The Alternative Facts of Cable Companies
Stories by Susan Crawford on Medium 2017-06-22
A state attorney general sues Spectrum for ripping off customers. It won’t force change, but it could start a movement.
New York State Attorney General Eric Schneiderman. (Andrew Burton / Getty Images)
Cable companies have bad reputations for customer service, and sometimes they rename themselves to divert attention and get a fresh start. Comcast’s “Xfinity” rebranding in 2010 has now been followed by Charter’s renaming of itself—after a megamerger with Time Warner Cable last year—as “Spectrum.” But changing your name doesn’t mean that you aren’t liable for misbehavior under your previous moniker. This is what Charter…er, Spectrum… found recently when, following a lengthy investigation, New York’s attorney general, Eric Schneiderman, filed an extraordinary lawsuit against the company.
Based on the company’s own documents and statements, it appears that just about everything it has been saying since 2012 to New York State residents about their internet access and data services is untrue. And not untrue in some grey, shadowy way—just untrue. The company’s 2.5 million New York subscribers (of its 22 million nationwide) have been told they’re getting X (in terms of download and upload speeds) when actually they’re getting a lot less than X.
Follow Backchannel: Facebook | Twitter
According to the complaint, customers are getting a lot less than X because of business decisions the company deliberately made in order to keep its capital expenditures as low as possible. This happened, according to the documents and statements revealed in the lawsuit, in at least three areas of Spectrum’s internet access business: squeezing more households into an inadequate number of narrow, shared neighborhood data connections; squeezing connections between Spectrum’s network and other networks; and squeezing consumers who should have gotten upgraded household equipment.
All of this was done to save money. Which is what corporations do. But here’s another thing that Spectrum did: Its marketing department kept sending out advertising claims to the public that didn’t match the reality of what consumers were experiencing or square with what company engineers were telling Spectrum executives. That gives the AG’s office its legal hook: Spectrum’s actions in knowingly saying one thing but doing another amount to fraudulent, unfair, and deceptive behavior under New York law.
Cable is in many ways an uncreative business—“like chicken in a grocery store,” as Comcast founder Ralph Roberts once said. The cable guys (today, mostly Comcast and Charter in the US, who together account for half of the 92 million high-speed internet access subscriptions in the country) have successfully implemented one basic, foolproof idea: locking up entire geographic markets by acquisition while scaling up rapidly as possible. With high numbers of subscribers all within clustered markets, costs per subscriber are vanishingly low, back office functions can be shared, programming can be bought at a bulk discount price (half or a third of what any smaller operator might pay), and competition can be avoided. Meanwhile, customers keep paying. Another week, another chicken.
All of these moves amount to building a very wide moat around Charter/Spectrum’s business within its footprint. In fact, as John Malone (now deeply involved in Charter’s management) put it about six years ago, “cable is pretty much a monopoly now.” The cable guys long ago divided up the country between themselves, and the only real competition Charter faces is in about 10 percent of its territory, from Verizon’s FiOS.
This is why Charter’s apparent actions, or inactions, are completely understandable. With no competition, it had no reason to upgrade its services. Indeed, the company’s incentives went exactly in the other direction: If you’ve got a monopoly, you’re in a position to make hay and drive up profits, dividends, and buybacks. Although the FCC in 2015 relabeled high-speed internet access as a regulated product, neither it nor state commissions have actually required particular levels of consumer service or reasonable prices.
But in order to avoid anyone getting the idea that oversight might be a good idea, Charter and Comcast have to uphold the fiction that their service is getting better and better in response to trumpeted “competition”—even if there isn’t any actual rival anywhere around. If everyone believes that services are improving, then there’s no need for government intervention. The market is providing! What a monopolist most desires is a quiet life.
That’s why Spectrum’s marketing and management teams let loose with ads claiming that consumers would get new X internet data speeds — “fast, reliable internet speeds.” The branding people went nuts, using adjectives like Turbo, Extreme, and Ultimate for the company’s highest-speed 200 or 300 Mbps download offerings.
But no one, or very few people, could actually experience those speeds.
Why? Because, according to the complaint, the company deliberately required that internet data connections be shared among a gazillion people in each neighborhood. Tying many households to a single narrow connection rather than increasing the bandwidth made available to those subscribers (or reducing the number of households in each service group) meant that when everyone logged in at night, traffic slowed to a crawl.
Not accounting for under-capacity also saved money when it came to the points where Spectrum’s network connected to other networks. Spectrum apparently intentionally declined to upgrade its doors to those other streams of traffic. (I wrote about this issue in “Jammed.”) So even though Spectrum subscribers were clamoring for that traffic, they were inexplicably getting wheels of buffering and experiencing slowdowns, lags, interruptions, and downtime. The traffic was being squeezed on its way into the network.
The squeezing even found its way inside customers’ houses. In order to avoid a capital outlay on upgraded cable modems, Spectrum kept outdated boxes in place for 800,000 New Yorkers. Those boxes weren’t even capable of transmitting and receiving wifi at the speeds the company advertised customers would be getting. The fact that the boxes were obsolete didn’t stop Spectrum from charging the outrageous monthly rental fee of ten dollars a month—an amount that the company picked because, well, it just could. Finally, in 2013, the company promised the FCC it would replace those older-generation modems, and persuaded the commission to exclude the poor results from speed tests of Spectrum services on this basis. Lucy with the football: Spectrum didn’t actually replace the modems.
The difference is that Lucy wasn’t breaking the law when she pulled the football away from Charlie Brown.
As the New York attorney general’s office puts it, “Spectrum relentlessly touted consistently fast internet speeds and reliable access to online content to solicit and retain subscribers. However, in reality, Spectrum-TWC knowingly failed to deliver on such promises.” As a result, New York subscribers have had to overpay month after month for services that Spectrum deliberately didn’t provide.
The AG is not a regulator. All his office can do is call Spectrum on its fraudulent and deceptive behavior. His lawyers can’t make rules or lower the barriers to actual competition. Indeed, in a world in which Spectrum faces little to no competition, now expects even less regulation than before, and has no need to spend money on better services, the lawsuit won’t by itself make much of a difference.
But maybe the public nature of the AG’s assault — charging Spectrum for illegal misconduct — will lead to a call for alternatives. Maybe it will generate momentum for better, faster, wholesale fiber networks controlled by cities and localities themselves. If that happened, retail competition would bloom. We’d get honest, straightforward, inexpensive service, rather than the horrendously expensive cable bundles we’re stuck with today.
Regulation seems off the table—but maybe local problem solving will make that future happen.
The Alternative Facts of Cable Companies was originally published in Backchannel on Medium, where people are continuing the conversation by highlighting and responding to this story.