Seven months after the FCC proposed new rules that would eliminate “video service junk fees,” including early-termination charges, DirecTV is still pushing back.
In a letter just sent to the agency, DirecTV outside counsel Michael Nilsson said early termination fees (ETFs), which can range from $450 to $700, are necessary in a linear pay TV business that requires installation of pricey equipment.
“DirecTV does not charge customers ETFs after their first two years, unless a customer chooses to accept an offer with an ETF, such as a new equipment upgrade or a retention offer with a lower monthly price,” Nilsson wrote. “Without ETFs, DirecTV would likely be forced to require subscribers to pay equipment and installation costs up front, raise monthly prices or both.”
This “unintended consequence“ of the FCC’s notice of proposed rulemaking (NPRM) “would be to make switching to DirecTV considerably harder, particularly for low-income subscribers,” added DirecTV's bleeding-heart barrister.
The satellite TV operator also took aim at another part of the NPRM targeting so-called “billing cycle fees” (BCFs) — the FCC wants pay TV operators like DirecTV to give customers back a prorated refund for the remainder of the month if they canceled within a 30-day cycle they've already paid for.
Nilsson tried to clarify DirecTV’s position on BCFs, stating that such rules could hinder cable and satellite TV companies from competing with online video distributors (OVDs), which would face the same restrictions.
“If a subscriber’s monthly term starts on the first of the month, and she cancels service on November 15, she in theory pays for the rest of November (that is, until December 1) but not for December,” Nilsson explained. “In addition, subscribers do not require ‘lead time’ to make their cancellation effective (e.g., a subscriber who calls on November 30 will not be charged for the billing cycle starting December 1). DirecTV emphasized that imposing additional regulations on satellite and cable providers (which are losing market share) will further inhibit their ability to compete against OVDs (which are gaining market share), and could ultimately leave consumers with fewer video choices overall.”
Cable lobby NCTA–The Internet and Television Association sent a similar missive to the FCC back in February.
“We agree with NCTA that the commission should not adopt its ETF and BCF proposals but that, if it chooses to act, a better approach would be to prohibit only ‘unjust and unreasonable” ETFs,” Nilsson added. “Of course, the question then would be what is considered ‘unjust and unreasonable,’ and we offered our views that, at a minimum, ETFs used to permit consumers to pay for upfront costs over time should be considered at least presumptively just and reasonable.”
