Why New York consumers, state regulators aim their ire at Charter Spectrum

Show Caption Hide Caption VIDEO: Charter Spectrum under siege Subimal Chatterjee, marketing professor at Binghamton University's School of Management, discusses brand loyalty issues facing the cable provider.

When the cable guy walked to his Spectrum van as he was exiting an Upstate Dunkin' Donuts last month, a motorist, not noticing the pedestrian, pulled out in front, coming close to hitting him.

Pointing to the Spectrum tag on his shirt, the pedestrian remarked: "It's 'cause I'm from Spectrum. Everyone hates Spectrum now."

That about sums it up. Consumer frustration with the cable television provider has rarely been higher.

Charter Communications Spectrum cable service is despised among hordes of customers. As hard as it is to believe, the provider may have drawn more customer ire than its predecessor, Time Warner Cable.

Like the cable installer getting his Dunkin' Donuts, Spectrum and owner Charter Communications is under siege across New York.

Going deep on Spectrum: Leadership and performance at parent Charter Communications Inc.

Ranked as the second-largest cable operator after Comcast, Charter reported more than 27 million residential and business customers from coast to coast at the end of 2017. But its problems began in New York when it acquired Time Warner Cable in 2015 for $57 billion, excluding debt. To get the deal by state regulators, Charter agreed to expand broadband Internet service.

New York now claims Charter has repeatedly missed deadlines to expand its high-speed internet service to less-densely populated areas of the state, which was part of the merger agreement.

A stinging 29-page Public Service Commission opinion accuses Charter Spectrum on being "more focused on its public relations perceptions than its public interest obligations," adding the company has been "openly brazen" in failing to live up to its merger commitments.

Charter claims innocence

Charter insists it has hit the deadlines and remains in compliance.

The state, however, says Charter is counting 18,000 addresses that shouldn't count — most of them in New York City, which, of course, is densely populated.

If the threat of making Spectrum forfeit its cable franchise weren't enough, Charter Spectrum also faces second serious allegations by the state Attorney General. Before he was forced out office by charges of sexual harassment, Eric Schneiderman accused Spectrum of having systematically defrauded customers since 2012 — dating back to its time as Time Warner — including by creating an impression they would consistently get fast internet speeds. The current attorney general, Barbara Underwood, continues to seek legal remedies.

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The attorney general said at least 640,000 subscribers signed up for high-speed plans but got slower speeds. Consumers were encouraged by the state to test their modem speeds themselves and report the findings. Schneiderman also accused Time Warner Cable of leasing older-generation modems to 900,000 subscribers, knowing they could not generate faster internet speeds.

In June, The Appellate Division of the state Supreme Court judge rejected Charter's request to have the suit dismissed, meaning it will proceed to trial unless a settlement is reached.

Customers, New York regulators and some video content providers say the company wields its monopoly power in most markets, squeezing money from consumers for over-priced, under-par services.

Customer complaints

"I have had nothing but issues with them," Jerry Jadlowski of Forestport, New York, wrote in a July 31 complaint to the Public Service Commission. "The cost of the service and the issues of rebooting, lack of service, poor quality of picture, etc., etc. have all been issues I have experienced," the Oneida County resident added.

Jadlowski's complaint is one among nearly 460 comments the Public Service Commission has fielded in its long-standing case examining the Charter's acquisition of Time Warner Cable three years ago.

Many comments are similar in tone — grievances about bad service, high prices and internet speeds failing to meet those as advertised.

Now this state examination has reached the boiling point: New York is telling Charter/Spectrum to sell its New York franchise because the cable giant allegedly failed to live up to the commitments it made about system upgrades.

An irritated Gov. Andrew Cuomo recently called out the cable provider during a public event, telling a Spectrum News reporter in response to an unrelated question: "Charter Spectrum has been executing fraud on the people of this state."

Charter Communications Chief Executive Thomas Rutledge is defiant, contending New York's move is politically motivated.

"We do have labor issues in New York City, which we believe has politicized the actions of the PSC," Rutledge said in an earnings conference call with analysts on on July 31.

Members of the International Brotherhood of Electrical Workers have been on strike against Charter Spectrum from more than year, and the war of words between management and the union has been escalating. The New York Times reported this week that various arms of the I.B.E.W. have been major contributors to Cuomo over the years, giving more than $100,000 since 2014, including $10,000 this April from the union’s New York political action committee.

Rutledge suggested the PSC action against Charter Spectrum could be a way for Cuomo to curry favor with the union movement in an election year.

"We believe we are in compliance with the plain reading of the build-out requirements that the state imposed on us in merger conditions. and we have a very strong case and the ability to defend ourselves," Rutledge said on the conference call with Wall Street analysis.

Nevertheless, Rutledge's defense is winning few converts among customers who feel put-upon.

"I am paying Spectrum for the alleged Turbo service which is running consistently at speeds more like a dial up," Phyllis Alberici of Johnsonville, Rensselaer County, said in a August 1 comment to the PSC. "I am paying a rental fee of $10 for a 7 year-old modem and when I call customer service (often more than once per week) I get an offshore voice that has marginal training, tries to up-sell me and cannot fix the issue."

Alberici's comments are reflected in Spectrum's nationwide customer satisfaction scores. The company's satisfaction mark, as rated by the American Customer Satisfaction Index, dropped to a 58 rating this year, down from 63 a year earlier.

Bad marks for industry

But Spectrum isn't the only target of cable contempt. Some customers loathe nearly every subscription television service. Marks are bad across the board.

Not a single television subscription service showed improved customer satisfaction over the past year. Spectrum's decline was the worst out of the dozen ranked. DIRECTV customer satisfaction was down 6 percent, Frontier Communications dropped 7 percent. Comcast, the number one cable provider, was third from the bottom with a consumer satisfaction mark of 57, down 2 percent from a year ago.

"Cable and satellite television customers think they are paying higher prices for lesser value and receiving poor service to boot," wrote the authors of the satisfaction index.

Subscription television and internet service providers rank at the bottom among all industries tracked by American Customer Satisfaction Index. ASCI uses responses from interviews with about 250,000 customers annually to calculate the customer satisfaction index of 380 companies in 46 industries.

How can one industry generate such animosity from so wide an audience?

Simple, says an expert in consumer behavior. In industries where competition is slim or non-existent customers feel as if they are being held hostage. Few choices for customers breeds malevolence.

"No one is ready to forgive Spectrum," said Subimal Chatterjee, marketing professor at Binghamton University. "We have a toxic mix: high prices combined with abysmal service."

"There's frustration because customers feel they can't do anything about it. What's the point of complaining?" Chatterjee asked.

Many others in the industry are suffering from the same customer perceptions, including Comcast, Frontier Communications and Cox Communications.

"There's a notion that there's no respect for the customer," Chatterjee said, especially when the service publicizes low rates for high-speed internet access only to find out the only way to get the promotional price is by bundling it with another high-priced service. "It's the 21st Century. You have to be cognizant about how people view you and they don't."

A spokeswoman for the Internet and Television Association, a Washington D.C. trade group representing the industry's interests, had no comment on the dispute between New York and Charter.

Cord-cutting

Even as the subscription services offer video products similar to Netflix, Amazon Prime and Hulu, customers see the newer streaming services as a less expensive, more consumer-friendly alternative to the legacy subscription cable television providers.

"Over-the-top operators have raised the bar by providing greater personalization, lower prices more mobility — and much better customer service," said the authors of ASCI 2018 Telecommunications Report. For subscription television companies "moving in on the video streaming market won't be enough to keep TV subscribers unless customer satisfaction improves."

Spectrum earlier this year introduced its entry into streaming, offering customers who don't buy traditional cable a $21.99 monthly plan that allows them to return to Spectrum TV by selecting 10 channels from the standard cable lineup.

Yet customers continue to abandon traditional subscription services in droves. In last year's fourth quarter, Comcast and AT&T's DIrecTV network lost 500,000 subscribers, a more than a 3 percent drop from a year earlier, according to MoffettNathanson research. That's the steepest decline since analysts started keeping track of cord-cutting eight years ago.

Chatterjee says that as the wave of technology change quickens, there is soon bound to be other options for high-speed internet, ones that will pose a serious challenge to Spectrum in upstate. In some cities across the nation there are multiple providers.

"What you are seeing here is the result of a lack of competition"' Chaterjee said. "No one can say what will happen a year from now, five years from now."

When competition arrives, he expects customers to flee because Spectrum has failed to build up a element essential for any consumer service company — brand loyalty.

Meanwhile, Charter CEO Rutledge is mounting a vigorous defense of his company: "We have thousands of franchise agreements and generally we have good relationships with the communities we service and we live up to our commitments and we have in New York state. In fact, we're well ahead of our obligations in terms of speed upgrade and in the build-out itself."

The USA Today Network Albany Bureau contributed to this story.

Follow Jeff Platsky on Twitter @JeffPlatsky