Charter/Spectrum is already a bloated cable behemoth building toward monopoly. Now it wants to crush the union.
Hundreds of union members march in support of IBEW Local 3 (Credit: Getty/Drew Angerer)
BY BOB HENNELLY | SEPTEMBER 28, 2017
An ongoing strike by 1,800 members of the International Brotherhood of Electrical Workers (IBEW) Local 3 in New York, against the cable giant Charter/Spectrum, could well determine whether the American labor movement has a fighting chance for a revival. The strike has gone on for almost six months, and many of the union families face foreclosure or eviction. For decades, these workers worked with the company’s corporate predecessors, made a living wage, had decent benefits, sent kids to college and made profits for their employer.
But Charter/Spectrum is not your cable company of yesteryear. These striking workers are up against a multibillion-dollar behemoth that approaches being a 21st-century version of the Rockefeller Standard Oil Trust of the 19th century. How it got so big so fast is another example of our “regulators” — and too many of our elected officials — falling captive to whatever big capital requires to get bigger, no matter what the collateral damage. A couple of thousand New York-area families is nothing to this crew. It has grand designs on global domination. Just check out Charter/Spectrum’s board.
Charter/Spectrum is the nation’s fastest growing cable provider, and the second-largest, serving 25 million households spread out across 41 states. In New York City, it also owns NY1, the city’s dominant 24/7 cable news outlet. The architect of Charter/Spectrum's meteoric ascendancy from bankruptcy in 2009, to near national monopoly in many parts of the country, is Tom Rutledge, a cable executive who lives in Connecticut. Last year, he was awarded $100 million in compensation, mostly in stock options, which could make him (depending on which list you prefer) the highest-paid CEO in the United States.
According to the firm’s 10-K filing with the Securities and Exchange Commission, Rutledge and Charter/Spectrum racked up more than $60 billion in debt on a buying spree last year, which gobbled up Time Warner Cable and Bright House Networks. In March 2016, a large coalition of social justice, consumer groups and internet-access advocacy nonprofits urged the Federal Communications Commission (FCC) to reject what they called a “disastrous” deal. The groups included Common Cause, MoveOn.org, Media Alliance and the Free Press.
“As Internet access becomes increasingly indispensable for engaging in our 21st-century economy and democracy, further consolidation of cable providers does not serve the public interest,” the coalition wrote. “The transaction would result in the new Charter/Spectrum nearly equaling Comcast’s current size, and would create a national broadband duopoly. These two companies would control nearly two-thirds of the nation’s high-speed broadband subscribers, and would offer service to almost 80 percent of the country. People in roughly 60 percent of Charter/Spectrum’s vastly expanded territory would have no other realistic option but Charter/Spectrum for bundled high-speed Internet and video services.”
The coalition warned that the billions in debt that Charter/Spectrum was taking on would have serious consequences. “This additional debt burden of $1,142 for each customer would saddle the newly combined entity with an incredible $66 billion in debt. To repay that, and to satisfy its investors, the new Charter/Spectrum would have to raise its prices substantially — squeezing captive customers and forcing some offline.”
The letter continued, “As a recent Pew Research Center report found, broadband adoption rates are dropping, particularly for low-income households and communities of color. The main reason for this decline is high prices, which force people in marginalized communities to choose between paying for broadband and other necessities. If this transaction were approved, cities like Los Angeles, New York City, Dallas and Cleveland would see Black and Latino households and low-income families take the hardest hit from rate hikes.”
Around the country, Charter/Spectrum has more than 90,000 employees, but only about 2,500 are represented by a union. This appears to be an anomaly that IBEW Local 3 thinks the company wants to fix by breaking it. They figure that would be great bragging rights for Rutledge and his powerhouse board of directors, made up of other cable tycoons and private capital and private-equity fund partners at the very top of America’s ever-steeper wealth pyramid.
Longtime New Yorkers are stunned that Local 3 has been out on strike for so long in a city that has been the bastion of the union movement since the tragic Triangle Shirtwaist Factory fire in 1911, which left 123 dead, mostly young immigrant women. Today, unions are on the defensive around the country, where in 28 states — including such former strongholds as Michigan — there are “right-to-work” (anti-union) laws that used to be on the books only in the South.
In Wisconsin, within only a few years, Republican Gov. Scott Walker passed several laws to break the backs of public unions in his state; membership in public unions dropped by 70 percent and among teachers' unions by half. A pending U.S. Supreme Court case could have the practical effect of defunding public unions by undermining their ability to collect the dues that fund their operations and political-action campaigns.
While polls indicate that Americans' support for unions remains strong, and even stronger among younger adults, union membership is down dramatically from its peak in the 1950s, when 35 percent of workers were unionized. In 2016, that percentage was 10.7 percent. Over the last few decades, labor did make headway in organizing the government public sector, but it has lost ground there as well. Today, 34.4 percent of government workers are unionized; in the private sector, that proportion is just 6.4 percent.
Last week, several thousand union members staged a rally for the beleaguered Local 3. The AFL-CIO’s national president, Richard Trumka, was on hand and said that IBEW Local 3’s fight against Charter/Spectrum had become a national focal point for the broader labor movement. “This is a very profitable company trying to take away from employees and workers from every sector [represented] here today," Trumka said. "We have workers from as far away as New Orleans, who came here today to say enough is enough. These brothers and sisters of Local 3 have earned a fair share of what they produce, and it is time that this company came to the table and negotiated a fair deal with them.”
Over the last few years, Republicans in particular have tried to fracture the labor movement by casting public employee unions as the enemy of all taxpayers, including union households from private-sector unions like the building trades. While well-paid jobs with pension and health care benefits became harder to find throughout the economy, it became easier to target public employees as having benefits that no one else had. But it now appears that the IBEW Local 3 strike may be mobilizing the broader movement to come together — where it all started.
Before last week's rally got underway, New York’s Police Benevolent Association (PBA) president, Pat Lynch, said in an interview that both public and private sector unions were being squeezed with the same scarcity playbook. “Management practices their techniques on every worker. They try to say to these workers in the cable company, ‘give back your pension’ and ‘give back your health care’ to get a raise today,” Lynch said. “We should be able to feed our families today — and tomorrow after we move to retirement. The city does the same thing to us. So we have to stand together as unions to stop it here, because they will use it at my doorstep tomorrow.”
Lynch continued, “You will look here at this strike line, you’ll see our members in uniform are on one side of the barrier and the workers on the other; but our hearts are with the workers. We have a job to do, but we know their fight is our fight, so we will fight right along with you. What you will see is the brothers and sisters in uniform high-fiving the strikers as they march across this bridge. Regardless of whether we wear a uniform or a hardhat or an eight-point cap, it is all the same fight and we are here to join it.”
Gerard Fitzgerald, president of New York City’s Uniformed Firefighters Association (UFA), went so far as to warn Charter/Spectrum that if the cable giant failed to sign a fair deal with its striking workers, the UFA would appeal to its 8,500 members to “seek alternatives to your services for their cable and internet services.”
That admonition came in a letter from Fitzgerald to Rutledge, Charter/Spectrum’s chairman and CEO. “At a time when living expenses throughout the city have risen exponentially and unions have been continually targeted unfairly by employers, your company has continued to enjoy success and profits including an over 30-percent increase in the value of Charter/Spectrum’s stock in the last 12 months,” Fitzgerald wrote. “Given that the success of Charter/Spectrum cannot be independent of its employees, we urge you to do the right thing by the members of Local 3 and provide them with a fair contract.”
In New York Gov. Andrew Cuomo’s rally speech, he put the Local 3 strike in the context of a national erosion of “respect for the working men and women” who have actually lost ground in terms of wages, as the concentration of wealth at the top has accelerated. “What we have seen is . . . the real wages of working men and women in the middle class have gone backwards over the past 20 years. . . . In the 1980s, CEOs earned, on average, 34 times more than a worker. Today [the CEOs earn] 271 times what the workers are making.”
New York City Mayor Bill de Blasio also took aim at the vast wage disparity between Rutledge and his workforce, “It makes no sense that there is a CEO anywhere that makes almost $100 million,” de Blasio told the crowd. “That makes no sense, when working people are just scraping to get by. You would think the CEO would say, ‘How do we give you your fair share?’ But all he is saying is ‘how do we take away what’s yours.’”
In a statement, Charter/Spectrum said it had already offered substantial pay hikes to Local 3 but wanted to switch the union workforce away from Local 3’s benefits plan to “excellent and reliable, company-sponsored health and retirement benefits and end their exposure to union plans in financial risk, because of wildly optimistic investment assumptions.”
Digging into the fine print of Charter/Spectrum’s 10-K from late 2016, however, the cable behemoth’s business plan itself seems a tad risky. “Our significant amount of debt could have consequences, such as: impact our ability to raise additional capital at reasonable rates, or at all; make us vulnerable to interest rate increases, in part because approximately 13% of our borrowings as of December 31, 2016 were, and may continue to be, subject to variable rates of interest; expose us to increased interest expense to the extent we refinance existing debt with higher cost debt . . .”
Later on, the 10-K states that the company's financial situation may “require us to dedicate a significant portion of our cash flow from operating activities to make payments on our debt, reducing our funds available for working capital, capital expenditures, and other general corporate expenses; limit our flexibility in planning for, or reacting to, changes in our business, the cable and telecommunications industries, and the economy at large; place us at a disadvantage compared to our competitors that have proportionately less debt; and adversely affect our relationship with customers and suppliers.”
In addition to amassing enormous debt, the Charter/Spectrum business strategy relies on booking past huge losses as a way to reduce future federal tax liability, as “federal tax net operating loss carry-forwards” worth, as of Dec. 31, 2016, approximately $11.2 billion, “resulting in a gross deferred tax asset of approximately $3.9 billion.”
In January, New York Attorney General Eric Schneiderman filed suit against Charter/Spectrum for defrauding consumers about their internet speed and performance. “The complaint alleges that, since January 2012, [Spectrum-Time Warner’s] marketing promised subscribers who signed up for its Internet service that they would get a 'fast, reliable connection' to the Internet from anywhere in their home,” according to the attorney general’s press release. “But a 16-month investigation by the Attorney General’s office – which included reviewing internal corporate communications and hundreds of thousands of subscriber speed tests – found Spectrum-Time Warner subscribers were getting dramatically short-changed on both speed and reliability.”
In the 19th century, we had fearless cartoonists who depicted the avarice of that period’s “robber barons” like Vanderbilt, Rockefeller and Carnegie. Their lust for wealth and power squeezed working people and corrupted our politics; and their greed was graphically depicted, which helped raise the American political consciousness. At their most rudimentary, such cartoons showed these giants of finance sitting on top of the huddled masses, who were depicted as gaunt and penniless.
Americans got it. There were the predator capitalists and then there was everybody else. Those depictions paved the way for the great pushback that came in the form of trust-busting, the income tax, government regulation and the labor movement itself — which, more than any singular social development, raised generations of Americans out of poverty and into the middle class. It paid for college, law school, medical school and more.
But there was, and still is, a great American ambivalence about robber-baron scale wealth. The New York Times will publish one story after another about the ravages of our accelerating income disparity and wealth concentration, only to celebrate and cater to it in its real estate, fashion and lifestyle sections and in advertising. And just how many dewy-eyed TV profiles do we have to sit through, breathlessly recounting the philanthropy of billionaires?
In the 21st century, with the telecom-media conglomerates as the successors of the Gilded Age monopoly trusts looking to strangle us with the ever-higher price of being connected, we really need those pen-and-ink cartoons again.
This article first appeared in Salon.com. An online version remains in the Salon archives. Reprinted with permission.
Bob Hennelly is a reporter with the Chief-Leader , which has been covering the civil service and public unions since 1897. He is also the national affairs reporter for WBGO, the NPR affiliate in Newark, New Jersey. Follow him on Twitter: @stucknation