NCTA: FCC Can’t Ban Cable ETFs, BCFs

Dec 08, 2023

By Ted Hearn, Editor of Policyband

Washington, D.C., Dec. 8, 2023 – The trade association for major cable TV companies says federal regulators are overreaching legally in trying to ban certain cable fees that President Biden has attacked as anti-consumer.

The trade group, NCTA – The Internet & Television Association, is telling Federal Communications Commission officials that the agency lacks legal authority to ban Early Termination Fees (ETFs) and Billing Cycle Fees (BCFs) – which are widely used by pay-TV providers, including streamers in the case of BCFs, but referred to as “junk fees” by Biden and FCC Chair Jessica Rosenworcel.

“The [FCC] lacks the authority to adopt either of the proposals,” and “are both forms of rate regulation and are therefore prohibited given the nationwide presumption of effective competition,” NCTA said in a Dec. 6 filing with the FCC to disclose details of discussions with aides to all five FCC Commissioners earlier this week.

The FCC ruled in 2015 that every cable TV system was deregulated, barring local governments for setting the price of cable's basic tier, which includes local TV stations.  Congress barred the FCC from regulating cable’s expanded basic tier – which typically includes ESPN, C-SPAN, CNBC, and Fox News – in March, 1999.

An Early Termination Fee is imposed when customers cancel service prior to the expiration of an existing service contract. A Billing Cycle Fee involves denial of pro rata refunds when customers cancel before the end of the month.

“An ETF is a ‘rate for the provision of cable service’ under the Cable Act because it is an amount of money that the customer agrees to pay a cable operator for the services and equipment provided by the operator, and this amount is integral to the rate structure of longer-term service plans,” NCTA said.

NCTA further explained that a BCF ban would unlawfully dictate a cable company’s retail rates.

“Banning ‘BCFs’ also regulates current customers’ rates for cable service by effectively requiring cable operators to offer service by the day, and by mandating that cable operators use the monthly price to determine the daily rate for service rather than some other rate,” NCTA said.

The FCC is expected to vote on the ETF/BCF bans at its Dec. 13 open meeting. Today, Rosenworcel published that meeting's agenda, placing the ETF and BCF bans as the first topic of discussion. The FCC is expected to adopt rules in 2024.

In a preview of the regulations, the FCC issued a notice last month saying ETF and BCF bans clearly fell within the agency’s consumer protection authorities within current federal cable law. NCTA pointed out that an ETF ban could have “the perverse effect” of harming consumers because ETFs involve long-term contracts that tend to reduce per-month service charges. 

Should the FCC go ahead with its plans, NCTA called for a national standard, urging the FCC to bar state and local regulation of ETFs and BCFs.

“A patchwork of state and local regulations would make it more difficult for cable operators – who operate on a franchise-by-franchise basis – to compete with nationwide DBS providers and online video distributors,” NCTA said.

Maine adopted a cable BCF ban in 2020 that Charter Communications fought in federal court in a losing cause. The U.S. Court of Appeals for the First Circuit held that Maine’s BCF was not impermissible cable service rate regulation. The U.S. Supreme Court declined to hear Charter’s appeal.

Rosenworcel’s plan also calls for banning satellite TV providers Dish and DirecTV from using ETFs and BCFs. NCTA’s filing did not discuss the FCC’s authority over satellite TV in this context.