ALBANY, N.Y. – Charter Spectrum will pay a record $174 million and refund customers in New York $62 million in a settlement over claims it defrauded internet subscribers.

The settlement announced Tuesday with the New York Attorney General's Office is the largest consumer payment by an internet provider in U.S. history, and Charter Spectrum has agreed to provide some premium cable channels for free to customers as part of the deal.

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

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The agreement settles a consumer fraud case brought by New York last year that claimed the state's largest internet service provider, which operated initially as Time Warner Cable, didn't provide reliable and fast internet service as promised.

The settlement includes restitution of $62.5 million for more than 700,000 active subscribers, Underwood said.

Agreement details

The customers will each receive between $75 and $150, and they will also get streaming services and premium channels, with a retail value of over $100 million, at no charge for about 2.2 million active subscribers.

The agreement also requires Charter to implement new marketing and business reforms, explain advertised internet speeds as “wired” and increase speed testing.

Separately, the company is in a fight with the state Public Service Commission over its expansion of internet service in New York.

In a statement, Charter said it continues to implement better service after its 2016 merger with Time Warner Cable.

"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," the company said in a statement.

The company added, "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.”

What will customers get?

Underwood said Charter has agreed to award a $75 refund to more than 700,000 active subscribers based on three criteria: leasing an inadequate modem; leasing an inadequate WiFi router; or subscribing to a previous Time Warner Cable "legacy" speed plan of 100 Mbps or higher.

Additionally, Charter will award another $75 refund to about 150,000 subscribers who had an inadequate modem for 24 months or more.

Charter will notify subscribers of their eligibility for refunds and disburse them within 120 days, the state said.

The payments come on top of $6 million that Charter had already provided some customers for inadequate modems, which was separate from Tuesday's announcement.

Charter will also offer free streaming services to 2.2 million active internet subscribers. Customers receiving internet and cable television from the company will get a choice of either three free months of HBO or six free months of Showtime.

All other New York customers will get a free month of Charter’s Spectrum TV Choice streaming service, as well as a free month of Showtime. Charter will notify subscribers of their eligibility for the free services within 120 days.

Charter will also have to end making "unsubstantiated claims" in its ads and improve its equipment provided to customers.