Proposed Rule2023-28622
Promoting Competition in the American Economy: Cable Operator and DBS Provider Billing Practices
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 5, 2024
Issuing agencies
Federal Communications Commission
Abstract
The Federal Communications Commission (FCC) proposes to adopt customer service protection rules that prohibit cable operators and direct broadcast satellite (DBS) service providers from imposing early termination fees and billing cycle fees on subscribers. This document addresses certain billing practices of cable and DBS providers that penalize subscribers for terminating video service or switching video service providers, and seeks comment on proposals to further protect consumers and promote competition in the video programming marketplace.
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[Federal Register Volume 89, Number 4 (Friday, January 5, 2024)]
[Proposed Rules]
[Pages 740-747]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28622]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 25 and 76
[MB Docket No. 23-405; FCC 23-106; FRS ID 192513]
Promoting Competition in the American Economy: Cable Operator and
DBS Provider Billing Practices
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Federal Communications Commission (FCC) proposes to adopt
customer service protection rules that prohibit cable operators and
direct broadcast satellite (DBS) service providers from imposing early
termination fees and billing cycle fees on subscribers. This document
addresses certain billing practices of cable and DBS providers that
penalize subscribers for terminating video service or switching video
service providers, and seeks comment on proposals to further protect
consumers and promote competition in the video programming marketplace.
DATES: Submit comments on or before February 5, 2024. Submit reply
comments on or before March 5, 2024.
ADDRESSES: Federal Communications Commission, 45 L Street NE,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: For additional information on this
proceeding, contact Katie Costello, Policy Division, Media Bureau at
<a href="/cdn-cgi/l/email-protection#135872677a763d507c6067767f7f7c537570703d747c65"><span class="__cf_email__" data-cfemail="317a504558541f725e4245545d5d5e715752521f565e47">[email protected]</span></a> or (202) 418-2233.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking, (NPRM) FCC 23-106, adopted on December 13,
2023, and released on December 14, 2023. These documents will also be
available via ECFS <a href="https://www.fcc.gov/cgb/ecfs/">https://www.fcc.gov/cgb/ecfs/</a>). (Documents will be
available electronically in ASCII, Word, and/or Adobe Acrobat.) To
request these documents in accessible formats for people with
disabilities, send an email to <a href="/cdn-cgi/l/email-protection#96f0f5f5a3a6a2d6f0f5f5b8f1f9e0"><span class="__cf_email__" data-cfemail="20464343151014604643430e474f56">[email protected]</span></a> or call the Commission's
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice),
(202) 418-0432 (TTY).
Synopsis. Introduction. This Notice of Proposed Rulemaking (NPRM)
initiates a proceeding to consider certain billing practices that may
have the effect of inhibiting video service subscribers from choosing
the video services they want or result in consumers paying fees for
video services they did not choose to receive. We propose to adopt
customer service protections that prohibit cable operators and direct
broadcast satellite (DBS) service providers from imposing early
termination fees (ETFs) and billing cycle fees (BCFs) on subscribers.
We have initiated proceedings to review how the Commission's existing
cable customer service standards may be updated to protect consumers
from misleading pricing and be applied to DBS providers. This item
builds upon those efforts and addresses additional junk fee billing
practices of cable and DBS providers that penalize subscribers for
terminating video service or switching video service providers, and
further protects consumers and promotes competition in the video
programming marketplace.
Background. Billing Practices. ETFs require subscribers to pay a
fee for terminating a video services contract prior to its expiration
date, making it costly for consumers to switch services during the
contract term. Because an ETF may have the effect of limiting consumer
choice after a contract is enacted, it may negatively impact
competition for services in the marketplace. This billing practice has
been used by video service providers for some time and, in 2008, the
Commission heard from expert panelists regarding the use of ETFs by
communications service providers, including representatives from cable
and DBS providers. More recently, the Executive Order on Promoting
Competition in the American Economy encouraged the Commission 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.
BCFs require video service subscribers to pay for a complete
billing cycle even if the subscriber terminates service prior to the
end of that billing cycle. As such, BCFs penalize consumers for
terminating service by requiring them to pay for services they choose
not to receive. Video service subscribers may terminate service for any
number of reasons, including moving, financial hardship, or poor
service. Recently, some states have enacted laws restricting BCFs. The
U.S. Court of Appeals for the First Circuit in Spectrum Northeast, LLC
v. Frey recently decided that one such BCF regulation imposed by the
State of Maine was not impermissible cable service rate regulation.
Likewise, the Supreme Court of New Jersey recently reached the same
conclusion regarding a similar New Jersey statute in the Alleged
Failure of Altice case.
Customer Service Standards. The 1984 Cable Act added Title VI to
the Communications Act of 1934 (Act). Section 632, entitled ``Consumer
Protection,'' addressed one particular type of consumer protection--
``customer service requirements,'' providing specifically that ``[a]
franchising authority may require . . . provisions for enforcement of .
. . customer service requirements . . .'' Although the term ``customer
service'' is not defined in the statute, the legislative history of the
1984 Cable Act defined ``customer service'' as ``the direct business
relation between a cable operator and a subscriber'' and ``customer
service requirements'' as including requirements related to ``rebates
and credits to consumers.'' In 1992, Congress amended section 632 to
``provide protection for consumers against . . . poor customer
service'' in part by requiring the Commission to ``establish standards
by which cable operators may fulfill their customer service
requirements.'' The legislative history of the 1992 Cable Act explained
that Congress considered cable customer service ``an area of paramount
concern,'' and that the standards are intended to ``provide increased
consumer protection.'' In 1993, the Commission implemented this mandate
in section 76.309 of its rules, adopting baseline customer service
requirements for cable operators. Although section 632 specifies
certain topics that must be addressed in the Commission's cable
customer service rules, such as ``communications between the cable
operator and the subscriber (including standards governing bills and
refunds),'' the list is not exhaustive. Because section 632(b) states
that the standards must address these topics ``at a minimum,'' the
Commission has broad authority to adopt customer service requirements
beyond those enumerated in the statute. Indeed, when enacting its
customer service standards, the Commission noted that ``we reserve the
right to respond to particular circumstances brought to our attention
to ensure that customer service satisfaction is achieved nationwide.''
With regard to DBS providers, section 303(v) of the Act grants the
Commission ``exclusive jurisdiction to regulate the provision of
direct-to-home satellite services,'' and section 335(a) provides broad
statutory authority to the Commission to impose ``public interest or
other requirements for providing video programming'' on DBS providers.
While the Commission has not adopted specific customer service
obligations for
[[Page 741]]
DBS providers as it has for cable providers, it has adopted rules
implementing other public interest obligations.
Discussion. Consistent with the objectives outlined above, we seek
comment on our tentative conclusions with respect to ETFs and BCFs. As
more thoroughly discussed below, this includes the scope and substance
of our proposed rules, our legal authority to adopt these rules, the
benefits and impacts of the proposed rules, and the extent to which any
alternatives could achieve our policy goals.
Proposed Rules. First, we propose to prohibit cable and DBS service
providers from imposing a fee for the early termination of a cable or
DBS video service contract. To the extent that the existing terms of
service between a cable operator or DBS provider and its subscriber
provide for an ETF, we seek comment on whether to deem such a provision
unenforceable if we were to prohibit ETFs. We seek comment on this
proposal to regulate video service ETFs. We tentatively find that our
proposed prohibition on ETFs is a reasonable customer service
requirement in an area, billing practices, where the Commission
receives hundreds of complaints annually. When the Commission first
established its customer service standards, it acknowledged that a
``key objective'' of the Act was to ``ensure that cable operators
nationwide provide satisfactory service to their customers.'' We
tentatively find that the imposition of ETFs inhibits subscribers from
switching providers and making choices about the video services they
wish to receive. We tentatively find that the prohibition of ETFs will
create a standard that protects consumers from a billing practice that
may effectively limit their ability to switch video service providers.
Limiting such restrictions imposed on consumer choice could serve the
public interest by allowing consumers to freely choose among providers,
which promotes vibrant competition in the market for video services and
encourages providers to maintain high customer service standards to
retain subscribers to their service. Although in the past video service
providers have generally claimed that ETFs decrease overall consumer
costs, individual consumers maintain in general that ETFs are
unreasonably restrictive. We tentatively find that our proposed rule
preventing ETFs will protect consumers from billing practices that may
deter or make it more difficult for consumers to switch providers, and
thereby impede competition in the video marketplace. We seek comment on
these tentative conclusions.
We also propose to require cable and DBS service providers to grant
subscribers a prorated credit or rebate for the remaining whole days in
a monthly or periodic billing cycle after the cancellation of service.
We seek comment on this proposal, and whether the specific language
reflects our intent of relieving a subscriber from payment obligations
as of the date the provider receives a cancellation request. To the
extent that the existing terms of service between a cable operator or
DBS provider and its subscriber provide for a BCF, we seek comment on
whether to deem such a provision unenforceable if we were to prohibit
BCFs. We tentatively find that this prohibition on BCFs is a reasonable
customer service requirement because this practice requires consumers
to pay for service they no longer wish to receive. As with ETFs, we
tentatively find that prohibition of BCFs will create a standard that
protects consumers from poor customer service, specifically, paying for
services that have been cancelled, and that such a standard will serve
the public interest by protecting consumers from unfair billing
practices. BCFs impose significant costs on consumers for services they
have cancelled and no longer wish to receive. For instance, based on
the average price for cable service, subscribers cancelling mid-billing
cycle could pay a significant price even after cancelling their
service: the average monthly price for basic tier cable service is
$42.63, for expanded basic tier service it is $101.54, for the next
most popular cable service tier it is $115.67, and the price for
services comparable to expanded basic tier service from DIRECTV and
DISH average $123.52 and $90.44 per month, respectively. We tentatively
find that our proposed rule preventing BCFs will protect consumers from
charges for cancelled cable or DBS service they no longer want. We seek
comment on these tentative conclusions.
Legal Authority. We seek comment on our authority to adopt ETF and
BCF regulations for cable and DBS providers. We tentatively conclude
that adoption of restrictions on both ETFs and BCFs is a proper
exercise of the Commission's authority under section 632 to ``establish
standards by which cable operators may fulfill their customer service
requirements.'' Section 632(b)(3) directs the Commission to establish
standards governing ``communications between the cable operator and the
subscriber (including standards governing bills and refunds).'' Because
ETFs and BCFs involve cable operators' billing and refund practices, we
tentatively conclude that these are customer service matters within the
meaning of section 632(b)(3). In addition, we tentatively find that we
may regulate these practices under our general authority in 632(b) to
establish ``customer service'' standards. Although the term ``customer
service'' is not defined in the statute, the legislative history
defines the term ``customer service'' to mean ``in general'' ``the
direct business relation between a cable operator and a subscriber,''
and goes on to explain that ``customer service requirements'' include
requirements related to ``rebates and credits to consumers.'' We
tentatively conclude that the proposed restriction on ETFs and BCFs
satisfies the definition of a ``customer service requirement'' because
billing practices governing the termination of service, such as ETFs
and BCFs, involve the ``direct business relation between a cable
operator and a subscriber.'' Additionally, we tentatively find that
pro-rata refunds are properly considered ``rebates [or] credits'' given
to consumers, which, according to the legislative history, are customer
service matters. Furthermore, the list of topics Congress required the
Commission to address in terms of customer service was not exhaustive.
We tentatively conclude that fees--both those inhibiting subscribers
from making choices about the video services they wish to receive and
those imposing significant costs on consumers for services they did not
choose to receive--are precisely the type of customer service concerns
that Congress meant to address when it enacted section 632. Thus, we
tentatively find that restrictions on such practices are within the
statute's grant of authority. We seek comment on this analysis. We also
seek comment on whether there are alternative or additional statutes or
arguments that provide a legal basis for our authority to adopt this
customer service requirement for cable operators.
We also seek comment on our authority to adopt ETF and BCF
regulations for DBS providers. We tentatively find that restrictions on
ETFs are in the public interest because the fees unreasonably inhibit
competition and consumer choice among video service providers. We
tentatively find that restrictions on BCFs are in the public interest
because the practice imposes fees on subscribers for services that they
did not choose to receive and that the fees can be significant.
Excluding DBS from these rules would mean that their subscribers would
remain vulnerable to these practices. Do
[[Page 742]]
we have authority under section 335(a) to adopt ETF and BCF regulations
for DBS providers? Do we have authority under other provisions of Title
III? We also seek comment on whether we have--and should exercise--
ancillary authority under section 4(i) of the Act to adopt such
regulations and whether it is necessary to undertake this regulation
for the Commission to effectively perform its responsibilities under
the foregoing primary sources of statutory authority? By doing so, we
will ensure uniformity of regulation between and among cable operators
(regulated under Title VI and by various state consumer protection laws
and local franchising provisions) and DBS providers (under Title III),
thereby preventing DBS providers from gaining a competitive advantage
over their competitors through the use of ETFs and BCFs. We seek
comment on this analysis. We also seek comment on whether there are
alternative or additional statutes or arguments that provide a legal
basis for our authority to adopt these customer service requirements
for DBS providers.
Finally, as noted above, based on the language and structure of
section 632, Congress authorized the Commission to establish customer
service requirements, and franchising authorities to adopt additional
laws above and beyond the Commission's baseline requirements.
Therefore, we tentatively find that this proposed rule would not
preempt existing state and local laws that prohibit ETFs and BCFs or
otherwise exceed the requirements we adopt in this proceeding, so long
as they are not inconsistent with Commission regulations. We seek
comment on this analysis.
Rate Regulation versus Customer Service Regulation. In Spectrum
Northeast, LLC v. Frey, the First Circuit determined that a state
regulation prohibiting BCFs substantially similar to the prohibition we
propose here is not rate regulation pursuant to the Act. We tentatively
conclude that this same analysis (as described in further detail below)
applies to our proposed BCF prohibition. We seek comment on this
tentative conclusion. While Spectrum Northeast, LLC v. Frey addresses
the issue of whether a BCF prohibition is impermissible rate
regulation, the court did not address ETFs. We tentatively conclude
that cable ETF regulations are not rate regulations under section 623
of the Act. We seek comment on this tentative conclusion. The statute
does not define the term ``rates'' or explain the meaning of the phrase
``rates for the provision of cable service'' for purposes of section
623. Historically, the Commission's cable rate regulations have not
covered service termination fees or termination rebates. The Commission
has previously found the regulation of fees similar to the proposed
regulation of ETFs and BCFs is not rate regulation. For instance, the
Commission has found that limits on late fees are considered customer
service regulation and not rate regulation. And, in practice, the Media
Bureau and its predecessor bureau (the Cable Services Bureau) have
found that local regulations similar to the proposed ETF and BCF
regulations herein, were not properly categorized as rate regulation
and therefore not pre-empted. Such findings have included local
regulations that address unreturned equipment fees, pay-by-phone fees,
late fees, returned check fees, and other miscellaneous cable
subscriber charges that were found not to be included as part of the
Commission's rate regulations. Thus, we tentatively conclude that
Commission practice and precedent supports the notion that ETF
regulations also are not rate regulation.
Furthermore, our tentative conclusion is consistent with recent
court precedent. In the First Circuit's recent decision in Spectrum
Northeast, LLC v. Frey, the court determined that a state BCF
regulation is not rate regulation pursuant to the Act. The Maine
regulation was enacted after a cable company implemented a new practice
of declining to provide refunds when cable service was terminated prior
to the end of a billing cycle. The regulation then required cable
operators to issue prorated credits or rebates for the days remaining
in a billing period after termination of cable service. The court
determined that the federal preemption of cable rate regulation ``did
not extend to the regulation of termination rebates'' and concluded
that the Maine law is not a law governing ``rates for the provision of
cable service'' but rather is a ``consumer protection law'' that is not
preempted. The court based its decision on four aspects of the
structure and legislative history of the Act. First, the court
explained that the legislative history of the Act and the Commission's
regulations ``focused on preempting monthly `rates' charged for the
provision of basic cable service'' and do not ``suggest that the term
`rates for the provision of cable service' includes termination fees or
termination rebates.'' Second, the court noted that Congressional
silence concerning termination fees or rebates is ``particularly
significant'' because Congress included regulation of rates for
``installation'' fees, but not termination fees, as rates ``for the
provision of cable service.'' Third, the court observed that Congress
acknowledged multiple potential sources of competition but did not
identify termination credits as being controlled by effective
competition. Instead, termination credits encourage competition ``by
prohibiting cable companies from creating artificial barriers to
switching between competitors by charging consumers beyond termination
of service.'' Finally, the court found that Congress expressed a
purpose to ``preserve state consumer protection laws'' despite
preempting the regulation of ``rates for the provision of cable
service,'' and this favors ``a narrow reading of the scope of the
preemption provision.''
The New Jersey Supreme Court also recently concluded that a New
Jersey statute banning BCFs was not rate regulation preempted by
federal law. The New Jersey code states that ``[b]ills for cable
television service shall be rendered monthly, bi-monthly, quarterly,
semi-annually or annually and shall be prorated upon establishment and
termination of service.'' In Alleged Failure of Altice, the Supreme
Court of New Jersey concluded that New Jersey's BCF regulation does not
regulate cable rates or control the rates for the provision of cable
service. The court based its decision on the ``ordinary meaning'' of
the text from the New Jersey statute and the Cable Act. The court
determined that ``the plain and ordinary meaning of rate regulation . .
. is not so broad as to encompass all laws that affect or concern cable
prices.'' With regard to the New Jersey BCF regulation, the court
concluded that ``the challenged regulation does not even indirectly
affect the actual rate Altice charges . . . the regulation merely uses
the rate that the cable provider sets to enforce a price proportional
to the quantity of service provided.''
With regard to cable ETFs, we tentatively conclude that the courts'
logic in Spectrum Northeast, LLC v. Frey and Alleged Failure of Altice
applies to the ETF regulation we propose in this NPRM. Similar to a
BCF, an ETF is assessed upon termination of service, i.e., it concerns
the time period when cable service ends. Thus, a restriction on ETFs
does not appear to cap the amount a cable operator can charge for the
provision of cable service; rather, it regulates only the charge that a
cable operator may impose on a customer after the customer has elected
to terminate service. Further, we tentatively find that the structure
and legislative history of the Act does not support treating ETFs as a
form of rate
[[Page 743]]
regulation, just as the courts found with regard to BCFs. Also, we
tentatively find that an ETF does not fall within the plain and
ordinary meaning of rate regulation, similar to the court's reasoning
regarding BCFs. Thus, we tentatively conclude that regulation of ETFs
is not ``rate regulation.'' In addition, our tentative conclusion is
consistent with case law evaluating whether State regulation of
cellular telephone ETFs is preempted by federal rate regulation. In In
re Cellphone Termination Fee Cases, the California Court of Appeals for
the First District concluded that a cellular telephone ETF regulation
was not preempted by federal law. Although the court was not addressing
cable rate regulation specifically, it was addressing a similar
statutory provision that carves out the universe of ``other terms and
conditions'' from rate regulation of wireless services, similar to how
``consumer protection'' and ``customer service'' is distinct from rate
regulation in the cable statute. The scope of both carveouts appears to
be similar in nature and includes billing issues, consumer protection,
and customer service. The court concluded that the ``purpose in
adopting the cellular telephone ETF was to control churn'' and prevent
customers from leaving, and because the State law invalidating the ETFs
had ``only an indirect and incidental effect on . . . rates,'' it was
not preempted by federal law. We find this reasoning and that of the
BCF cases discussed above to be applicable to the question of whether
cable ETF regulations are rate regulations under the Act, and
tentatively conclude that they are not. We therefore tentatively
conclude that, consistent with case law and the Commission's own
precedent, regulations concerning cable ETFs also are not rate
regulations. Thus, we tentatively find inapplicable section 623's
prohibition on the Commission's regulation of ``the rates for the
provision of cable service'' in franchise areas where effective
competition exists. Nearly all, if not all, cable operators now face
effective competition and are not subject to rate regulation. However,
there is no such prohibition found in section 632's customer service
provision. Accordingly, the applicability of ETF and BCF regulations
are not affected by the existence of effective competition in a
community. We seek comment on this analysis.
Implementation. We seek comment on how to tailor our rules to best
protect consumers and promote competition. As an initial matter, we
seek specific comment on the interplay of our proposed rules and any
state or local ETF and BCF regulations. To what extent are State and
local authorities currently regulating ETFs and BCFs with respect to
cable and DBS services? Do local authorities have adequate resources to
enforce the proposed rules effectively? To the extent the Commission
were to enforce its own rules in individual cases, how could it best
coordinate enforcement with local authorities?
We also seek specific comment from State and local authorities on
our proposed prohibition on cable and DBS ETFs and BCFs as proposed in
appendix A. Should we adopt something less than a total ban and allow
variations within States or communities? Given our shared jurisdiction
with local authorities over cable customer service issues, we seek
comment regarding their local subscriber complaints and regulation
experiences. We seek comment on what enforcement mechanisms should be
implemented at the federal level. We also seek comment on what
enforcement mechanisms have been or could be implemented at the local
level and how those might inform enforcement mechanisms at the federal
level. To the extent we adopt a ban on DBS ETFs and BCFs, would this
need to be enforced by the Commission given that DBS providers are not
required to have local or state franchises? If so, are there additional
rules we should adopt to ensure an effective enforcement scheme?
If the Commission adopts the proposals to ban ETFs and BCFs, what
is a reasonable amount of time for cable and satellite providers to
implement this change? How should our proposed rule banning BCFs be
implemented for the benefit of current subscribers? Do operators
require time to implement changes to their current billing systems?
What effect, if any, will our proposed rule banning ETFs have on
consumers' existing contracts? If commenters argue that our proposed
rule should apply only to new contracts entered into after its
effective date, what are the legal and policy justifications for
treating agreements of existing customers differently than new
customers? Should there be a grace period to accommodate existing
contracts with ETF provisions? If so, what effect, if any, will our
proposed rule have on existing ETFs? In lieu of the rules proposed in
appendix A, we seek comment on whether the Commission should, on the
other hand, adopt more detailed cable and DBS regulations that include
grace periods, limiting or extenuating circumstances, or other factors
for determining when an ETF or BCF might be appropriate. Is there any
justification for less than a total ban on ETFs and BCFs? For example,
should our rules exempt small cable operators or rural cable operators?
Any party advocating for an exception should explain the reason they
believe a carve-out from the prohibition is necessary. We seek comment
on these issues.
To the extent cable or DBS video service is part of a bundled
package with non-video services, could ETF and BCF rules be applied to
the entire bundle, and if so, under what authority? We therefore seek
comment on enforcement issues relating to an ETF or BCF ban when video
services are bundled with non-video services. With respect to cable,
does permitting state and local government enforcement of an ETF or BCF
ban conflict with other sections of Title VI of the Act or the scope of
local franchise authority under Title VI when video services are
included as part of a bundle? We recognize that section 624(b)(1)
provides that franchising authorities ``may not . . . establish
requirements for . . . information services.'' Does this provision
limit franchising authorities' ability to enforce a Commission-
established ban on ETFs or BCFs when video services are part of a
bundle with non-video services? We seek comment on these issues.
State of the Video Marketplace. We seek comment on how cable
operators and DBS providers currently handle ETFs and BCFs. As noted
above, BCFs are a more recent development than ETFs. Were there changes
in the video marketplace that prompted introduction of ETFs and/or
BCFs? Are there video service providers who currently do not impose
ETFs and/or BCFs? Are there providers that offer multiple subscription
choices including plans with and without ETFs? Are providers offering
long term contracts at reduced prices without ETFs? If so, what other
differences are there between offerings with and without ETFs? How
likely are consumers to elect a plan that does not include ETFs when
such offerings are available? If such offerings are available, what is
the cable operator's or DBS provider's rationale for offering that plan
or option? Would the absence or presence of an ETF impact a consumer's
choice of provider? Are there any cable operators or DBS providers that
offer multiple subscription choices including plans with and without
BCFs? If so, what is the cable operator's or DBS provider's rationale
for offering that plan or option? Are there cable operators or DBS
providers that only impose BCFs in certain circumstances
[[Page 744]]
and not in other circumstances? If so, what are the circumstances in
which the BCF is not imposed? What is the cable operator's or DBS
provider's rationale for not imposing the BCF in those circumstances?
Would the absence or presence of BCFs impact a consumer's choice of
provider? How would prohibiting or limiting cable operators and DBS
providers from imposing ETFs and/or BCFs change providers' current
customer services?
Cost/Benefit Analysis. If a ban on ETFs were implemented, we expect
consumers to benefit because they would have the ability to switch
video service providers more easily and cancel video service without
cost. In addition, a ban on BCFs would benefit consumers because it
would prevent consumers from paying for services they choose not to
receive. If ETFs are eliminated, would video service providers still
choose to offer long term contracts for reasons other than price, for
instance in order to avoid churn? Could the elimination of ETFs alter
the price of long term contracts and if so how? What would be the
impact of such changes on consumers? If video service providers were to
decide not to offer long term contracts or to offer them at higher
prices, would the higher prices be offset by the consumer savings in
avoiding ETFs? How would these possible outcomes affect low-income and
new consumers? Further, would eliminating ETFs and BCFs affect billing
cycles? We seek comment on how the Commission should assess the
likelihood and magnitude of these potential benefits and costs to
consumers.
We also seek comment on how a ban on ETFs and BCFs would affect
competition among video providers. By reducing consumer switching
costs, could a ban on ETFs foster competition between developing online
video services and cable and satellite video providers? For example,
might consumers who have signed multi-year contracts with cable and
satellite video providers benefit from earlier opportunities to choose
among all options? Would this additional choice enhance competition?
For cable and satellite video customers, what are the shares of
customers with month-to-month, one-year, two-year, or other service
agreements subject to ETFs or BCFs?
We also seek comment on any potential costs that would be imposed
on regulatees if we adopt the proposals contained in this NPRM. Do
these costs differ between large and small cable providers? Would a ban
on ETFs and BCFs impose substantial or unnecessary burdens on small
cable operators? Further, would a ban on ETFs limit entry by new
providers by limiting their ability to recoup upfront costs through an
ETF? Would a ban on ETFs and BCFs have a positive impact on video
service provider negotiations with broadcast stations and cable
networks for programming by allowing consumers more freedom to switch
providers to obtain preferred programming? Could programming costs be
affected by a ban on ETFs and BCFs? What amounts do cable and DBS
operators charge for early termination fees? Comments should be
accompanied by specific data and analysis supporting claimed costs and
benefits.
Digital Equity and Inclusion. Finally, the Commission, as part of
its continuing effort to advance digital equity for all, including
people of color, persons with disabilities, persons who live in rural
or Tribal areas, and others who are or have been historically
underserved, marginalized, or adversely affected by persistent poverty
or inequality, invites comment on any equity-related considerations and
benefits (if any) that may be associated with the proposals and issues
discussed herein. Specifically, we seek comment on how our proposals
may promote or inhibit advances in diversity, equity, inclusion, and
accessibility, as well the scope of the Commission's relevant legal
authority.
Ex Parte Rules--Permit-But-Disclose. The proceeding this Notice
initiates shall be treated as a ``permit-but-disclose'' proceeding in
accordance with the Commission's ex parte rules. Persons making ex
parte presentations must file a copy of any written presentation or a
memorandum summarizing any oral presentation within two business days
after the presentation (unless a different deadline applicable to the
Sunshine period applies). Persons making oral ex parte presentations
are reminded that memoranda summarizing the presentation must (1) list
all persons attending or otherwise participating in the meeting at
which the ex parte presentation was made, and (2) summarize all data
presented and arguments made during the presentation. If the
presentation consisted in whole or in part of the presentation of data
or arguments already reflected in the presenter's written comments,
memoranda, or other filings in the proceeding, the presenter may
provide citations to such data or arguments in his or her prior
comments, memoranda, or other filings (specifying the relevant page
and/or paragraph numbers where such data or arguments can be found) in
lieu of summarizing them in the memorandum. Documents shown or given to
Commission staff during ex parte meetings are deemed to be written ex
parte presentations and must be filed consistent with rule 1.1206(b).
In proceedings governed by rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte
presentations and memoranda summarizing oral ex parte presentations,
and all attachments thereto, must be filed through the electronic
comment filing system available for that proceeding, and must be filed
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).
Participants in this proceeding should familiarize themselves with the
Commission's ex parte rules.
Filing Requirements--Comments and Replies. Pursuant to Sec. Sec.
1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419,
interested parties may file comments and reply comments on or before
the dates indicated on the first page of this document. Comments may be
filed using the Commission's Electronic Comment Filing System (ECFS).
See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR
24121 (1998).
Electronic Filers: Comments may be filed electronically using the
internet by accessing the ECFS: <a href="https://apps.fcc.gov/ecfs/">https://apps.fcc.gov/ecfs/</a>.
Paper Filers: Parties who choose to file by paper must file an
original and one copy of each filing. Filings can be sent by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission. Commercial
overnight mail (other than U.S. Postal Service Express Mail and
Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction,
MD 20701. Postal Service first-class, Express, and Priority mail must
be addressed to 45 L Street NE, Washington, DC 20554. Effective March
19, 2020, and until further notice, the Commission no longer accepts
any hand or messenger delivered filings. This is a temporary measure
taken to help protect the health and safety of individuals, and to
mitigate the transmission of COVID-19. During the time the Commission's
building is closed to the general public and until further notice, if
more than one docket or rulemaking number appears in the caption of a
proceeding, paper filers need not submit two additional copies for each
additional docket or rulemaking number; an original and one copy are
sufficient.
[[Page 745]]
Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980,
as amended (RFA), requires that an agency prepare a regulatory
flexibility analysis for notice and comment rulemakings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' Accordingly, the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) concerning the possible/
potential impact of the rule and policy changes contained in this NPRM.
The IRFA is set forth below. Written public comments are requested on
the IRFA. Comments must be filed by the deadlines for comments on the
NPRM indicated on the first page of this document and must have a
separate and distinct heading designating them as responses to the
IRFA.
Paperwork Reduction Act. This document does not contain any
proposed information collections subject to the Paperwork Reduction Act
of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not
contain any new or modified information collection burden for small
business concerns with fewer than 25 employees, pursuant to the Small
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44
U.S.C. 3506(c)(4).
Providing Accountability Through Transparency Act. Consistent with
the Providing Accountability Through Transparency Act, Public Law 118-
9, a summary of this document will be available on <a href="https://www.fcc.gov/proposed-rulemakings">https://www.fcc.gov/proposed-rulemakings</a>.
People with Disabilities. To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#dabcb9b9efeaee9abcb9b9f4bdb5ac"><span class="__cf_email__" data-cfemail="d0b6b3b3e5e0e490b6b3b3feb7bfa6">[email protected]</span></a> or call the
Consumer and Governmental Affairs Bureau at (202) 418-0530.
Initial Regulatory Flexibility Act Analysis. As required by the
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission
has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the
possible significant economic impact on small entities of the policies
and rules proposed in this Notice of Proposed Rulemaking (NPRM). The
Commission requests written public comments on this IRFA. Comments must
be identified as responses to the IRFA and must be filed by the
deadlines for comments specified in the NPRM. The Commission will send
a copy of the NPRM, including this IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration (SBA). In addition, the
NPRM and IRFA (or summaries thereof) will be published in the Federal
Register.
Need for, and Objectives of, the Proposed Rules. The NPRM initiates
a proceeding to consider billing practices that inhibit video service
subscribers from choosing the video services they want and that result
in consumers paying fees for video services they choose not to receive.
The Commission has received numerous complaints from cable and DBS
subscribers about two billing practices: early termination fees (ETFs)
and billing cycle fees (BCFs). An ETF is a fee that a provider charges
a subscriber when the subscriber terminates its service contract prior
to its expiration. ETFs remove consumer choice, negatively impacting
competition for services in the marketplace. A BCF is a fee that
subscribers pay when they cancel service prior to the end of a billing
cycle and the service provider refuses to refund a pro-rated share of
the billing cycle charge for the unused service. BCFs harm consumers by
requiring them to pay for services they did not choose to receive. Both
of these fees place a financial burden on subscribers and can create
barriers to competition. The proposed rules in the NPRM will prevent
the imposition of ETFs and BCFs, protecting consumers and promoting
competition.
Legal Basis. The proposed action is authorized under Sec. Sec. 1,
4(i), 303(v), 335(a) and 632(b), of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i), 303(v), 335(a) and 552(b).
Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply. The RFA directs agencies to provide a
description of, and where feasible, an estimate of the number of small
entities that may be affected by the proposed rule revisions, if
adopted. The RFA generally defines the term ``small entity'' as having
the same meaning as the terms ``small business,'' ``small
organization,'' and ``small governmental jurisdiction.'' In addition,
the term ``small business'' has the same meaning as the term ``small
business concern'' under the Small Business Act (SBA). A small business
concern is one which: (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any
additional criteria established by the SBA.
Cable and Other Subscription Programming. The U.S. Census Bureau
defines this industry as establishments primarily engaged in operating
studios and facilities for the broadcasting of programs on a
subscription or fee basis. The broadcast programming is typically
narrowcast in nature (e.g., limited format, such as news, sports,
education, or youth-oriented). These establishments produce programming
in their own facilities or acquire programming from external sources.
The programming material is usually delivered to a third party, such as
cable systems or direct-to-home satellite systems, for transmission to
viewers. The SBA small business size standard for this industry
classifies firms with annual receipts less than $41.5 million as small.
Based on U.S. Census Bureau data for 2017, 378 firms operated in this
industry during that year. Of that number, 149 firms operated with
revenue of less than $25 million a year and 44 firms operated with
revenue of $25 million or more. Based on this data, the Commission
estimates that a majority of firms in this industry are small.
Cable Companies and Systems (Rate Regulation). The Commission has
developed its own small business size standard for the purpose of cable
rate regulation. Under the Commission's rules, a ``small cable
company'' is one serving 400,000 or fewer subscribers nationwide. Based
on industry data, there are about 420 cable companies in the U.S. Of
these, only seven have more than 400,000 subscribers. In addition,
under the Commission's rules, a ``small system'' is a cable system
serving 15,000 or fewer subscribers. Based on industry data, there are
about 4,139 cable systems (headends) in the U.S. Of these, about 639
have more than 15,000 subscribers. Accordingly, the Commission
estimates that the majority of cable companies and cable systems are
small.
Cable System Operators (Telecom Act Standard). The Communications
Act of 1934, as amended, contains a size standard for a ``small cable
operator,'' which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than one percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' For purposes of the Telecom Act Standard, the
Commission determined that a cable system operator that serves fewer
than 498,000 subscribers, either directly or through affiliates, will
meet the definition of a small cable operator. Based on industry data,
only six cable system operators have more than 498,000 subscribers.
Accordingly, the Commission estimates that the majority of cable system
operators are small under this size standard. We note however, that the
Commission neither requests nor collects information on whether cable
system operators are
[[Page 746]]
affiliated with entities whose gross annual revenues exceed $250
million. Therefore, we are unable at this time to estimate with greater
precision the number of cable system operators that would qualify as
small cable operators under the definition in the Communications Act.
Direct Broadcast Satellite (``DBS'') Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. DBS is included in the Wired
Telecommunications Carriers industry which comprises establishments
primarily engaged in operating and/or providing access to transmission
facilities and infrastructure that they own and/or lease for the
transmission of voice, data, text, sound, and video using wired
telecommunications networks. Transmission facilities may be based on a
single technology or combination of technologies. Establishments in
this industry use the wired telecommunications network facilities that
they operate to provide a variety of services, such as wired telephony
services, including VoIP services, wired (cable) audio and video
programming distribution; and wired broadband internet services. By
exception, establishments providing satellite television distribution
services using facilities and infrastructure that they operate are
included in this industry.
The SBA small business size standard for Wired Telecommunications
Carriers classifies firms having 1,500 or fewer employees as small.
U.S. Census Bureau data for 2017 show that 3,054 firms operated in this
industry for the entire year. Of this number, 2,964 firms operated with
fewer than 250 employees. Based on this data, the majority of firms in
this industry can be considered small under the SBA small business size
standard. According to Commission data however, only two entities
provide DBS service--DIRECTV (owned by AT&T) and DISH Network, which
require a great deal of capital for operation. DIRECTV and DISH Network
both exceed the SBA size standard for classification as a small
business. Therefore, we must conclude based on internally developed
Commission data, in general DBS service is provided only by large
firms.
Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. The NPRM proposes to adopt rules that prohibit
cable and DBS service providers from imposing ETFs and BCFs. This may
impose new or additional compliance obligations on small entities. When
subscribers wish to terminate their services contract prior to its
expiration date, small entity cable operators may need to use
additional accounting and finance processes to determine the prorated
credit or rebate to provide subscribers for the remaining days in a
billing cycle. These operators must then determine how to return this
fee to the subscriber. The NPRM seeks comment on any potential costs
that would be imposed on regulatees and whether a ban on ETFs and BCFs
would impose unnecessary burdens on small cable operators. The
Commission anticipates the information received in comments including
where requested, cost and benefit analyses, will help identify and
evaluate relevant compliance matters for small entities, including
compliance costs and other burdens that may result from the proposals
and inquiries made in the NPRM.
Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered. The RFA requires an
agency to describe any significant alternatives that it has considered
in reaching its proposed approach, which may include the following four
alternatives (among others): (1) the establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for such small entities; (3) the
use of performance, rather than design, standards; and (4) an exemption
from coverage of the rule, or any part thereof, for small entities.
To assist in the Commission's evaluation of the economic impact on
small entities, as a result of actions that have been proposed in the
NPRM, and to better explore options and alternatives, the Commission
seeks comment on whether any of the burdens associated with the
compliance requirements described above can be minimized for small
entities. An alternative option that may reduce burdens on small
entities considered in the NPRM is whether the Commission should adopt
more detailed cable and DBS regulations that include grace periods,
limiting or extenuating circumstances, or other factors for determining
when an ETF or BCF might be appropriate. Additionally, the Commission
seeks comment on whether potential costs associated with a ban on small
entities imposing ETFs and BCFs would impose unnecessary burdens on
small cable operators. The Commission expects to more fully consider
the economic impact and alternatives for small entities based on its
review of the record and any comments filed in response to the NPRM and
this IRFA.
Federal Rules that May Duplicate, Overlap, or Conflict with the
Proposed Rule. None.
It is ordered that, pursuant to the authority found in Sec. Sec.
1, 4(i), 303(v), 335(a) and 632(b), of the Communications Act of 1934,
as amended, 47 U.S.C. 151, 154(i), 303(v), 335(a) and 552(b), this
Notice of Proposed Rulemaking is adopted. It is further ordered that
the Commission's Office of the Secretary, Reference Information Center,
shall send a copy of this Notice of Proposed Rulemaking, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
List of Subjects
47 CFR Part 25
Administrative practice and procedure, Satellites.
47 CFR Part 76
Television.
Federal Communications Commission
Marlene H. Dortch,
Secretary.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications Commission proposes to amend 47 CFR part 25 and 76 as
follows:
PART 25--SATELLITE COMMUNICATIONS
0
1. The authority citation for Part 25 is revised to read as follows:
Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 310, 319,
332, 335, 605, and 721, unless otherwise noted.
0
2. Amend Sec. 25.701 by revising the introductory text of paragraph
(a) and by adding paragraph (g) to read as follows:
Sec. 25.701 Other DBS Public interest obligations.
(a) DBS providers are subject to the public interest obligations
set forth in paragraphs (b), (c), (d), (e), (f) and (g) of this
section. * * *
* * * * *
(g) Customer service obligations. A DBS provider shall not charge a
subscriber a fee for terminating a DBS services contract before its
expiration date. A DBS provider must provide a subscriber a prorated
credit or rebate for the remaining days in a billing cycle after the
cancellation of DBS service.
* * * * *
[[Page 747]]
PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE
0
3. The authority citation for Part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303,
303a, 307, 308, 309, 312, 315, 317, 325, 338, 339, 340, 341, 503,
521, 522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548,
549, 552, 554, 556, 558, 560, 561, 571, 572, 573.
0
4. Amend Sec. 76.309 by adding paragraph (c)(5) to read as follows:
Sec. 76.309 Customer service obligations.
* * * * *
(c) * * *
(5) A cable operator shall not charge a subscriber a fee for
terminating a cable services contract before its expiration date. A
cable operator must provide a subscriber a prorated credit or rebate
for the remaining days in a billing cycle after the cancellation of
cable service.
* * * * *
[FR Doc. 2023-28622 Filed 1-4-24; 8:45 am]
BILLING CODE 6712-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.