Disclosing Hidden Fees

The FCC recently proposed a requirement that companies that sell traditional cable TV must disclose the full cost of video to customers. I’ve written about hidden fees many times over the years, and the fees have grown to become a big issue for customers.

Hidden fees are those that a cable provider doesn’t disclose when they advertise to attract new customers. At best, these fees are mentioned vaguely in the small print but are often difficult or impossible to find.

Consider the hidden fees that Comcast charges (I can make a similar list for any of the big cable companies). Comcast’s hidden fees differ by market, and the following is from a market we recently studied.

  • The broadcast fee is $28.70 per month. This is a fee where Comcast accumulates increases in programming costs each year instead of billing the cost increases into the price of cable.
  • The regional sports fee in the market we looked at is $6.10 per month – the fee varies depending upon the local sports networks carried. This fee accumulates increases in sports programming fees that Comcast has chosen not to include in the advertised price of cable TV.
  • Comcast charges $9.00 extra for each settop box – a fee that is not mentioned in advertised prices.

For Comcast, these fees are almost $43 per month in this market for a customer with one settop box. A customer that signs up for a $40 special promotion for video on the web will be shocked when the first bill shows up at $83.

The FCC is the federal regulator for cable TV, and it has always had the full authority to require cable companies to do disclose honest rates. What I find disappointing is that they’ve done nothing until now. This announcement is clearly in response to President Biden criticism of hidden fees in many industries, including airline and online ticket prices. Why hasn’t the FCC tackled hidden fees for cable TV until now? In this example, the hidden fees are greater than the advertised special price for the cable service. I think the average person would think that hidden fees probably mean paying a few extra bucks – not a fee that is more than the advertised price of the purchased service.

This topic has been taken on a few times at the state level. In 2018, Lori Swanson, the Attorney General of Minnesota, sued Comcast and asked for refunds for all cable customers who were billed hidden fees, retroactive to 2014, in violation of the states Prevention of Consumer Fraud Act and Uniform Deceptive Trade Practices Act. The suit concentrated on the Broadcast TV fee and the regional sports fee. In January 2020, Comcast settled with the Minnesota Attorney General’s Office and agreed to pay $1.4 million in refunds to 15,600 Minnesota customers. That’s a pretty small penalty for a practice that must net the company a huge cash flow nationwide.

To be fair to Comcast and the other cable providers, there are underlying costs that are covered by these fees, so the fees are not extra profit. Local television stations, nationwide TV networks, and sports programming have continued to increase the cost of programming at a much faster pace than inflation. Comcast has no choice but to pass on these costs to subscribers. What the FCC is finally criticizing is that cable companies sign new customers to a year-long contract based on advertised low rates and then surprise them with these giant hidden fees.

It’s troubling that the FCC could have done something about this at any time and never acted until now. But even more annoying, at least to me, is that FCC has this authority for cable TV but can’t ask similar questions about broadband rates. The price for broadband from the big ISPs has been rising at a rapid pace. As an example, I looked recently at some rate research I did in 2016, and the broadband prices for Charter have more than doubled since then. Unlike cable TV programming, there are no big underlying costs that have driven the big cable companies to increase broadband rates, and those increases were far in excess of inflation.

The FCC under Chairman Ajit Pai killed the agency’s ability to do anything about broadband prices when it killed Title II regulation. The FCC recently opened an inquiry into data caps, which might be a hopeful sign that the FCC is thinking about getting back into broadband regulation. The history of the FCC tells me to be cautious with any optimism when it comes to regulating the biggest companies in the industry. We’ve watched the FCC do nothing for years about hidden cable fees while it also killed its own ability to regulate broadband – two moves that clearly favor the big monopoly providers over the public.

2 thoughts on “Disclosing Hidden Fees

  1. Hidden fees bigger than the advertised price? I haven’t ever done the math but I am not surprised, what a rip-off.

    Your last comment about the “FCC doing nothing about the hidden fees and/or regulating broadband – two moves that favor the big monopoly providers”, I don’t fully agree with. We win users over from 2 of the biggest monopoly companies in the nation routinely. The winning factors are some of the exact things your article here mentions. People are sick of the hidden fees and other gotchas, so when a local small provider like us is available we don’t even have to advertise. We’ve been in successful business for over a decade and have yet to run a single ad. Anytime FCC steps up and does more regulating of broadband it requires more paperwork and documentation from the ISP, and that will kill us small guys. We don’t have staff for it. We’re busy installing new customers and strengthening our core. Any time I spend on documentation, reporting, and other government sludge is just money down the drain. If you want to see broadband advance at the fastest pace possible, let the big ISP’s keep doing what they are doing. It’s no secret we purchase our upstream from them. I have 3 active contracts with AT&T with a new one on the way and 1 contract with Comcast and a new one on the way. Since we started business the cost of our upstream bandwidth has been reduced lower and lower. In a round about way, the price gouging of those big giants in dense population is what is allowing them to lower their prices for our type of services, which in turn allows us to provide reasonably priced bandwidth for the country folks that the big ISP’s can’t reach. This is why it’s so frustrating to see the government step in and put it’s thumb on the scale and try to throw money around when all they are achieving is what the free market has already achieved. Taking money from the dense areas and subsidizing the hard to reach areas.

    I’d be interested in other peoples thoughts on this.

    #1 The government taxes everyone, getting the bulk of that money from the denser populated areas, and gives that money to the big ISP’s (because small ones can’t pull off grant requests) that then build out subsidized bandwidth to under served areas.

    #2 The big ISP’s are allowed to price broadband how they want, making a tidy profit or more, which allows them to reduce core access prices for smaller ISP’s like us that then find it affordable to build out into the under served areas. And since the big ISP’s only service the dense population, that money is essentially coming from the same people, to subsidize bandwidth to the same areas. Without all the government crud getting involved.

    I really appreciate some of the data points you pull up here now and then. Very interesting.

  2. The FCC is captured by the telecom industry- they do nothing in regard to regulating them — they just use the revolving door between the 2 and many own stock in telecom. It is an outrageous example of collusion and our federal government has done nothing about it. Check out Norm Alster’s Captured Agency book.

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