Senator Richard Blumenthal of Connecticut introduced Senate Bill S.916, which takes aim at eliminating junk fees, which are fees that are not advertised for a product but that get added on after a customer buys a product or service. These fees were attacked this year by President Biden in the State of the Union Address.
The bill language is clear: “A covered entity shall clearly and conspicuously display, in each advertisement and when a price is first shown to a consumer, the total price of the good or service provided by the covered entity, including any mandatory fees a consumer would incur during the transaction, which shall not change during the purchase process.” The legislation goes on to give authority to regulate junk fees to the Federal Trade Commission.
Telecom companies, particularly cable companies, are among the worst in having hidden junk fees that are not included in advertising but are added to a customer’s first bill. But telecom companies aren’t the only industry, and the bill is aimed at airlines, online ticket companies, and other industries that routinely advertise prices that are lower than what a consumer is ultimately charged.
It’s clear why companies use junk fees since the practice gives them the ability to advertise super-low rates to attract customers. Consider the junk fees charged by Comcast. Comcast is not unusual, and the hidden fees of other large cable companies are similar.
Comcast routinely advertises low rates to attract new cable TV customers. A customer who buys at an advertised special rate will get a first bill with a lot of hidden junk fees that are not included in the advertised price – or else hidden deep in small print footnotes.
- Comcast has a broadcast fee of $28.70 per month. This is a fee where Comcast has accumulated annual increases in programming costs into this side fee instead of raising the basic price of cable.
- Most markets have a regional sports fee. This fee is specific per market and can range from $4 to $8. This fee is the accumulated increases in sports programming costs that have not been added to the basic rate.
- Comcast also charges $9.00 extra for each settop box – a fee that is not included in the advertised price.
A first-time Comcast customer buying cable at an advertised $30 special rate could get a first bill for almost $75 – a startling difference.
Comcast also has hidden fees for broadband. The company charges $15 per month for a WiFi modem. The biggest surprise for many new customers is the Comcast data cap on broadband. The company charges $10 for each 50 GB of data over the data cap limit.
Consumers hate hidden fees. Anybody who has signed with one of the giant cable companies got a big surprise when they opened their first bill. But by then, most people are locked into a contract that came along with getting the low advertised rates.
There have been almost no repercussions for the practice. Occasionally, the states will pursue a company for deceptive advertising. For example, in early 2020, Comcast settled a dispute with the Minnesota Attorney General’s Office over false advertising related to sports fees. Comcast refunded $1.4 million to customers and paid a fine of $160,000 – which is a small penalty for a Company that had 16.1 million cable customers at the end of last year – all paying similar fees.
Deceptively low special rates make it unfairly hard to compete against a cable company. A competitor could have prices that are lower than the cable company, but hidden fees let the cable company advertise an untruthfully lower price. My clients with fiber networks tell me that customers routinely compliment them for not having hidden fees. People have gotten used to signing up for a low rate but paying a lot more – they become instantly loyal to a company that doesn’t play the games. This legislation would hopefully make the big ISPs become more truthful – but I’ll believe it when I see it.