The Federal Communications Commission (FCC) yesterday proposed to eliminate video service “junk fee” billing practices by cable operators and direct broadcast satellite (DBS) providers.
Specifically, FCC Chairwoman Rosenworcel is targeting early termination fees for cable and DBS video services. The proposal does not cover virtual MVPDs, but does cover any entity providing cable service, which can include telcos.
While subscribers to streaming video services are prone to subscribe and unsubscribe constantly based on their budgets and what programming they’re currently most interested in watching, subscribers to cable and DBS video services are locked into monthly contracts.
The FCC’s announcement notes that TV video subscribers may want to terminate service for any number of reasons, including moving, financial hardship, or poor service. But early termination fees require subscribers to pay for an entire billing cycle’s service, even if they don’t want that service for the full billing cycle.
The FCC stated, “Because these fees may have the effect of limiting consumer choice after a contract is enacted, it may negatively impact competition for services in the marketplace."
“No one wants to pay junk fees for something they don’t want or can’t use,” said Chairwoman Jessica Rosenworcel in a statement.
Michael Grebb, VP and lead analyst with One Touch Intelligence, said these junk fees have been a point of contention for a while, and he pointed to a law in Maine that already requires video providers to prorate a customer’s final bill from the date they cancel. Charter Communications had challenged the law, but the Supreme Court declined to hear the challenge.
Grebb said since Charter failed in its attempt to overturn the Maine law, it's unclear whether the industry would want to battle the FCC on its new proposal. “The FCC probably views this as a feel-good vote that will be popular with consumers,” he said.
In terms of how much the elimination of junk fees might cost cable and DBS operators, Grebb said, “The financial impact of prorating the bill would be painful but not devastating, in my opinion. But if a large cable operator lost, say, 300,000 subs in a quarter, the cost of not completing all those billing cycles could still amount to several million dollars.”
The FCC’s proposal will be voted on during the Commission’s December 13 open meeting. If adopted by a vote of the full Commission, this action, called a Notice of Proposed Rulemaking, would:
- Propose to adopt customer service protections that prohibit cable operators and DBS service providers from imposing a fee for the early termination of a cable or DBS video service contract.
- Propose to adopt customer service protections to require cable and DBS service providers to grant subscribers a prorated credit or rebate for the remaining whole days in a monthly or periodic billing cycle after the cancelation of service.
If the proposal moves forward, the FCC will begin a comment period before deciding on next steps – including any final rules.
The FCC seems determined to protect consumers of video services. In March, it introduced a proposal that would require cable and satellite pay TV providers to give consumers a clear “all-in” price for video services to better understand what they’re paying for on their monthly bills.
The aim is to deter the practice of adding programming costs as a tax, fee or surcharge on consumers’ bills. The all-in proposal was adopted in June, and comments were recently filed. The Commission is reviewing those and considering next steps now.