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Charter Spectrum Wireless Service

This Tuesday, Sept. 4, 2018, photo shows Charter Communications, Inc.'s Spectrum trucks in the parking lot at a Spectrum customer center in Orlando, Fla. (AP Photo/John Raoux)

Consumers will receive refunds — and potentially free HBO or Showtime — after Charter/Spectrum reached a record settlement with New York Attorney General Barbara Underwood. 

The $174.2 million settlement followed a consumer fraud investigation and lawsuit filed by the attorney general's office last year. Charter/Spectrum was accused of defrauding internet customers by failing to provide internet speeds the company pledged to deliver to its subscribers. 

Charter/Spectrum also leased deficient modems and wireless routers to subscribers. The equipment, Underwood's office said, didn't deliver the internet speeds customers were promised. 

The hefty settlement includes $62.5 million in direct refunds to consumers, which is believed to be the largest payout from an internet service provider to consumers in U.S. history. More than 700,000 active Charter/Spectrum subscribers will receive a share of the settlement. They will each receive between $75 and $150, according to a news release. 

"This settlement should serve as a wake-up call to any company serving New York consumers: Fulfill your promises, or pay the price," Underwood said. 

The settlement terms outline how the refunds will be paid out. Charter/Spectrum will pay $75 to each of the more than 700,000 active subscribers who leased an inadequate modem or wireless router, or subscribed to a Time Warner Cable legacy speed plan of 100 Megabits or higher. 

Charter acquired Time Warner Cable in 2016. The purchase created the second-largest internet service provider in the U.S. 

Charter/Spectrum will pay an additional $75 to approximately 150,000 subscribers who had an inadequate modem for at least two years. 

The settlement requires the company to inform subscribers of their eligibility and disburse the refunds within 120 days. Subscribers who have already received refunds for inadequate modems won't be eligible for additional payments. 

The refunds won't be the only relief provided to consumers. Charter/Spectrum will be required to offer either three free months of HBO or six free months of Showtime to subscribers receiving cable television and internet service. Active internet subscribers will receive a free month of Spectrum TV Choice service, which provides access to broadcast TV channels and 10 cable networks, and a free month of Showtime. 

Charter/Spectrum has made improvements to its network, replaced modems and upgraded wireless routers since the attorney general's investigation commenced. 

The company is also required to adopt reforms to its business and marketing practices. One of the major changes is describing internet speeds in promotional materials as "wired" and informing consumers that wireless speeds may vary. 

As outlined in the settlement, Charter/Spectrum will be prohibited from making unsubstantiated claims about internet speeds for streaming, the reliability of its service and availability of wireless internet speed. 

Charter/Spectrum must provide consumers with new equipment if the current modem or router is inadequate, and the company must train customer service representatives about factors that may affect internet speeds. 

"We are pleased to have reached a settlement with the attorney general on the issue of certain Time Warner Cable advertising practices in New York prior to our merger, and to have put this litigation behind us," Charter/Spectrum said in a statement Tuesday. 

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