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FCC narrowly approves proposed rule to ban cable, satellite “junk fees”

The FCC wants early termination fees to become a thing of the past, but some question whether the agency has the authority to regulate those charges.

The FCC wants early termination fees to become a thing of the past, but some question whether the agency has the authority to regulate those charges.

The board of the Federal Communications Commission. (Still frame via web video)
The board of the Federal Communications Commission. (Still frame via web video)

The board of the Federal Communications Commission (FCC) this week is moving forward on a proposal that would, in theory, ban cable and satellite television companies from charging customers who want to break their service contracts.

On Wednesday, the FCC approved a notice of proposed rulemaking that would ban so-called “junk fees” charged by cable and satellite customers, including early termination fees (ETFs) that are passed along to consumers in their final bill if they decide to drop a service before the end of their contractual term.

Those service contracts are used by major cable and satellite TV companies to draw customers into their services, and typically carry long-term discounts on the normal retail cost of a television package along with other perks like free installation and equipment.

The trade-off for receiving these perks is customers agree to be locked into a service for a period of time — typically, one or two years — and affirm their willingness to pay an ETF if they want to end their service early.

Some companies waive those ETFs for long-term customers who face financial difficulties or who are moving to an area where a cable or satellite company does not or cannot provide their service. But the FCC feels the good will of the cable and satellite companies isn’t enough in the day of abundant, low-cost streaming cable replacements, most of which offer prepaid TV service without contracts.

“These friction-filled tactics to keep us subscribing to our current providers are aggravating and unfair,” said Jessica Rosenworcel, the FCC chairperson who has positioned herself as a fierce critic of the cable and satellite industry.

The FCC voted to approve the notice of proposed rulemaking along party lines, with three commissioners voting in favor and two opposing the measure.

FCC Commissioner Nathan Simington was one of two agency officials to cast a “no” vote on Wednesday. While delivering his prepared remarks, Simington said the anti-junk fee proposal would “reduce consumer choice” in the competitive pay TV marketplace “and won’t save consumers one thin dime.”

The notice of proposed rulemaking allows the FCC to gather on-the-record comments from key industry stakeholders and the greater public on the anti-junk fee measure. Some industry groups have already offered their thoughts on the matter, suggesting the FCC may lack the legal authority to regulate consumer fees as outlined in the proposal.

Earlier this month, the NCTA Internet & Television Association (NCTA) responded to a draft version of the notice by claiming the FCC “lacks the authority to adopt” the proposal. They also said a similar measure being floated by the FCC that would require cable and satellite companies to issue prorated credits or refunds if customers cancel their service during a billing cycle also falls outside the scope of the agency’s regulatory abilities.

“Banning whole-month billing would again put cable operators at a competitive disadvantage when cord-cutting is rampant,” the NCTA wrote in a December 6 letter, which was submitted to the FCC after an ex-parte meeting with some agency officials.

The NCTA continued: “Prohibiting ETFs and requiring pro-ration are both forms of rate regulation and are therefore prohibited given the nationwide presumption of effective competition.”

The comments strongly suggest that any rules regarding junk fees and service-related billing would face legal opposition if they were to pass.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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