Charter Will Pay Record $174.2 Million to Settle Fraud Lawsuit Over Netflix, Internet Throttling

Communications company “ripped off” customers by knowingly providing slower-than-expected internet service, New York Attorney General Barbara Underwood says

Charter Communications

Charter Communications has agreed to pay a record $174.2 million — and provide customers with months of free HBO and Showtime — to settle a fraud lawsuit claiming it knowingly delivered slower internet speeds than promised to its subscribers, the office of New York Attorney General Barbara Underwood said Tuesday.

As part of the deal, Charter will directly pay $62.5 million to 700,000 customers — who will receive between $75 and $150 each — for providing internet service that fell well short of speeds it had offered. The payout is believed to be the largest consumer refund ever paid by an internet provider in U.S. history, according to Underwood’s office.

Charter will also provide more than $100 million worth of streaming service and premium channels to 2.2 million customers for no additional charge. The company will offer all internet and cable subscribers a choice of either three free months of HBO or six free month of Showtime as part of its settlement.

“This settlement should serve as a wakeup call to any company serving New York consumers: fulfill your promises, or pay the price,” Underwood said in a statement. “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.”

In 2017, the New York Attorney General charged Charter and Time Warner Cable, its predecessor, with knowingly delivering slower internet service than its customers expected, for five years. Charter knew it couldn’t meet the speeds it promised customers, the Attorney General’s office argued, and in some cases provided internet speeds that were 80 percent slower than advertised — making it impossible for customers to use Netflix and other streaming services.

Charter guaranteed subscribers would enjoy a “seamless” access to their favorite internet content, while simultaneously “engaging in hardball tactics with Netflix and other popular third-party content providers,” according to the Attorney General’s office. This “ensured that subscribers would suffer through frozen screens, extended buffering and reduced picture quality.”

The company will notify customers within 120 days of their eligibility for refunds and free services, as part of its settlement. Charter shares were down 1.7 percent in early trading on Tuesday, hitting $304 per share.