FCC Authority Over Pay-TV ‘Junk Fees’ Debated

Feb 06, 2024

By Ted Hearn, Editor of Policyband

Washington, D.C., Feb. 6, 2024 – The Federal Communications Commission is looking askance at certain billing practices of cable and satellite TV providers.

In comments filed with the agency yesterday, a key issue debated was this: Does the FCC even have the legal authority to abolish what FCC Chair Jessica Rosenworcel refers to as “junk fees?”

By and large, cities and consumer groups pointed to several provisions in federal law in support of regulation, while others from a free-market perspective described the crackdown on pay-TV fees as a form of rate regulation outside the scope of FCC authority granted by Congress.

“In a failed attempt at linguistic legerdemain, the [FCC] asserts that its proposals in fact are permissible ‘customer service requirements,’ not rate regulation,” Free State Foundation (FSF), a nonpartisan free market-oriented think tank, said in its comments. “Congress's prohibition on rate regulation can't be so easily negated in the service of promoting ‘Regulatory Bidenomics.’"

Public Knowledge (PK), an open Internet advocacy group, said in its comments that federal law provides specific and general authority for the FCC to protect consumers from paying unwanted pay-TV fees.

“[The FCC] provides a solid legal basis for its proposed rules. Specifically, the FCC has authority under Section 632 of the Communications Act to establish ‘standards by which cable operators may fulfill their customer service requirements,’” PK said.

Rosenworcel is going after early termination fees (ETFs) and billing cycle fees (BCF) used by cable and satellite in customer agreements. ETFs require customer payment for breaking a service contract early, and BCFs involve the denial of partial-month refunds to non-contract customers who drop service with time remaining on a monthly bill.

“The [FCC] makes a strong case that ETF and BCF regulations are ‘customer service’ rules, not ‘rate regulation,’” Public Knowledge said.

Under the Telecommunications Act of 1996, the FCC lost statutory authority in March 1999 to regulate the price of the cable programming tier that includes national services like ESPN, Fox News, and C-SPAN.

In 2015, the FCC itself ruled that every cable system in the country was subject to effective competition, denying local governments the authority to regulate the price of cable’s basic programming tier, which typically includes local TV stations and public access channels.

According to FSF, the FCC is engaging in rate regulation because an ETF ban would preclude long-term contracts that cost less than month-to-month plans. And, FSF adds, requiring prorated BCFs would mean cable and satellite would need to “establish a daily price for their service despite a statutory prohibition against rate regulation.”

Unlike cable, satellite carriers DirecTV and Dish have not been price regulated at the federal or state level, calling some to question the FCC's authority to intervene with ETF and BCF bans.

According to PK, federal law “allows the FCC to impose ‘public Interest’ requirements on DBS providers. Banning ETFs and BCFs for DBS falls within this authority because these fees work against the public interest, by inhibiting consumer choice and forcing payment for unwanted services.”