FCC votes to crack down on cable and satellite TV 'junk fees'

The FCC voted Wednesday to plow ahead on new rules that take aim to protect consumers from "video service junk fees," including early termination fees and billing cycle fees.

The Commission passed the proposal in a 3-2 vote that fell along partisan lines. FCC Chairwoman Jessica Rosenworcel proposed the new rules last month, holding that such restrictions would help to promote competition in the pay-TV market.

Today's vote sets the stage for the FCC to seek public comments and replies before setting a vote on a final order that's expected to take place sometime in 2024.

If adopted, the rules could slap restrictions on early termination fees and billing cycles fees that require pay-TV customers to pay for a complete billing cycle even if they terminate service prior to the end of the cycle. The rules, which tie into President Biden's 2021 order to beef up competition across the US economy, also seeks to require cable and satellite TV service providers to deliver credits and rebates after a consumer cancels video services.

"These friction-filled tactics to keep us subscribing to our current providers are aggravating and unfair," Rosenworcel said at Wednesday's FCC meeting. "So today we kick off a rulemaking to put an end to these practices."

FCC Commissioner Nathan Simington, who joined fellow Republican Commissioner Brendan Carr in voting down the proposal, argued that the move won't save consumers "one thin dime" because pay-TV rates with early termination fees are more costly than no-contract, month-to-month plans. He also believes the rule will make it more difficult for cable and satellite TV operators to "compete in the unified marketplace."

They're already losing subscribers by the millions as consumers cut the cord on traditional pay-TV and instead opt for subscription-based or free Internet-delivered streaming services or turn to free, over-the-air broadcast TV. Leichtman Research Group estimates that the nation's top cable operators and other providers of "traditional" pay-TV services lost about 2 million subs in Q3 2023 alone.

Meanwhile, the NCTA – The Internet & Television Association has questioned whether the FCC has the legal authority to crack down on the Commission-labeled "video junk fees." PolicyBand reports that the cable industry is expected to challenge the FCC in court on the matter.

The NCTA reiterated today that it's not in favor of a ban.

"We look forward to participating in this proceeding to ensure it preserves consumer choice and competitive parity. For instance, we do not support banning consumers from choosing a service plan with discounted rates in exchange for long-term service agreements that may include early termination provisions," the NCTA said in a statement. "The FCC should understand that its proposals would amount to rate regulation and result in consumers having fewer options.”

The new video fees-focused rules do not cover virtual multichannel video programming distributors (vMVPDs), but do cover manage IPTV services delivered by telcos.

Rosenworcel previously has stated that regulatory authority over streaming services should come from Congress. A pair of House Republicans have also called on the FCC to resist the urge to regulate vMVPDs, arguing that Congress, not the FCC, has the authority to alter those rules, anyway.