Tackling Hidden Fees

The topic of hidden fees on telecom bills was in the news recently when AT&T tripled their administrative charge on cellular bills – a change that nets then $800 million annually in new bottom line. Consumer Reports recently launched a campaign they are calling “What’s The Fee?” that is identifying and tackling hidden fees from big corporations like ISPs, airlines and banks. Their advocacy branch, Consumers Union launched a web site to identify hidden fees and started a petition drive to notify the big companies that many of their customers are unhappy with these fees. Consumers Union says they get more complaints on the issue for Comcast compared to any other corporation.

I’ve written in the past about the hidden fees that ISPs put onto their bills. I think they use these fees for a number of reasons:

  • The hidden fees disguise the true price of their products. The big cable companies widely advertise the price of cable that doesn’t include the fees without telling the public that the fees can’t be avoided. They night advertise a $69 cable package that might actually cost over $90.
  • The big cable companies have increased the rates for the hidden fees at a much faster pace than the increases in the ‘basic’ published rates for cable TV. This disguises rate increases by holding down the published rates for cable TV.
  • The hidden fees put pressure on competitors. Any competitor to the big ISPs that wants to publish true rates is at a disadvantage when customers compare their true rate to the deceptive basic rates of the cable companies that don’t include the hidden fees. My clients wrestle with this issue all of the time – should they be honest with customers and look to be more expensive or should they follow the same practice of mimicking the hidden fee structure so that their pricing is more easily compared?

What are the hidden fees? Let’s look at Comcast:

  • Broadcast TV Fees. This fee supposedly covers the cost of the retransmission fees paid to the over-the-air networks like ABC, CBS, FOX and NBC. Comcast charged $1.50 for this fee in 2015 and it’s now up to $7.75. Comcast doesn’t mention on bills that they own NBC. Comcast already charges all customers a substantial fee for basic TV that far exceed the cost of buying this programming.
  • Regional Sports Fee. This fee is now up to $6.75 per month in many markets (varies somewhat around the country). This fee supposedly compensates for the various regional sports networks. What Comcast fails to mention is that they now own the majority of regional sports networks, including a big pile they are getting due to the AT&T / Time Warner merger. This fee was $1 in 2015.
  • Settop Box and Cable Modems. While these are not hidden fees, these charges are supposedly set to recover the cost of the hardware. But in recent years Comcast has jacked up these fees significantly, to the point that I would consider a big portion of these to also be hidden fees. The charge for a cable modem is now $11. The company charges $9.95 for the first settop box and $7.75 for additional ones. Just a few years ago these fees were around $5. In both cases it’s likely that the settop box and cable modem costs Comcast $100 or less.
  • HD Fee. Comcast no longer charges separately for this, but I still see this on the bills from some of the other cable companies. This fee was established years ago when HD was a new technology, but today practically every channel is HD.

The Comcast fees have gotten so large that they could add $25 per month to the advertised price of a cable / broadband package. There is an open class-action lawsuit against Comcast that is seeking damages for customers who were charged these fees when they purchased advertised products that didn’t mention the fees.

What is most perplexing is that regulators have been quiet on the topic, even though just about everything to do with these fees is deceptive. Comcast swears that it provide full disclosure about these fees and that customers are not deceived, but one has to read some truly fine print on their web site when ordering a cable product to understand that these fees will be added to the advertised price.

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