Time Warner Cable was hit with two class-action lawsuits in regard to its decision last month to charge its data customers a cable modem lease fee of $3.95 a month.
The lawsuits were filed in the Superior Court of New Jersey and the Supreme Court of New York. The lawsuits contend that Time Warner Cable didn’t give its customers a mandatory 30-day notice, and that the fee wasn’t included in existing customer agreements.
When Time Warner Cable announced a broader rollout of the fee on Oct. 15, the nation’s second-largest cable operator said subscribers could opt to buy their own modems from a pre-approved list, all of which were Motorola models, but the lawsuits also said that Time Warner Cable didn’t tell customers that their VoIP services wouldn’t work with the purchased modems.
The lawsuits seek an injunction to stop Time Warner Cable from applying the fee, which was originally instituted on a trial run in April. According to published reports, Time Warner Cable could raise $40 million a month and more than $500 million a year with the cable modem lease fees.
"It's a massive hi-tech consumer fraud accomplished by low-tech methods," attorney Steven Wittels said. "Send customers confusing notice of the fee in a junk mail postcard they’ll throw in the garbage, sock them with a $500-million-dollar-a-year rate hike, then announce on your website that customer satisfaction is your No. 1 priority. That’s some way to deliver satisfaction."
Time Warner Cable spokesman Alex Dudley said the company had no comment on the lawsuits or the projected amount of capital that the fees could raise. Dudley did say in an email to CED that there’s a provision in Time Warner Cable’s service agreement that prohibits class-action lawsuits.
Following the announcement of the fee last month, Time Warner Cable received some negative publicity after subscribers detailed their waits in long lines to return their leased modems to Time Warner Cable.
In the company’s third-quarter conference call earlier this month, Time Warner Cable President and COO Rob Marcus said about 3 percent of the company’s subscribers had elected to purchase their own cable modems instead of paying the fee.
“I would say, overall, the reaction has been entirely predictable,” Marcus said on the earnings conference call. “As with any rate increase, there are certain customers who do call in and resist taking the increase, but by and large, this is a more broad-based price increase than we generally do, in that it hits somewhere in the order of 80 percent to 90 percent of our customers. I think it's been very manageable, and we're pleased with the reaction so far.”
Other cable operators charge to lease cable equipment, including modems, set-top boxes and DVRs.