FCC might ban early termination fees for pay-TV

FCC Chairwoman Jessica Rosenworcel is proposing a new set of rules that take aim at early termination fees and other "video service junk fees," all in the name of promoting competition in the pay-TV arena.

Rosenworcel's proposal, set for a vote at the FCC's December 13 open meeting, aims to banish early termination fees and "billing cycles fees" that require pay-TV subs to pay for a complete billing cycle even if they terminate service prior to the end of the cycle. The proposal also seeks rules that would require cable and satellite TV service providers to deliver credits and rebates after a consumer cancels video services.

Rosenworcel's announcement references cable and satellite but does not mention traditional telco TV services or a newer category of virtual multichannel video programming distributors (vMVPDs), such as YouTube TV, FuboTV and Dish Network-owned Sling TV, that allow customers to come and go from month to month. Light Reading has asked Rosenworcel's office for a clarification on those points.

Update: The FCC clarified that the proposal does not cover virtual MVPDs, but does include traditional pay-TV services offered by telcos.

'Limits their freedom'

In the announcement, Rosenworcel notes that pay-TV subscribers can terminate service for several reasons, including moving, financial hardship or poor service, but early termination fees require them to pay for terminating the service prior to its expiration date, "making it costly for consumers to switch services during the contract term." She feels that such fees limit customer choice and negatively impact video competition.

Related:FCC wants 'all-in' price for cable and satellite video services

"No one wants to pay junk fees for something they don't want or can't use. When companies charge customers early termination fees, it limits their freedom to choose the service they want," Rosenworcel said in a statement. "In an increasingly competitive media market, we should make it easier for Americans to use their purchasing power to promote innovation and expand competition within the industry."

Rosenworcel said the proposed rules follow an Executive Order on Promoting Competition in the American Economy that encourages the FCC to consider "prohibiting unjust or unreasonable early termination fees for end-user communication contracts; enabling consumers to more easily switch providers" in order to promote competition and lower prices. 

The proposal also arrives in the wake of the FCC's requirement for broadband operators to supply broadband nutrition labels and a separate proposal that seeks the "all-in" price on cable and satellite video services, including broadcast TV fees and regional sports programming surcharges.

Related:FCC to require ISPs to display broadband 'nutrition labels'