November 15, 2012

Time Warner modem charge prompts two class-action lawsuits

Plaintiffs claim new leasing fee, estimated to generate $40 million a month for cable TV provider, violates company's customer contracts

By Ray Routhier
Staff Writer

When Cindy Peterson was told in October that she had to start paying $3.95 a month for a Time Warner Cable modem that she's had in her home for years, it was the last straw.

"I had had it with them," said Peterson, of New Gloucester. "I was paying about $122 a month (for cable TV and Internet). They keep raising the price, and it just wasn't worth it to me. So I switched (to other providers), and now I'm paying about half."

Time Warner's decision to start charging for modems that it previously provided for free didn't just rankle a lot of Maine customers like Peterson -- it prompted two national class-action lawsuits.

The lawsuits, filed in New York and New Jersey courts earlier this week, claim that Time Warner's new charges, which went into effect Nov. 1, are illegal because they violate the company's own contracts with customers.

Lawyers for the plaintiffs estimate that Time Warner is generating $40 million a month with the new modem fees. The main issue, says lead lawyer Steven L. Wittels of New York, is that the company didn't follow its own contracts with customers, and did not give 30 days' direct notice to all 10 million or so customers affected.

The suits include lead plaintiffs in New York and New Jersey, but are filed on behalf of customers in states where Time Warner operates, including Maine. Wittels said he would welcome more Time Warner customers from around the country to contact him about joining the suit.

Wittels called the modem lease payments a "massive hi-tech fraud accomplished by low-tech methods" because the company sent some customers postcard notice of the new fees, hoping they'd throw them away or be too confused to pay close attention.

Andrew Russell, a Time Warner spokesman in Maine, said the company would not comment on legal action. He also would not say how many customers in Maine have modems. (In July, when Time Warner was involved in a contract dispute with a network provider, company representatives said it had more than 360,000 subscribers in the state who received TV, phone or Internet service.)

Russell did say the modem lease fee is only charged to Time Warner Internet customers. However, customers also need modems for phone service through Time Warner, and phone service can affect the kind of modem a customer is required to use.

Wittels said the suit will also contend that Time Warner misled customers who use modems in several ways, including giving contradictory information about whether they can use their own modems for Internet service instead of Time Warner's.

"They expect customers to abide by the contract, but they never amended the contract. They tell you right in the contract they'll supply the modem," said Wittels. "Then they tell you can use your own modem, but if you don't want to be charged, you should return their modem. But the contract says you can keep that modem as long as you have service."

Wittels said Time Warner technicians have shown up at customers' homes and tell them they need to lease a Time Warner modem to support their services -- even though they bought their own modem from a list of "approved" modems listed on Time Warner's website.

Wittels said one hope of the lawsuit is that a judge will order an injunction stopping Time Warner from collecting the modem fees nationwide. Another hope is that eventually Time Warner customers will be reimbursed for those fees.

Modem fees are not uncommon, as other Internet and cable providers charge them. But the issue in the class-action lawsuits against Time Warner is that it allegedly violated its own contract with customers to hit them with a rate hike, said Wittels.

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