MANHATTAN (CN) – New York’s attorney general said Tuesday that the state’s largest broadband provider, Spectrum Time Warner, agreed to pay more than $174 million to settle a consumer-fraud case over spurious promises of “lightning-fast” internet speed.
“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” New York Attorney General Barbara Underwood said in a statement announcing the settlement.
She added, “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.”
The settlement is the first payout in the AG’s probe into broadband internet service in New York state.
The deal includes $62.5 million in direct refunds to more than 700,000 active subscribers, who will each receive between $75 and $150, which is believed to be largest-ever payout to consumers by an internet service provider in U.S. history, according to Underwood’s office.
Additionally, about 2.2 million active subscribers will receive streaming services and premium channels at no charge, a retail value of over $100 million.
Spectrum’s parent company Charter Communications, which acquired Time Warner in 2016, must notify subscribers of their eligibility for refunds and disburse payments within 120 days.
Underwood’s predecessor Eric Schneiderman filed the fraud complaint in February 2017 in Manhattan Supreme Court, demanding a permanent injunction stopping Spectrum from violating New York General Business Law, as well as civil penalties and restitution for New Yorkers who had paid excessive fees.
The AG’s lawsuit claimed that the fraud began in 2012, three years before Time Warner merged with Charter and announced exorbitant price hikes under the Spectrum brand.
Time Warner rolled out a TV ad campaign in 2014 unveiling supposedly “Ultimate Internet” speeds of 300 megabits-per-second as a “new dimension of reliability and a revolution in velocity essential for today’s online life.”
The complaint alleged that the internet provider aggressively marketed and charged more for download speeds of 100, 200, and 300 megabits-per-second while not maintaining enough network capacity to reliably deliver those speeds to subscribers. It was also accused of providing faulty modems and hardware to consumers that could not process the advertised speeds.
Charter is now required to describe internet speeds as “wired,” tell consumers that wireless speeds may vary, and disclose the factors that might lead actual experiences to vary, including the number of users and device limitations.
The company will also be prohibited from describing internet speeds as “consistent” without fully satisfying the Federal Communications Commission’s consistent speed metric and must make reasonable efforts to deliver access to all online content and services featured in its advertisements.
Underwood’s settlement announcement acknowledges that Charter has made significant investments to address the problems identified in the complaint and improve internet service in New York, including network enhancements, modem replacements and upgraded WiFi routers.
In a statement Tuesday, Charter was keen to move past Time Warner’s marred legacy.
“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.