Key Points:

• Charter shareholders filed a class action alleging the company misled investors about broadband losses tied to the end of ACP.
• The company reported 117,000 broadband losses in Q2, with about 50,000 linked to ACP disconnects.

Charter Communications and some of its top executives are facing a federal lawsuit that accuses them of downplaying the potential impact that the loss of a short-term federal subsidy would have on its broadband Internet business.

The proposed class-action lawsuit was filed last week, and accuses Charter and its executives of trying to ease concerns over the loss of the Affordable Connectivity Program (ACP), despite knowing millions of its Spectrum Internet subscribers were receiving the benefit.

The ACP was activated in 2022, and was intended to help subsidize the cost of broadband Internet for low-income Americans who were increasingly working from home during the two-year coronavirus health pandemic. The program replaced a similar one called the Emergency Broadband Benefit, which ended the prior year.

Two out of five American households qualified for the program, and Charter was one of several broadband companies that allowed customers to enroll. Eligible households received a $30 discount on their home Internet service or comparable wireless service (but not both), and some companies, including Charter, offered a $30 per month plan for ACP recipients that effectively made the plan free.

The ACP program ended in June 2024 after Congress failed to renew the benefit, despite pleas from the broadband industry that warned millions of Americans might churn out due to a lack of affordability. Charter addressed the issue by launching a new, low-cost Internet plan called Spectrum Internet Assist that required customers to meet certain eligibility requirements — most who were receiving some form of government assistance qualified for the service.

But the low-cost plan wasn’t enough to convince subscribers to stay, and Charter has faced ongoing broadband customer losses since the expiration of the ACP, including from its most recent quarter when it lost 117,000 broadband customers, of which nearly 50,000 were once receiving ACP benefits.

The plaintiffs in the lawsuit claim Charter “made materially false and misleading statements that conditioned investors to believe the Company could manage and reverse the causes of Internet customer declines,” even though executives have been forthcoming with analysts that the expiration of the ACP was having long-term effects on its broadband business.

“From a year-over-year standpoint, you have newly acquired customers, who would have qualified for the ACP, who don’t have ACP today and therefore… have a higher non-pay rate than they would otherwise,” Chris Winfrey, the CEO of Charter, said on a recent conference call with investors.

A Charter spokesperson declined to comment on the lawsuit when reached by The Desk on Wednesday.

Charter is not in a unique position: Some of its peer telecoms, including Comcast (Xfinity) and Altice USA (Optimum) have also logged ongoing broadband subscriber declines during their recent financial quarters.