a way that did not deliver the promised Internet speeds over any type of connection. It cut corners by packing too many subscribers in the same service group, which resulted in slower speeds for subscribers, especially during peak hours. It also failed to add more channels for each service group, which similarly resulted in slower speeds for subscribers.
Spectrum-TWC fraudulently induced at least 640,000 subscribers in New York State to sign up for high-speed plans that it knew it could not provide. SpectrumTWC knowingly failed to allocate sufficient bandwidth to subscribers, which it could have done either by reducing the size of its service groups or adding more channels to each service group. Based on several Internet speed tests, including those run by the FCC, subscribers on the 300 Mbps plan generally received only 10% to 70% of the promised speed; subscribers on the 200 Mbps plan received only 14% to 60% of the promised speed; and subscribers on the 100 Mbps plan received only 24% to 87% of the promised speed.
As for the accusation that it lied to the FCC, that requires some unpacking. Back in 2013, Spectrum-TWC was actively avoiding replacing older modems that were unable to offer DOCSIS 3.0 performance, but it didn’t want to look bad in the annual broadband report that the FCC creates. The FCC’s reports are based on information gathered from 4,000 subscribers across the United States, but to goose its ratings, Spectrum-TWC promised the FCC it would replace all of the substandard cable modems of its subscribers. In reality, it treated the subscribers on the FCC’s panel as VIPs, replacing their hardware (and onlytheir hardware), and over-provisioning their modems to temporarily boost their speeds by up to 20%.
One Spectrum-TWC employee wrote the following:
Our Sam Knows scores [more on that in a moment] are like watching a slow-motion train wreck. We need to get in front of this. One thing I think we may need to be prepared to do is just give more ports to Cogent during sweeps month [when FCC results are measured for purposes of the MBA report]. We don’t have to make any promises, we just have to make it work temporarily.
The FCC’s broadband tests are administered by Sam Knows, a federal contractor that measures performance by attaching its own network product to the modem. The box then runs speed tests when the modem isn’t already in use. Spectrum-TWC offset its poor performance in some tests by deliberately providing additional bandwidth and capability to the FCC’s panelists at times when their network wasn’t crowded, thereby hiding its poor overall results. The company candidly acknowledged this in its own internal communications, stating: “We recommend increasing over-provisioning our modem speeds to around 20% to drive our Sam Knows scores > 100% and then to market that we deliver more than promised speeds.”
A 2013 presentation by engineers at Spectrum-TWC noted that by gaming the system in this fashion, the company was able to hide the impact of using older, single-channel modems, network congestion, and the poor state of network cable lines. Finally, the company is accused of deliberately lying to customers about the potential speed of its wireless network, promising that it could deliver wire-line-equivalent performance and giving customers who called to complain about their network performance the run-around. Internal communication records show the company was perfectly aware of these issues, but did nothing.
The company continued to publish information claiming the following:
- That maximum wireless broadband performance would not be impacted by how many devices were attached to a router or modem.
- That in ‘real-world testing’ users could connect to a wireless modem from 150 feet away, meaning anyone in a house could expect maximum router performance, no matter where they were.
- That having multiple users on the same cable network would have no impact on the service’s performance.
Combine this guidance with the fact that the company was renting substandard modems and routers with performance well below advertised speeds, and you have a recipe for hundreds of thousands of angry customers. Again, internal communication shows Spectrum-TWC was absolutely aware of these issues and did nothing to either resolve them or to change its own marketing.
Spectrum-TWC is also accused of false advertising due to promising access to various content services that it failed to deliver due to high lag, bandwidth throttling, and the service problems consumers encountered during its various spats with content providers like Netflix. One Chartered executive’s communications on that topic seem particularly relevant to the discussion of who should be paying for Internet service.
Our interconnect strategy these days, is more about how we manage our backbone and especially edge resources with the enormous growth in content. The transit costs are rounding errors compared to impacts to the edge of making the wrong decisions. We really want content networks paying us for access and right now we force those through transit that do not want to pay.(Emphasis added by lawsuit)
Every time this topic comes up, there are those who argue that Netflix et al are freeloaders trying to steal funds from the noble ISPs that heroically deliver service at extremely high prices. Quotes like the above should put rest to such sentiment. Spectrum-TWC explicitly notes that its costs are a rounding error — what it cares about is making content networks pay for access to drive up its own profits — without ever bothering to pass those profits along to consumers by either improving their service or delivering on its own promises.
The image above is from Level 3 and concerns that company’s spat with Verizon in 2014 — but it also references precisely the same claims this lawsuit makes. Spectrum-TWC and other ISPs engineered their networks to ensure that traffic would be congested, then “fixed” the problem only for the services that were willing to pay to play. The lawsuit notes that Spectrum-TWC’s specific strategy for forcing companies to pay for transit was to refuse to add additional ports, thereby forcing content providers to either move content through other networks (increasing latency and reducing customer satisfaction) or limiting the performance of services like Netflix, Hulu, and Amazon Prime — thereby increasing latency and reducing customer satisfaction. Games like League of Legends were also impacted.
New York State has asked for a judgment that would require Charter (now the parent company of TWC) to pay a $5,000 civil fine per violation and provide a full refund to all customers on top of that. It is unclear whether the FCC will take any action at all — the new head of the FCC, Ajit Pai, is generally hostile to the organization’s own mission, the concept of net neutrality, and customer protections in the form of clear billing rules and laws.