Internet provider Charter to pay $174 million in fraud settlement, issue customer refunds

The payout is the largest ever in the U.S. to be paid to consumers by an internet service provider, the A.G.’s office said Tuesday.
Image: Tom Rutledge, chairman and chief executive officer of Charter Communications Inc., speaks at a conference in New York on Nov. 10, 2016.
Tom Rutledge, chairman and chief executive officer of Charter Communications Inc., speaks at a conference in New York on Nov. 10, 2016.Michael Nagle / Bloomberg via Getty Images

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/ Source: CNBC.com
By Lauren Feiner, CNBC

Charter Communications has agreed to a $174.2 million deal to settle fraud charges brought against it by New York Attorney General Barbara Underwood.

The payout is the largest ever in the U.S. to be paid to consumers by an internet service provider, the A.G.’s office said Tuesday.

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Underwood alleged that Charter, using its brand names of Time Warner Cable and later Spectrum, failed to provide the speedy internet service it promised customers.

As a result of the settlement, over 700,000 active subscribers in New York will be paid $75 to $150 each for a total of $62.5 million in direct refunds. Additionally, 2.2 million active internet subscribers will receive free streaming services and premium channels from Charter valued at $100 million, according to Underwood’s office.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” Underwood said in a statement. “Not only is this the largest-ever consumer payout by an internet service provider, returning tens of millions of dollars to New Yorkers who were ripped off and providing additional streaming and premium channels as restitution — but it also sets a new standard for how internet providers should fairly market their services.”

As part of the settlement, Charter will have to update the way it markets its internet service by describing speeds as “wired” and telling consumers that speeds may vary. Charter must also do regular testing to make sure its claims are accurate.

Before the settlement, Charter already paid out $6 million in refunds for inadequate modems, and those subscribers will not be eligible for the settlement payment, the Attorney General’s office said. Eligible subscribers will be contacted and refunded by Charter within 120 days, according to the A.G.’s office.

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," the company added.