Pushback Against Hidden Fees

Cable companies have become notorious for billing hidden fees – fees that are not clearly identified when new customers sign for service. Hidden fees have been around for a long time, but in recent years have exploded. The motivation for having hidden fees is clear – it lets a cable company advertise the base fees that don’t include the hidden fees. But it’s an odd shell game since customers find out about all of the hidden fees when they get the first bill.

There is interesting pushback against Cox Communications where multiple customers are taking Cox to arbitration and claiming they were not told about the hidden fees when they subscribed for service. I wrote a blog about arbitration recently and described how over 100,000 customers have taken Intuit to arbitration because the company advertised free tax filing, which isn’t available. Intuit tried to reach a settlement with customers, but a court ruled that they were stuck with the binding arbitration rules they had forced onto customers. Intuit offered a settlement of $40 million to customers, but if they lose the arbitration cases and have to pay court fees, it could cost the company $175 million.

Something similar is happening with Cox. The Hattis and Lukacs law firm from Belleview, Washington, has assisted 295 Cox customers to file a binding arbitration complaint against the Cox hidden fees. The law firm says it plans to bring many more thousands of suits.

The Cox customers seem to have a legitimate complaint. I looked at the Cox website the basic Cox Contour cable package is advertised as low as $53 per month. You have to dig deep into the small print to understand that charges can be a lot higher. The Cox hidden fees are not insignificant. Consider the following:

  • The broadcast fee is $19.00 per month. This is a fee where the cable companies have diverted increases in programming costs into the fee rather than raise the basic price of cable.
  • The regional sports fee can be as much as $12.50 per month – the fee varies by market depending upon the local sports networks that Cox carriers. Again, the company has pushed rate increases into this fee to hold down the advertised price of cable TV.
  • Cox also charges from $6 to $10 extra for a settop box – a fee that is not included in the advertised price.

A customer buying the $53 basic cable product could get the first bill over $90 – a startling difference to somebody who thinks they purchased a $53 product.

Cox also has what most in the industry consider hidden fees for broadband. The company charges $12 per month for a WiFi modem. The biggest surprise for broadband customers might be the Cox data caps that charge $10 per 50 GB of data for any customer exceeding the monthly data cap – with the maximum monthly data cap surcharge at $100.

It’s no wonder that customers dislike ISPs when the first transaction with them smacks of deception. New customers often sign a one or two-year contract for service and are then locked into paying the higher fees.

Cox is not unique, and all of the big cable companies and most of the big telcos also have hidden fees. The Cox fees are on the high side compared to most cable companies, but not by much.

The FCC proposes to expose the practice of hidden fees for broadband by requiring ISPs to disclose all of their charges on a broadband label. Unfortunately, the FCC label doesn’t include the cable product, which has the highest hidden fees.

It will be interesting to see if this kind of lawsuit will change ISP practices. With Cox’s 3.4 million cable customers, there are a lot of folks who could join in the binding arbitration effort to get a refund. One would think that this is going to make all big cable companies pause because they all use the same tactic of forcing customers to use binding arbitration. My prediction is this will lead big ISPs to drop the arbitration requirement rather than change the way they charge customers.

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