FCC Votes To Pursue Rule Banning Early Termination Fees In Pay TV

The Federal Communications Commission on Wednesday voted to move forward with pursuing proposed rules changes that would ban cable and satellite providers from charging consumers for early termination of contracts and require them to issue pro-rated rebates or credits for the remaining days in a billing cycle when subscribers cancel before a contract expires.

Yesterday's vote, adopting a notice of proposed rulemaking (NPRM) filed in November by Democratic FCC chair Jessica Rosenworcel, means the proposed rule change will proceed to the public comment stage, followed by analysis of that feedback and a decision as to whether to proceed with a final rule.



During the vote yesterday, which was 3-2 along partisan lines, Rosenworcel reiterated that consumers are tired of “junk fees.”

The proposed requirements — which would not apply to the streaming services that are already driving a massive exodus of cable/satellite subscribers — empower consumer choice.

But pay-TV providers fear that they could serve to accelerate the exodus from traditional TV providers, in addition to delivering another financial hit. Given that high subscription fees are the primary driver of that exodus, providers may face something of a Catch-22 scenario, since raising fees again to cover the loss of termination fee income might also feed the flight to streaming services.

Republican commissioners voted against the proposal, asserting that it unfairly singles out cable and satellite providers, and would exceed the FCC's authority by veering into rate-making.

Cable industry trade group NCTA-The Internet & Television Association argued that the proposal would “deprive consumers of competitive options they currently enjoy and would raise cable operators’ costs of providing service while creating additional disparities between competitors in a hypercompetitive marketplace.” 

The association said that if the FCC implements the rule change, it should preempt state and local regulations around early termination fees. It also said it would seek to make sure that any rule change does not result in precluding operators from being able to offer consumers discounted rates in exchange for long-term service contracts.

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