INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------X THE PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, Plaintiff, SUMMONS Index No.: 450318/2017 -against- Plaintiff designates New York County as the Place of Trial CHARTER COMMUNICATIONS, INC. and SPECTRUM MANAGEMENT HOLDING COMPANY, LLC (f/k/a TIME WARNER CABLE, INC.), Defendants. ------------------------------------------------------------------------X TO THE ABOVE NAMED DEFENDANTS: YOU ARE HEREBY SUMMONDED to answer in this action and serve a copy of your answer on the Plaintiff’s attorney within twenty (20) days after service of this summons, exclusive of the day of service. If this summons is not personally served upon you, or if the summons is served upon you outside of the State of New York then your notice of appearance must be served within thirty (30) days. In the case of your failure to appear or answer, judgment will be taken against you by default, for the relief demanded in the complaint. Date Filed: January 31, 2017 1 of 87 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 INDEX NO. 450318/2017 RECEIVED NYSCEF: 02/01/2017 (5,& 7 6&+1(,'(50$1 $WWRUQH\ *HQHUDO RI WKH 6WDWH RI 1HZ 100% and then to market that we deliver more than promised speeds.” 217. The overprovisioning strategy manipulated the Sam Knows test by padding the test result average with scores from times when a service group was not heavily utilized—either because at the moment the test ran the service group was not congested, or because the service group was not heavily utilized in general—to compensate for the lower scores from service groups that were congested. 218. A 2013 Spectrum-TWC engineering presentation, which predated the decision to overprovision speeds by 20%, bluntly characterized the overprovisioning maneuver as putting “lipstick on a pig.” 219. As the presentation explained, overprovisioning masked the widespread deployment of deficient older-generation, single-channel modems, the prevalence of 46 51 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 heavily congested service groups and the poor physical health of neighborhood cable lines. 220. Overprovisioning boosted Spectrum-TWC’s average speed results in the FCC’s speed test measurements and concealed the underlying problems. SpectrumTWC’s manipulation of the FCC test helped the company mask the fact that SpectrumTWC consistently failed to deliver advertised speeds to most subscribers under typical service group utilization scenarios. D. Spectrum-TWC Misled Subscribers By Promising Wireless Speeds That It Knew It Could Not Deliver 221. Spectrum-TWC knew that its advertising reinforced subscribers’ expectations that they would experience the same Internet speed regardless of whether they connected through a wired connection or a wireless router. 222. For example, in a September 30, 2014 email, a senior customer service representative explained to other Spectrum-TWC executives, “[w]e are getting a ton of service calls in regards to slow wireless speeds, these customers have 300 down and only getting 50 down on wireless.” The representative continued: “[c]ustomer expectation vs. actual results is what we are trying to get some clarity on. Customers are paying for 300 down and they are expecting wireless to be close.” 223. Similarly, an internal Spectrum-TWC email dated July 8, 2015 noted: The concern is around MAXX customers (that have recently received their new MAXX HSD speeds) having the expectation that their WiFi enabled devices in their home (primarily mobile devices – tablets, smart phones, smart TV’s, etc.) will be able to achieve the same wire-line MAXX speed on all WiFi devices. This is leading to increased unnecessary truck [rolls] for customer education.16 (Emphases added.) 16 The reference to “truck rolls” described the need to dispatch a technician to the home to fix the problem. 47 52 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 224. RECEIVED NYSCEF: 02/01/2017 The promised wireless connectivity, however, defied the technical bounds of wireless technology. In the real world, wireless speeds were almost always slower, often much slower, than the high-speed plans Spectrum-TWC advertised. 225. The quality of the wireless connection was affected by distance, interference and the number of devices simultaneously accessing the Internet. 226. In fact, Spectrum-TWC’s engineers warned senior executives in a March 2014 presentation to “refrain from making any (implied) guarantees about wireless performance until we have a better way to measure it in the home.” 227. Spectrum-TWC nonetheless persisted with deceptive advertising, even though its executives acknowledged in internal communications that the company’s advertising would result in complaints from subscribers confused about why their wireless speeds were much slower than promised. 228. A Spectrum-TWC engineering presentation from February 2015, titled “WiFi and Home Networking” included the slide below, which implied that SpectrumTWC must address the proverbial elephant in the room that “Customers expect Ethernet connectivity, quality, speed and reliability from WiFi”:17 17 The “Ethernet” reference in the slide is to a wired connection. 48 53 of 87 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 229. INDEX NO. 450318/2017 RECEIVED NYSCEF: 02/01/2017 In another graphic from the same internal presentation, Spectrum-TWC’s engineers illustrated how subscribers on a 300 Mbps plan may only see “speed test results into the single digits” because of the various limitations on wireless speeds: 49 54 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 230. RECEIVED NYSCEF: 02/01/2017 Notably, the presentation pointed out that there was an “immediate degradation of speed” from the moment a wireless router was used in the subscriber’s home. 231. An internal Spectrum-TWC Customer Care Department fact sheet, dated January 29, 2016, discussed the myriad factors that eroded wireless connectivity, including the limited “Indoor Range” of Spectrum-TWC wireless routers, the “slower speeds” experienced when “multiple users” access content at once, and the adverse effects of interference. These same factors caused dead spots within a home where connecting wirelessly might be impossible at any speed. 232. Spectrum-TWC ignored these basic facts and instead continued to promise subscribers through advertising and other means that they could use a wireless connection to access “blazing fast speeds” “throughout the home.” 233. Spectrum-TWC also instructed its customer service representatives to reiterate the same false advertising claims with little or no qualification when interacting with subscribers. 234. A Frequently Asked Questions (FAQ) guide for Spectrum-TWC customer service representatives, which was current as of February 2016, provided the following demonstrably false guidance:  Question: “Will Wireless Home Networking affect the speed of my connection on any of my computers?” Answer: “Under normal usage, with a maximum number of computers on the network, the speed of your Internet connection should not be affected.”  Question: “What is the range of the wireless cable modem?” 50 55 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Answer: “In ‘real-world’ testing, users were able to connect from as far as 150 feet away – more than enough range to connect from just about anywhere in your home.”  Question: “How will multiple users affect the speed of my Internet cable modem?” Answer: “Under normal usage, the speed of your Internet connection should not be affected.” 235. Each of the above answers was false or misleading. 236. First, as noted above, wireless speeds were consistently slower than wired 237. Second, numerous factors reduced the speeds achieved wirelessly, speeds. including electronic interference, building materials, and other ordinary household conditions. 238. Third, when multiple devices attempted to simultaneously access a single wireless connection, they shared the available bandwidth. For example, if four devices simultaneously ran a speed test on a 20 Mbps connection, the maximum speed any one device could achieve would be 5 Mbps. 239. Consumer speed test data from thousands of tests run on the popular Speedtest.net website confirmed that Spectrum-TWC subscribers experienced a sharp drop in speeds when connecting wirelessly. 240. Table 5 below summarizes the Speedtest.net results of tests measured on handheld devices that relied exclusively on wireless connectivity for the period August 2015 to January 2016:18 18 Table 5 is constructed using a similar methodology to Table 3 above to represent the results of the Speedtest.net tests. It reports results taken from tests run on devices that use a mobile operating system, and therefore necessarily connected to the Internet wirelessly. 51 56 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Table 7: Speedtest.net Results For Handheld Devices (Aug. 2015 – Jan. 2016) Speed Plan Subscribers Who Took Tests Median Speed 50 Mbps 100 Mbps 200 Mbps 300 Mbps 43,390 11,328 15,572 6,669 29 Mbps 39 Mbps 41 Mbps 46 Mbps 241. The results show that the average subscriber on the 50 Mbps plan achieved about 29 Mbps, the average subscriber on the 100 Mbps plan achieved about 39 Mbps; the average subscriber on the 200 Mbps plan achieved about 41 Mbps; the average subscriber on the 300 Mbps plan achieved about 46 Mbps, or just over one-fifth of the promised speed. II. Spectrum-TWC Misled Subscribers By Promising Reliable Access To Online Content That It Chose Not to Deliver 242. Subscribers use the Internet to access online content, which can include Internet websites and applications like Facebook, YouTube and FreshDirect; gaming platforms like League of Legends; television shows and sports events through streaming video connections on Hulu or ESPN.com; and movies on sites like Netflix, to name a few examples. 243. During the Relevant Period, Spectrum-TWC served as a virtual gatekeeper to a subscriber’s access to such products and services available on the Internet. Not only did Spectrum-TWC have control over the equipment it leased to a subscriber and the bandwidth it made available to her, Spectrum-TWC also determined whether a subscriber had reliable access to online content because that content had to travel through SpectrumTWC’s interconnection points with backbone and content providers. 52 57 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 244. RECEIVED NYSCEF: 02/01/2017 Despite making reliable access to online content a cornerstone of its marketing during much of the Relevant Period, Spectrum-TWC did not maintain sufficient ports19 in its connections with backbone and content providers to process the ever-increasing volume of online content sought by its subscribers. 245. Spectrum-TWC’s decision not to install the required port capacity led to its interconnection points routinely becoming over-congested with traffic. 246. This congestion was the result of Spectrum-TWC’s deliberate strategy to use its own subscribers as leverage to extract fees from backbone and content providers. 247. As a result of this congestion, Spectrum-TWC subscribers faced the slowdowns, buffering, interruptions and other frustrations that Spectrum-TWC’s ads specifically promised would not exist when accessing online content, including Netflix, online games and other content featured in Spectrum-TWC’s advertising materials. A. Spectrum-TWC Represented That Subscribers Would Get Reliable Access To Online Content 248. Virtually every Spectrum-TWC advertisement for Internet service during the Relevant Period explicitly promised reliable Internet service, or made one or more of several concrete claims about the type of Internet service it would provide to its subscribers. 249. For example, Spectrum-TWC ads repeatedly told subscribers they could get Internet content with “no buffering,” “no slowdowns,” “no lag,” and that they could access online content “without interruptions,” “without downtime” and “without the wait.” 19 Ports are physical hardware sockets where one network can plug into another network through a fiberoptic wire. Ports are located at interconnection points between the ISP and backbone and content providers. Higher port capacity at an interconnection point allows more data to be transferred between networks at a given time. 53 58 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 250. RECEIVED NYSCEF: 02/01/2017 Often, Spectrum-TWC linked the company’s performance claims to popular Internet activities, like streaming movies on Netflix or playing online games. 251. In early 2012, to highlight its role in getting its subscribers popular online content, Spectrum-TWC launched an $80 million advertising campaign called “Enjoy better.” 252. As Spectrum-TWC’s Chief Marketing Officer explained at the time, the new campaign aimed to link Spectrum-TWC to “the things that consumers love to do and get through us” so that consumers would understand that “we help you get to things you love.” 253. Spectrum-TWC’s campaign ran extensively in New York and highlighted the popular online products and services that subscribers could access through SpectrumTWC’s Internet service. 254. Often, Spectrum-TWC’s commercials inserted the names of companies like Facebook and Netflix between “Enjoy” and “better,” so they read, for example, “Enjoy Netflix better.” 255. During this time, Spectrum-TWC also promised its customers that they could “Stream Netflix and Hulu movies and shows effortlessly” and “Watch YouTube video[s] without waiting.” 256. A Spectrum-TWC commercial in 2012 showed wireless devices reliably streaming movies and games, displayed logos for popular web services like Netflix, and featured a voiceover pledging that Spectrum-TWC would deliver: “Movies without downtime. Games without lag time. Do whatever you love with the best Internet around”: 54 59 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 257. RECEIVED NYSCEF: 02/01/2017 A mailer from 2013 promised: With Internet from TWC, you’re connected to everything you love to do online, faster. Streaming your favorites for movie night? With no buffering, you can spend more time watching and less time waiting. Getting your game on? You’ve got a true edge with all the speed you need and none of the lag. Your wait is over. Get ready to log on to the most instant Internet ever. (Emphases added.) 258. The 2013 mailer also pledged, without qualification, that subscribers could stream high-definition movies with “absolutely no buffering.” 259. Spectrum-TWC delivered a similar message to Spanish speakers. For example, a Spectrum-TWC mailer from 2013 (excerpted below) promoted the 30 Mbps “Extreme Internet” speed plan by assuring subscribers, among other things, that they could stream high-definition video content “sin demoras” (which translates as “without delays”): 55 60 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 260. RECEIVED NYSCEF: 02/01/2017 Similarly, a Spectrum-TWC mailing in 2015 specifically promised that subscribers could stream Netflix and Hulu “without interruptions:” 261. The second page of the mailing made the same claim in Spanish: “El redimiento que necesitas para transmitir y ver películas y programas en NetflixTM y HuluTM, sin interrupciones.” 262. In certain advertisements, Spectrum-TWC depicted the frustrations users commonly faced with a spotty and unreliable connection in an effort to induce consumers to sign up with Spectrum-TWC. 263. For example, a 2016 web commercial, shown in the screenshot below, promised “Fast, reliable, unlimited Internet” on screen while a voiceover assured consumers that they would receive Internet service that “includes much more than just a connection. It starts with our blazing fast, super-reliable connection.” The voiceover continued, “stream your favorite movies and TV shows with no buffering.” 56 61 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 264. RECEIVED NYSCEF: 02/01/2017 Based on these ads, a Spectrum-TWC subscriber would have expected to receive reliable access to online content in general and, in particular, to Netflix, online games, and the other popular content providers. Conversely, the same subscriber would have expected to avoid several specific hallmarks of an unreliable and underperforming Internet connection, including buffering, interruptions and lag time. B. Spectrum-TWC’s Failure To Add Port Capacity Deprived Its Subscribers Of Reliable Access To Online Content 265. Throughout the Relevant Period, subscribers’ demand for online content continued to grow exponentially, causing traffic flowing through Spectrum-TWC’s interconnection points to grow by 40% or more each year. 266. To keep up with this exponential growth in traffic, Spectrum-TWC needed to regularly add ports to its interconnection points to meet the growing content demands of its subscribers. 267. Spectrum-TWC knew that by failing to add more ports to its interconnection points with its backbone and content providers, its network would suffer 57 62 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 from interruptions and slowdowns during peak hours, and deprive its subscribers of reliable access to online content. 268. Despite making access to online content a central theme of its “Enjoy better” marketing campaign, Spectrum-TWC, for much of the Relevant Period, failed to maintain sufficient ports at its interconnection points with backbone and content providers. 269. Spectrum-TWC’s subscribers were effectively pawns in the company’s deliberate strategy to extract fees from backbone and content providers in exchange for granting access to Spectrum-TWC’s subscribers. 270. The high congestion levels at interconnection points had a foreseeable and measurable negative impact on the reliability of a Spectrum-TWC subscriber’s access to online content. 271. The effects of high congestion levels at interconnection points are measured by two metrics of Internet reliability: packet loss and latency. 272. Packet loss is when packets of data being communicated between networks fail to reach their destination. High levels of packet loss result in slower download and upload speeds, poor quality Internet phone services and pauses or interruptions when streaming media or playing games online. 273. Latency is the time for a data packet to go from a device to the content provider and back. High latency, also called “lags,” adversely affects the reliability of Internet service. A high-latency network connection could disrupt the performance of online gaming, videoconferencing, internet phone service, and streaming media services. 58 63 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 274. Spectrum-TWC used an industry rule of thumb to assess whether there was traffic congestion at an interconnection point. This standard generally dictated that ISPs should add more ports if over 70% of the interconnection ports’ capacity were utilized during peak hours. 275. At 70% port capacity utilization, ports may have episodes of congestion that result in slowdowns and interruptions for subscribers. The episodes of congestion increase in frequency and severity as port utilization approaches 90%, and can cause certain applications like streaming video and online gaming to stop working entirely. To continue with the highway analogy, if there are not enough access lanes to a bridge, that can cause a traffic jam. 276. At various times during the Relevant Period, Spectrum-TWC’s ports with certain of its backbone and content providers far exceeded the 70% threshold. 277. Table 8 provides a snapshot of the monthly peak hours port utilization for Spectrum-TWC’s top backbone and content providers between December 2013 and February 2014: Table 8: Monthly Peak Hours Port Utilization (2013-2014) Backbone/Content Provider XO Tata Akamai Level3 NLayer Cogent Dec. Jan. Feb. 91% 88% 73% 82% 87% 96% 92% 83% 73% 87% 89% 96% 92% 87% 81% 91% 80% 90% 59 64 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 278. RECEIVED NYSCEF: 02/01/2017 These high levels of port utilization with Spectrum-TWC’s backbone and content providers resulted in Spectrum-TWC’s subscribers failing to receive reliable access to online services and applications. C. Spectrum-TWC Promised Reliable Access To Online Content That It Intentionally Failed To Deliver In A Bid To Extract Fees From Backbone and Content Providers 279. At the same time it advertised reliable access to online content, Spectrum- TWC rolled out a new interconnection strategy that it knew would cause subscribers to experience the very performance issues that Spectrum-TWC’s ads promised they would avoid. 280. In 2011, with consumer demand for content poised to grow dramatically, Spectrum-TWC saw an opportunity to generate additional revenue by renegotiating its arrangements with its backbone and content providers. 281. Revisiting earlier arrangements, in which Spectrum-TWC often exchanged data with backbone and content providers for free, Spectrum-TWC now sought to make those providers pay Spectrum-TWC for access to its subscribers. 282. A March 2011 strategy document for senior management titled “Internet Economics” detailed Spectrum-TWC’s approach. 283. In that document, Spectrum-TWC outlined how ending such free arrangements “should eventually lead to longer-term revenue growth and cost containment.” 284. A senior Spectrum-TWC executive explained in an email a short time later that, as consumer demand for content exploded, the company wanted to take the opportunity to extract additional revenues from content providers: 60 65 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Our interconnect strategy these days, is more about how we manage our backbone and especially edge resources with the enormous growth in content. The transit costs are rounding errors compared to impacts to the edge of making the wrong decisions. We really want content networks paying us for access and right now we force those through transit that do not want to pay. (Emphasis added.) 285. Spectrum-TWC’s ability to control access to Spectrum-TWC subscribers gave it leverage over backbone and content providers in the negotiations. 286. Absent a payment, Spectrum-TWC could effectively “throttle” or limit the ability of backbone and content providers to deliver online content by either decommissioning ports or failing to maintain sufficient ports at interconnection points to handle the ever-increasing traffic load. 287. As a Spectrum-TWC executive observed in an internal email from 2013, its contentious relationships with its backbone and content providers “may be artificially throttling [subscriber] demand.” (Emphasis added.) 288. The specific tactic Spectrum-TWC used most frequently to limit port capacity was to refuse to add additional ports, thereby leaving its backbone and content providers to drop data packets or find a more circuitous route to transmit the traffic, which increases latency. 289. Internal documents from Spectrum-TWC confirmed that subscribers experienced the harm expected from Spectrum-TWC’s sharp interconnection practices. 290. In the second quarter of 2015, for example, as part of an effort to track the experience of subscribers, Spectrum-TWC surveyed its customers about certain reliability issues. In the prior 30 days: (i) 42% of subscribers reported an “interruption in Internet 61 66 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 service”; (ii) 37% of subscribers reported a “buffering problem”; and (iii) 25% experienced “Issue with streaming video content.” 291. These poor customer survey results were the predictable outcome of Spectrum-TWC’s strategy to extract revenues from backbone and content providers, at the expense of Spectrum-TWC’s subscribers. Spectrum-TWC Misled Subscribers By Falsely Promising 1. Reliable Access To Online Content Broadly 292. Content providers rely on several major backbone providers to carry their traffic to ISPs. 293. For example, one major backbone provider was Cogent. For much of the Relevant Period, Cogent and Spectrum-TWC had a dispute because Cogent refused to pay for access to Spectrum-TWC’s subscribers. 294. Spectrum-TWC responded to Cogent’s refusal to pay for access to its subscribers by delaying or avoiding capacity upgrades, which had the effect of throttling incoming traffic from Cogent. 295. Cogent explained the consequences of Spectrum-TWC’s actions to delay or avoid capacity upgrades in a letter dated July 29, 2015: The problem that exists today – packets dropping on the ground to the detriment of your customers and ours – is the direct and foreseeable result of TWC’s decision to cease upgrading peering capacity with Cogent . . . . This has been going on for more than two years. Our proposal is that the parties use all the tools to alleviate congestion . . . with each side bearing its own very small expense ($10,000 for a 10 Gbps port) of adding capacity. TWC has rejected that. (Emphasis added.) 296. As mentioned in the letter, Spectrum-TWC could have unclogged the congested interconnection ports with Cogent at any time for a relatively low cost of 62 67 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 $10,000 per 10 Gbps20 of additional capacity. But Spectrum-TWC did not do so for many years. 297. On one occasion during its dispute with Cogent, a senior Spectrum-TWC executive even suggested temporarily alleviating congestion with Cogent because high levels of congestion could have harmed Spectrum-TWC’s FCC test scores. 298. In an email, dated June 17, 2013, Spectrum-TWC’s head of strategy for Spectrum-TWC, suggested: Our Sam Knows scores are like watching a slow-motion train wreck. We need to get in front of this. One thing I think we may need to be prepared to do is just give more ports to Cogent during sweeps month [when FCC results are measured for purposes of the MBA report]. We don’t have to make any promises, we just have to make it work temporarily. (Emphasis added.) 299. As depicted in Chart 5 below, the average peak hour packet loss for traffic carried by Cogent to Spectrum-TWC subscribers from 2014 through 2015 was far higher than the packet loss experienced by subscribers to another major New York-area cable ISP that maintained sufficient port capacity with Cogent:21 20 21 “Gbps” is gigabits-per-second. Chart 5 was constructed using Cogent packet loss data. 63 68 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Chart 5: Cogent Ports Average Peak Hour Packet Loss (2014-2015) 300. Spectrum-TWC’s higher level of packet loss led to interruptions and slowdowns for its subscribers seeking content delivered through Cogent’s network. 301. Spectrum-TWC knew that during the pendency of its dispute with Cogent, Spectrum-TWC’s subscribers were not getting reliable access to online content, and were experiencing packet loss and high latencies. Despite its knowledge that it was not delivering the Internet services it had promised to its subscribers, Spectrum-TWC failed to take any steps to invest in additional port capacity for its network for much of the Relevant Period. 302. It was only after the FCC’s Open Internet Order required Spectrum-TWC to provide Cogent with equal access to its subscribers, did Spectrum-TWC resolve its 64 69 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 dispute with Cogent and agreed to add additional ports. Within a few months after it signed the agreement in October 2015, Spectrum-TWC added additional ports. This quickly reduced the level of packet loss and improved the experience of SpectrumTWC’s subscribers who consumed content delivered through Cogent. Spectrum-TWC Misled Subscribers By Falsely Promising 2. Reliable Access To Netflix 303. Between 2012 and 2014, Spectrum-TWC ran advertisements assuring subscribers they could “Enjoy Netflix better.” At the same time Spectrum-TWC ran these ads it was engaged in a long running dispute with Netflix that had a measurable negative impact on the quality of subscribers’ Netflix video streams. 304. During the Relevant Period, Netflix was one of the most popular sources of streaming video and was also a competitor to Spectrum-TWC’s own cable television offerings. 305. For much of the Relevant Period, Netflix accounted for over 40% of Internet traffic on Spectrum-TWC’s network. 306. Netflix could only deliver its content to subscribers through the last mile access network controlled by Spectrum-TWC. Netflix even offered to install for free its own equipment on Spectrum-TWC’s network to ensure smooth content delivery to subscribers. Spectrum-TWC, however, rejected that offer and sought payment from Netflix in exchange for unimpeded access to the last mile connection to Spectrum-TWC subscribers. 307. Absent a payment, Spectrum-TWC failed to maintain enough port capacity at interconnection points to handle the ever-increasing traffic load, and thereby, effectively limited the Netflix traffic flowing to Spectrum-TWC subscribers. 65 70 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 308. RECEIVED NYSCEF: 02/01/2017 While negotiations with Netflix were ongoing between 2012 and June 2014 (the “Dispute Period”), Spectrum-TWC did not inform subscribers about the negative effect that the protracted dispute with Netflix had on its subscribers’ ability to enjoy content from Netflix. 309. The negative effects of Spectrum-TWC’s bargaining tactics, which included deliberately failing to provide sufficient interconnection capacity to meet subscriber demand for Netflix, are reflected in Netflix’s time-weighted bit rate metric (“TWBR”). TWBR measures the average streaming video speed received by SpectrumTWC subscribers. Slower streaming speeds are associated with reduced picture resolution (e.g., from high definition to standard definition or lower), additional buffering and other video performance issues, including pixelated screens, interruptions and outages. 310. Netflix’s top high-definition streams traveled at a bit rate of about 4.8 Mbps. Standard definition streams traveled at speeds below 3 Mbps. 311. Chart 6 below shows that the quality of the Netflix video streams received by Spectrum-TWC subscribers dipped significantly during peak hours during the Dispute Period.22 This resulted in subscribers getting poorer quality streams during the very hours when they were most likely to access Netflix. 22 Chart 6 is constructed using Netflix data. 66 71 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Chart 6: Average Netflix Streaming Speed For Spectrum-TWC Subscribers (2012 - 2014) 312. In June 2014, Netflix finally agreed to Spectrum-TWC’s demands and paid for access to Spectrum-TWC’s network. In a few months, Spectrum-TWC upgraded its interconnection ports and the quality of Netflix streams for subscribers improved dramatically. 313. Spectrum-TWC knew that its refusal to add capacity to ports carrying Netflix traffic reduced the quality of Netflix content provided to its subscribers. 314. In an email to a Netflix employee, dated July 23, 2014, an employee of Spectrum-TWC expressed concern at the company’s poor streaming quality results and asked: “Do you have a high level explanation for that (that you’re at liberty to say)? I’m just wondering if there is something we need to address on our side (besides firing up the peering with you we have on deck).” (Emphasis added.) 315. Netflix’s response confirmed that “firing up the peering,” (in other words, adding ports) would solve the problem and explained that “[i]n the end, if you increase 67 72 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 hours of viewing at peak without having any more bandwidth available it results in lower speed per subscriber.” 316. An internal Spectrum-TWC presentation, dated February 2015, summarized the impact on various performance metrics after Netflix agreed to pay Spectrum-TWC for access to the last mile: 317. This table showed that once Netflix agreed in June 2014 to pay Spectrum- TWC, Spectrum-TWC subscribers’ average TWBR (referenced in the table as “TWC Avg. Stream Rate”) quickly jumped by 28%—from 2.49 Mbps in April 2014 to 3.18 Mbps in December 2014. The higher speeds improved picture quality and reduced buffering and other interruptions that Spectrum-TWC’s subscribers experienced. 318. Had Spectrum-TWC not reached a deal with Netflix, as represented in the column marked “December 2014 No Deal Assumption,” Spectrum-TWC calculated that subscribers would have continued to suffer by receiving slower, lower quality streams despite Spectrum-TWC’s promises to the contrary. Spectrum-TWC Misled Subscribers By Falsely Promising 3. Reliable Access To Online Games 319. In its advertisements, Spectrum-TWC made specific appeals to online gamers, featuring popular gaming systems in its advertisements and promising gaming 68 73 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 without “lag time.” However, for much of the Relevant Period, Spectrum-TWC’s interconnection practices led to many subscribers experiencing lag and other interruptions when playing online games. 320. One of the most popular online games during the Relevant Period was League of Legends, which was developed and published by Riot Games. League of Legends is a multiplayer, online battle arena video game. It was launched in October 2009 and rapidly grew in popularity. 321. As of January 2014, globally, over 67 million people played League of Legends per month, 27 million per day, and over 7.5 million concurrently during peak hours. In September 2016, Riot Games estimated that over 100 million people worldwide played each month. 322. Riot Games carefully tracked the latency of its servers and packet loss to measure its customers’ service quality. 323. In general, Riot Games specified a “stable latency” of less than 60 milliseconds and a packet loss of less than two percent to ensure a “good network experience.” 324. Latency above 100 milliseconds affected performance in key parts of the game, creating lag time that put Spectrum-TWC subscribers at a disadvantage to their gaming competitors on other ISP networks. Similarly, packet loss of more than two percent resulted in interruptions, buffering, and other performance issues. 325. Data from Riot Games confirmed that from at least September 2013, when Riot Games started to maintain this data, through August 2015, when Riot Games agreed 69 74 of 87 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 INDEX NO. 450318/2017 RECEIVED NYSCEF: 02/01/2017 to pay Spectrum-TWC for access, Spectrum-TWC subscribers did not enjoy a “good network experience.” 326. As reflected in Chart 7 below, Spectrum-TWC subscribers in New York experienced average latencies above 100 milliseconds when playing League of Legends until the summer of 2015:23 Chart 7: Average Latency For Spectrum-TWC Subscribers On League of Legends (Nov. 2013-Aug. 2015) 327. On average, these Spectrum-TWC subscribers experienced greater latency than subscribers of other New York-based ISPs. 328. Similarly, as shown in Chart 8 below, for most of the Relevant Period the packet loss experienced by Spectrum-TWC subscribers ran at or significantly above Riot Games’ two percent threshold: 23 Chart 7 and 8 are constructed using Riot Games data. 70 75 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 Chart 8: Average Packet Loss For Spectrum-TWC Subscribers On League Of Legends (Nov. 2013-Aug. 2015) 329. It was not until Riot Games agreed to pay Spectrum-TWC for access to its subscribers, that Spectrum-TWC agreed to connect its ports to Riot Games. Prior to this, Spectrum-TWC deprived its subscribers of reliable access to online content as promised. 330. This data confirmed that Spectrum-TWC’s network failed to deliver the reliable, interruption and lag-free gaming experience it had promised to subscribers. CONCLUSION 331. Throughout the Relevant Period, Spectrum-TWC 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. 71 76 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 332. Spectrum-TWC’s deceptive advertising and business practices induced New York subscribers to overpay month-in and month-out for Internet services that Spectrum-TWC deliberately refused to provide. FIRST CAUSE OF ACTION PURSUANT TO EXECUTIVE LAW § 63(12): REPEATED AND PERSISTENT FRAUDULENT CONDUCT 333. The OAG repeats and realleges paragraphs 1 through 332 as if fully set forth herein. 334. Executive Law § 63(12) authorizes the OAG to bring an action to enjoin repeated or persistent fraudulent conduct. 335. As set forth above, Defendants have engaged in repeated and persistent fraudulent acts, including but not limited to: a. Misrepresenting the speed of the Internet service consistently delivered to subscribers, including by: i. Leasing subscribers older-generation, single-channel modems and deficient wireless routers that were incapable of delivering the promised speeds; ii. Failing to allocate sufficient resources for Spectrum-TWC’s network to reliably deliver the speeds promised to subscribers, including by failing to reduce the size of service groups or to add additional channels to each service group; and iii. Promising subscribers wireless speeds that Spectrum-TWC could not deliver, including by omitting to disclose the real-world conditions that significantly limit wireless performance. 72 77 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 b. Misrepresenting the ability of subscribers to reliably access online content, including by: i. Failing to maintain sufficient port capacity to ensure that subscribers would not experience buffering, slowdowns, interruptions, lags, down times or other indicators of unreliable Internet service; and ii. Failing to maintain sufficient port capacity to ensure that subscribers could reliably access Netflix, online games and other specifically promised sources of content. 336. By these actions, Defendants have engaged in repeated and persistent fraudulent conduct in violation of Executive Law § 63(12). SECOND CAUSE OF ACTION PURSUANT TO EXECUTIVE LAW § 63(12): VIOLATIONS OF GENERAL BUSINESS LAW § 349: DECEPTIVE BUSINESS PRACTICES 337. The OAG repeats and re-alleges paragraphs 1 through 332 and incorporates them by reference herein. 338. Executive Law § 63(12) authorizes the Attorney General to bring an action to enjoin repeated illegal acts or persistent illegality in the carrying on, conducting, or transaction of business. 339. GBL § 349 prohibits deceptive acts and practices in the conduct of any business, trade, or commerce or in the furnishing of any service in the state of New York. 340. Defendants have engaged in repeated and persistent deceptive acts and practices, including but not limited to: 73 78 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 a. Misrepresenting the speed of the Internet service consistently delivered to subscribers, including by: i. Leasing subscribers older-generation, single-channel modems and deficient wireless routers that were incapable of delivering the promised speeds; ii. Failing to allocate sufficient resources for Spectrum-TWC’s network to reliably deliver the speeds promised to subscribers, including by failing to reduce the size of service groups or to add additional channels to each service group; and iii. Promising subscribers wireless speeds that Spectrum-TWC could not deliver, including by omitting to disclose the real-world conditions that significantly limit wireless performance. b. Misrepresenting the ability of subscribers to reliably access online content, including by: i. Failing to maintain sufficient port capacity to ensure that subscribers would not experience buffering, slowdowns, interruptions, lags, down times or other indicators of unreliable Internet service; and ii. Failing to maintain sufficient port capacity to ensure that subscribers could reliably access Netflix, online games and other specifically promised sources of content. 341. By these actions in violation of GBL § 349, Defendants have engaged in repeated and persistent illegality in violation of Executive Law § 63(12). 74 79 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 THIRD CAUSE OF ACTION PURSUANT TO EXECUTIVE LAW § 63(12): VIOLATIONS OF GENERAL BUSINESS LAW § 350: FALSE ADVERTISING 342. The OAG repeats and re-alleges paragraphs 1 through 332 and incorporates them by reference herein. 343. Executive Law § 63(12) authorizes the Attorney General to bring an action to enjoin repeated illegal acts or persistent illegality in the carrying on, conducting, or transaction of business. 344. GBL § 350 prohibits false advertising in the conduct of any business, trade, or commerce or in the furnishing of any service in the state of New York 345. Defendants have engaged in false advertising, including but not limited to: a. Misrepresenting the speed of the Internet service consistently delivered to subscribers, including by: i. Leasing subscribers older-generation, single-channel modems and deficient wireless routers that were incapable of delivering the promised speeds; ii. Failing to allocate sufficient resources for Spectrum-TWC’s network to reliably deliver the speeds promised to subscribers, including by failing to reduce the size of service groups or to add additional channels to each service group; and iii. Promising subscribers wireless speeds that Spectrum-TWC could not deliver, including by omitting to disclose the real-world conditions that significantly limit wireless performance. 75 80 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 b. Misrepresenting the ability of subscribers to reliably access online content, including by: i. Failing to maintain sufficient port capacity to ensure that subscribers would not experience buffering, slowdowns, interruptions, lags, down times or other indicators of unreliable Internet service; and ii. Failing to maintain sufficient port capacity to ensure that subscribers could reliably access Netflix, online games and other specifically promised sources of content. 346. By these actions in violation of GBL § 350, Defendants have engaged in repeated and persistent illegality in violation of Executive Law § 63(12). FOURTH CAUSE OF ACTION VIOLATIONS OF GENERAL BUSINESS LAW § 349 347. The OAG repeats and realleges paragraphs 1 through 332 as if fully set forth herein. 348. GBL § 349 prohibits deceptive acts and practices in the conduct of any business, trade, or commerce or in the furnishing of any service in the state of New York. 349. As set forth above, Defendants have engaged in deceptive acts and practices in violation of GBL § 349, including, but not limited to: a. Misrepresenting the speed of the Internet service consistently delivered to subscribers, including by: 76 81 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 i. Leasing subscribers older-generation, single-channel modems and deficient wireless routers that were incapable of delivering the promised speeds; ii. Failing to allocate sufficient resources for Spectrum-TWC’s network to reliably deliver the speeds promised to subscribers, including by failing to reduce the size of service groups or to add additional channels to each service group; and iii. Promising subscribers wireless speeds that Spectrum-TWC could not deliver, including by omitting to disclose the real-world conditions that significantly limit wireless performance. b. Misrepresenting the ability of subscribers to reliably access online content, including by: i. Failing to maintain sufficient port capacity to ensure that subscribers would not experience buffering, slowdowns, interruptions, lags, down times or other indicators of unreliable Internet service; and ii. Failing to maintain sufficient port capacity to ensure that subscribers could reliably access Netflix, online games and other specifically promised sources of content. FIFTH CAUSE OF ACTION VIOLATIONS OF GENERAL BUSINESS LAW § 350 350. The OAG repeats and realleges paragraphs 1 through 332 as if fully set forth herein. 77 82 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 351. GBL § 350 prohibits false advertising in the conduct of any business, trade, or commerce or in the furnishing of any service in the state of New York. 352. As set forth above, Defendants have engaged in false advertising in violation of GBL § 350, including, but not limited to: a. Misrepresenting the speed of the Internet service consistently delivered to subscribers, including by: i. Leasing subscribers older-generation, single-channel modems and deficient wireless routers that were incapable of delivering the promised speeds; ii. Failing to allocate sufficient resources for Spectrum-TWC’s network to reliably deliver the speeds promised to subscribers, including by failing to reduce the size of service groups or to add additional channels to each service group; and iii. Promising subscribers wireless speeds that Spectrum-TWC could not deliver, including by omitting to disclose the real-world conditions that significantly limit wireless performance. b. Misrepresenting the ability of subscribers to reliably access online content, including by: i. Failing to maintain sufficient port capacity to ensure that subscribers would not experience buffering, slowdowns, interruptions, lags, down times or other indicators of unreliable Internet service; and 78 83 of 87 INDEX NO. 450318/2017 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/01/2017 ii. Failing to maintain sufficient port capacity to ensure that subscribers could reliably access Netflix, online games and other specifically promised sources of content. PRAYER FOR RELIEF WHEREFORE, plaintiff requests an order and judgment: a. Permanently and preliminarily enjoining Defendants from violating the laws of the State of New York, including: Executive Law § 63(12); General Business Law §§ 349 and 350; b. Directing Defendants to produce an accounting of monies collected from consumers in New York paying for Internet services in violation of Executive Law § 63(12) or General Business Law §§ 349 and 350; c. Directing Defendants to disgorge all monies resulting from the fraudulent and illegal practices alleged herein; d. Directing Defendants to make full restitution to consumers and pay damages caused, directly or indirectly, by the fraudulent and deceptive acts and repeated fraudulent acts and persistent illegality complained of herein plus applicable pre-judgment interest; e. Directing Defendants to pay a civil penalty of $5,000 for each violation of GBL Article 22-A, pursuant to GBL § 350-d; f. Directing such other equitable relief as may be necessary to redress defendants’ violations of New York law; g. Awarding plaintiff costs of $2,000 pursuant to CPLR § 8303(a)(6); and h. Granting such other and further relief as the Court deems just and proper. 79 84 of 87 FILED: NEW YORK COUNTY CLERK 02/01/2017 12:05 AM NYSCEF DOC. NO. 1 INDEX NO. 450318/2017 RECEIVED NYSCEF: 02/01/2017 1HZ