(Bloomberg) -- New York State sued Charter Communications Inc. claiming it ripped off millions of customers with promises of faster Internet speed than the company knew it could possibly deliver.
Subscribers to the company's premium plan received Internet speed as much as 70 percent slower than guaranteed in advertisements by Time Warner Cable, which Charter acquired last year for $55 billion an renamed Spectrum, New York Attorney General Eric Schneiderman said Wednesday in a statement.
The suit, filed Wednesday in New York State Supreme Court, follows a 16-month probe that included reviewing internal corporate communications and hundreds of thousands of subscriber speed tests, according to the statement.
The investigation found Spectrum-Time Warner subscribers "were getting dramatically short-changed on both speed and reliability," essentially confirming "what millions of New Yorkers have long suspected," the statement said. Spectrum-Time Warner Cable has approximately 2.5 million subscribers across New York state, it said.
Justin Venech, a spokesman for Charter, said the company is disappointed with Schneiderman's decision to sue because it was based on service promises that were advertised before the company acquired Time Warner.
Timing Issue
"Charter made significant commitments to N.Y. state as part of our merger with Time Warner Cable in areas of network investment, broadband deployment and offerings, customer service and jobs," Venech said in a statement. "Charter has already made substantial investments in the interest of upgrading the Time Warner Cable systems."
The attorney general contends that despite rebranding as Spectrum, the company hasn't addressed hardware and network problems. Schneiderman claims that executives at Spectrum-Time Warner knew about the failures, but continued to make promises of higher speed to customers.
Schneiderman says the probe revealed the company earned billions of dollars in profits from selling its high-margin Internet service to millions of New York subscribers, while simultaneously declining to make capital investments necessary to improve its network.
Charter won final regulatory approval in May for its takeover of Time Warner Cable and a smaller cable provider, Bright House Networks. The deal gave Stamford, Connecticut-based Charter 13 million additional customers in cities including New York, Los Angeles and Dallas, becoming the closest competitor to U.S. market-leader Comcast Corp.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net. To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Paul Cox, Joe Schneider
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