FCC Sets New Rules to Eliminate Cable Industry’s ‘Deceptive Junk Fees’

The Internet and Television Association responded that the FCC actions were not beneficial for consumers.
FCC Sets New Rules to Eliminate Cable Industry’s ‘Deceptive Junk Fees’
The Federal Communications Commission’s hearing room in Washington, on Dec. 14, 2017. Brendan Smialowski/AFP via Getty Images
Naveen Athrappully
Updated:

The U.S. Federal Communications Commission (FCC) implemented new steps to combat “deceptive junk fees” in the TV industry by requiring service providers to mention the full cost of their service at the outset, including all charges.

On Thursday, the agency “adopted new rules requiring cable and satellite TV providers to specify the ‘all-in’ price clearly and prominently for video-programming service in their promotional materials and on subscribers’ bills,” the FCC said in a press release on March 14. The new rules aim to “eliminate the misleading practice of describing video programming costs as a tax, fee, or surcharge.” The agency pointed out that TV providers often use “deceptive junk fees” to hide the true final cost of their services. FCC actions will now seek to put an end to “this form of price masking, increasing competition and reducing confusion among consumers.”

The rules mandate direct broadcast satellite (DBS) providers to mention the total cost of their service, including broadcast retransmission consent, regional sports programming, and other programming-related fees. The cost must be mentioned as a “prominent single line item” both in the service’s promotional materials as well as customer’s bills.

The FCC noted that DBS providers often obscure charges in promotional materials, which creates “significant and costly” confusion among customers.

“This updated ‘all-in’ pricing format allows consumers to make informed choices, including the ability to comparison shop among competitors and to compare programming costs against alternative programming providers, including streaming services.”

FCC  Chair Jessica Rosenworcel said the agency’s records demonstrate that 24–33 percent of consumers’ bills at present are made up of special fees like “regional sports assessments” or “broadcast subscription.”

“It is not just annoying; it makes it hard for consumers to compare services in a market that is evolving and has so many new ways to watch,” she said. “No one likes surprises on their bill. The advertised price for a service should be the price you pay when your bill arrives.”

The Internet and Television Association (NCTA), a group representing TV networks and broadband providers, criticized the new FCC policy.

“Today’s misguided action will not help consumers and will only add confusion from government-imposed ad requirements. Cable providers offer clear and accurate pricing information to attract and retain subscribers, including ‘all-in’ pricing information before signing up for service,” it said.

“The FCC’s micromanagement of advertising in today’s hyper-competitive marketplace will force operators to either clutter their ads with confusing disclosures or leave pricing information out entirely. For consumers, it’s a lose-lose proposition.”

FCC’s Crackdown on Junk Fees

Some experts are not convinced that eliminating junk fees would be a good thing for consumers. Amit Bhattacharjee, associate professor of marketing at the Leeds School of Business at the University of Colorado Boulder, pointed out that such fees are typically not a huge component of the price of a product and are only an easy political target.

Businesses incur numerous costs in their operations and “if you prevent them from charging fees to cover those costs, it’s not like you somehow eliminate the costs themselves. Companies still have to incur them,” he said, according to a post published on the university website on Aug. 9.

“But if they can’t selectively charge fees to certain consumers or in certain situations and have to lump them into one uniform, all-inclusive price, that price will inevitably be higher for everyone else. It’s hard to legislate away economic realities.”

In addition to requiring “all-in” pricing, the FCC is looking at eliminating early termination fees from cable and satellite TV providers as well.

Early termination fees “require subscribers to pay a fee for terminating a video services contract before its expiration date, making it costly for consumers to switch services during the contract term,” the FCC said in a fact sheet.

The agency has “put forward rules to grant prorated credits or rebates for the remaining days in a billing cycle after the cancellation of service,” Ms. Rosenworcel stated.

Another change comes into effect next month when the FCC’s “Broadband Nutrition Labels” will be rolled out by broadband providers, which will provide customers with “easy-to-understand facts about service plans to help improve transparency and increase competition.”

The FCC is planning to lower costs and address the lack of choice for broadband services made available to apartments, public housing, condos, and other multi-tenant buildings.

“Too often, tenants living in these households are forced to pay high prices with limited choices for internet or other services. The chairwoman’s proposal would seek to eliminate ‘bulk billing’ arrangements imposed on tenants that impose a specific broadband service provider for their household,” the agency said.

“The proposal would also increase competition for communications service in these buildings by making it more profitable for competitive providers to deploy service in buildings where it is currently too expensive to serve consumers because tenants are required to take a certain provider’s service.”

The National Multifamily Housing Council criticized the proposal, warning that instead of boosting competition, “it would do the opposite.”

The proposal “runs in direct opposition to the historical federal investments and resources being poured into communities of all types to bridge the digital divide, by eliminating a cost effective, quick and reliable solution to improve broadband access and adoption,” the group stated.

Naveen Athrappully
Naveen Athrappully
Author
Naveen Athrappully is a news reporter covering business and world events at The Epoch Times.