Cable TV companies tell FCC: Early termination fees are good, actually

A stack of $1 bills getting blown off a person's hand.

Getty Images | Jeffrey Coolidge

Cable and satellite TV companies are defending their early termination fees (ETFs) in hopes of avoiding a ban proposed by the Federal Communications Commission.

The FCC voted to propose the ban in December, kicking off a public comment period that has drawn responses from those for and against the rules. The FCC plan would prohibit early termination fees charged by cable and satellite TV providers and require the TV companies to give prorated credits or rebates to customers who cancel before a billing period ends.

NCTA-The Internet & Television Association, the main lobby group representing cable companies like Comcast and Charter, opposed the rules in a filing submitted Monday and posted on the FCC website yesterday. DirecTV and Dish opposed the proposal, too.

The NCTA claimed that banning early termination fees would hurt consumers. “Discounted plans with ETFs are an advantageous choice for some consumers,” the lobby group said. The NCTA said the video industry is “hyper-competitive,” and that it is easy for customers to switch providers.

“In response to these marketplace realities, some cable operators offer discounts for consumers who choose to agree to remain customers for a longer term,” the NCTA said. “Longer subscriber commitments decrease a cable operator’s subscriber acquisition costs and provide a more predictable revenue stream, which in turn enables a cable operator to offer discounted monthly rates.”

Cable companies also recently urged the US to scrap a “click-to-cancel” regulation that aims to make it easier for consumers to cancel services.

NCTA opposes partial-month credits, too

TV providers will be less likely to offer discounts to long-term customers if they are unable to impose early termination fees on those who want to cancel before a contract expires, the NCTA said. Customers who don’t want the possibility of an ETF can just choose a month-to-month plan, the NCTA argued.

The NCTA also defended whole-month billing in cases where customers cancel partway through a month. Whole-month billing “is the norm for many other common services, including gym memberships, gaming subscriptions, and online publications,” the NCTA said.

Taken together, “prohibiting ETFs and whole-month billing would increase prices and impair competition, to consumers’ detriment,” the NCTA claimed. The NCTA also claims the proposal amounts to rate regulation and is not allowed under the FCC’s legal authority to “establish standards by which cable operators may fulfill their customer service requirements.”

The proposed “ban on ETFs and a proration requirement are not ‘customer service requirements’ by any common understanding of the term,” the NCTA said.

The FCC proposal said that “customer service” isn’t defined in the 1984 Cable Act, but that the legislative history suggests the term includes rebates, credits, and other aspects of the relationship between providers and customers.

“Although section 632 specifies certain topics that must be addressed in the Commission’s cable customer service rules, such as ‘communications between the cable operator and the subscriber (including standards governing bills and refunds),’ the list is not exhaustive,” the FCC said. “Because section 632(b) states that the standards must address these topics ‘at a minimum,’ the Commission has broad authority to adopt customer service requirements beyond those enumerated in the statute.”

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