In a surprise move by Congress, the recent appropriations bill that funds the government through September 2020 includes a new law that mandates that cable companies tell their customers the truth about cable pricing. Labeled as the Television Viewer Protection Act of 2019 the bipartisan law places new requirements on companies selling cable TV.
The bill was originally sponsored by Representative Mike Doyle (D-PA). In the original version of the bill, the cable providers had to advertise the full monthly cost of service. Full cost meant including such things as hidden fees, equipment charges, and any taxes or surcharges added to a cable bill. The bill also requires disclosure about the details of any promotional pricing and cable companies should make it clear when the promotion ends.
That final version of the law softened the disclosure requirement and cable companies can still promote deceptive special pricing. However, a cable provider must notify customers buying a new plan within 24-hours “by phone, in person, online, or by other reasonable means” of the full cost of buying the service. Customers then have 24-hours from the time the cable company sends the notice to cancel service with no penalty. The cynic in me believes that cable companies will find ways to meet the law and still be deceptive – such as putting the pricing notice at the end of a long email message that customers aren’t likely to read. However, if cable providers follow the spirit of the law, it should end the practice of customers seeing bills that are much higher than what they expect. Another provision of the new law is that cable providers can no longer charge for equipment they don’t provide – something that Frontier was accused of during the last year.
Interestingly, the law only affects cable TV pricing and not pricing for broadband or telephone service. I hope the cable companies don’t somehow shift hidden fees to these other services. The law also seems to ignore the fact that a majority of traditional cable customers buy a bundle of multiple services. The cable companies have never come clean with customers about how bundling discounts work, leaving the companies with the flexibility to penalize customers for withdrawing any one of the bundled services. I suspect the cable companies will somehow not come clean about bundling prices for cable TV, even with this new law.
The bill gives cable companies six months to implement the new practices. Oddly, the bill also allows the FCC to extend the starting date up to six additional months. It’s hard to picture any reason for the FCC to extend the deadline other than kowtowing to the cable companies.
From a consumer perspective, this law is long overdue. For the last five years, the cable companies have disguised much of their rate increases by folding them into hidden fees rather than into advertised rates. A few months ago, Consumer Reports reported that the hidden fees for the big cable companies range from $22.96 monthly for AT&T U-verse to $43.79 for Verizon FiOS.
The timing of this new law is interesting from a market perspective. We’re now seeing cord-cutting at a record pace, and forcing the cable companies to be honest with customers is likely to accelerate cord cutting even more.
Smaller cable providers that compete against the big companies have always been torn about how to advertise their prices. Some match the practices of the big cable companies and have hidden fees and advertise deceptively low prices. Others have taken the high road and advertise the full price of service while pointing out that their competitor’s pricing is deceptive. These new rules make it easier for smaller cable companies to disclose their full prices and to challenge the big cable companies to do the same.
The new law also includes several other changes for the cable industry. The law allows the 5-year sunset provision that has allowed satellite TV providers to import distant local network stations for rural customers. The companies have always argued that the cost of negotiating with every local station across the country is astronomical and that they would allow network channels to go dark rather than seek deals with every local network affiliate in the country. I guess we’ll soon find out if that’s true when the satellite providers can no longer bring in network stations from out of the market. I would hope that a satellite provider that decides not to deliver network affiliates like ABC, CBS, FOX, or NBC will lower the price of the cable package to reflect undelivered channels.
Finally, the bill includes a requirement that local stations and programmers negotiate programming contracts in good faith. That’s an idea that has been bouncing around for a while in response to local stations negotiating in large groups instead of individually. In the last year, we have seen programming go dark at a record pace when stations and programmers are deadlocked in negotiations. We’ll have to wait a while to see if this stronger language gives the FCC any real leverage to end retransmission disputes.