Siding against Charter, a New York appeals court ruled Thursday that the state attorney general can pursue claims that the company's broadband ads duped consumers.
The ruling upholds a decision issued earlier this year by New York County Supreme Court Justice Peter Sherwood, who ruled that the Federal Communications Commission's regulations about broadband didn't override New York state's consumer protection laws.
The legal dispute between dates to February 2017, when former Attorney General Eric Schneiderman alleged in a lawsuit that Time Warner fraudulently induced at least 640,000 subscribers in New York to purchase plans with speeds higher than the company could provide. (Charter purchased Time Warner in 2016 and subsequently renamed the company Spectrum.)
Ads for Time Warner's service allegedly included promises of a “blazing fast, super-reliable connection,” "no interruptions," and "no slowdowns," but subscribers actually experienced significant congestion, according to the Attorney General. The complaint includes allegations that subscribers on a plan promising 300 Mbps typically received 15% of the promised speed when connecting wirelessly.
The complaint also alleges that Time Warner didn't adequately prevent congestion -- apparently referring to Netflix subscribers' prior problems with choppy streams. (In 2014, Netflix largely resolved the issue by agreeing to pay providers extra fees in order to interconnect directly with their networks.) Time Warner also allegedly failed to provide many customers with modems capable of enabling web-surfing at the advertised speeds, according to the complaint.
Charter argued to Sherwood that the case should be dismissed for several reasons, including that its disclosures complied with the Federal Communications Commission's 2010 transparency requirements. Sherwood rejected the broadband provider's argument. Charter then asked New York's Appellate Division, First Department, to dismiss several of the Attorney General's claims.
The broadband company contended that its disclosures about broadband speeds were based on an FCC-approved methodology. "This case involves the Attorney General’s attempt to take statements the FCC defines as truthful and to redefine them as false under state law," Charter said in its legal papers.
The Appellate Division disagreed, writing that Sherwood "correctly rejected defendants’ argument that the claims based on allegations of false promises about broadband speeds involve an irreconcilable conflict between federal and state law."
The court added that the FCC's transparency standards don't override state laws against fraud and false advertising.
Advocacy group Public Knowledge, which sided against Charter in a friend-of-the-court brief, praised the appellate decision. The organization -- which has heavily criticized recent FCC decisions to abandon Obama-era broadband polices, including the net neutrality and privacy rules -- argued to the appellate court that state officials' authority to prosecute broadband providers "becomes especially vital when the federal watchdog elects to abdicate its responsibilities."
Public Knowledge senior counsel John Bergmayer stated that Thursday's ruling "bodes well for state efforts to protect broadband users generally."
He added: "Such efforts are especially important given the current FCC’s decision to abdicate many of its consumer protection responsibilities with respect to broadband.”
Charter said Thursday it will "continue to defend vigorously against these allegations."