The biggest cable provider in New York State may not be able to continue in its current form. Following the state’s public service commission saying Charter (doing business in the state as Spectrum) has “continually failed to meet its commitments to the state” (which were part of the approval for 2016’s merger of Charter and Time Warner Cable) and threatening heavy penalties, they’ve unveiled those penalties, which include Spectrum being “no longer permitted to serve customers in the state.” That’s a big deal, as Spectrum provides cable, internet and telephone services to more than 2 million subscribers in the state, more than any other company.
Here’s more from New York City’s WABC-7:
Spectrum reportedly failed to meet deadlines, attempted to skirt obligations to serve rural communities and used unsafe practices in the field.
As a result, the New York State Public Service Commission revoked the approval of the merger.
“Charter’s repeated failures to serve New Yorkers and honor its commitments are well documented and are only getting worse,” Commission Chair John Rhodes said. “Charter’s non-compliance and brazenly disrespectful behavior toward New York State and its customers necessitate the actions taken today seeking court-ordered penalties for its failures, and revoking the Charter merger approval,”
…The cable provider is required to continue operations for 60 more days without interruptions in service, as the state transitions to a successor provider.
The state is also seeking up to $3 million in penalties. And while nothing will happen immediately as a result of this (there’s the 60-day period to start, and Charter may be able to challenge some of this), it could lead to significant changes if enforced. For now, though, Charter has responded with a statement blaming “politically charged” rhetoric:
“In the weeks leading up to an election, rhetoric often becomes politically charged. But the fact is that Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the PSC. Our 11,000 diverse and locally based workers, who serve millions of customers in the state every day, remain focused on delivering faster and better broadband to more New Yorkers, as we promised.”
One solution could see Charter spinning off its New York division; it’s also possible that the division could be sold to someone else. But this is the culmination of months of complaints from the state, including a statement from the commission last week that accused the company of “gaslighting“:
Charter has continually failed to meet its commitments to the state, including its obligation to timely extend its high-speed broadband network to 145,000 unserved and underserved homes and businesses. Charter has also continued to make the false claim in advertisements and other public statements that it is exceeding its obligations to New York State, notwithstanding that the Commission has previously directed Charter to cease its misleading campaign and has referred the matter to the New York Attorney General for appropriate action. Charter’s claims are simply false and the Commission will not stand idly by while Charter deceives the public and its shareholders. Charter’s own data shows a gaping hole between its commitments and its performance. New York will not tolerate Charter’s gaslighting its own customers into believing it is meeting its promises.
The biggest thing at issue here is the degree to which Charter is extending its network. The 2016’s merger’s approval required the company to extend its network to 145,000 unserved or underserved homes and businesses within four years. Last June, they agreed to a $13 million fine for only building to 15,164 homes and businesses in the first year, well short of the 36,250 required. Since then, there’s dispute about how their buildout is going; the company has claimed that they’ve extended their network to over 61,000 homes so far, but a commission audit in March found 14,000 of those were ineligible, as the company was already required to build to those. So there are significant disagreements over the numbers.
It’s rare to see a state try to undo a merger this way and prohibit a company from operating (in its current form) in the state, but New York is clearly unhappy with Charter’s actions in the wake of this merger, and displeased enough that they’re moving beyond fines to merger revocation. We’ll see how Charter responds and what actually comes of this, but with more than 2 million subscribers to Charter in New York, it’s going to have a major impact on the television and internet landscape there.