The splashy ads offer one price, but sometimes what you actually pay for Internet service comes in way higher.
It's an unexpected sticker shock for some when they open their bill and the number at the bottom in no way reflects the advertised price. Until recently that practice had been legal. ISPs were allowed to promote the price for broadband without disclosing mandatory fees, modem rental costs, installation fees, and more.
Under the new open Internet rules approved by the Federal Communications Commission, ISPs will be forced to be much more transparent about what customers will actually pay. This includes the above-mentioned disclosures as well as having to tell customers a month before any promotional pricing expires.
It's worth noting that while the FCC has signed off on these changes, they are likely to face Congressional challenges as well as legal ones brought by the ISPs.
What are the new rules?
"The existing transparency rule defines the required disclosure of 'commercial terms' to include pricing, privacy policies, and redress options," states the FCC's new order. "While we do not take additional action concerning the requirement to disclose privacy policies and redress options, the record demonstrates need for specific required disclosures about price and related terms."
The new policy, which was first unearthed by Ars Technica, puts a number of disclosure requirements on the ISPs, including Comcast (NASDAQ:CMCSA), Time Warner Cable (UNKNOWN:TWC.DL), Verizon (NYSE:VZ), and AT&T (NYSE:T). The rules, hidden in the 300-plus page PDF, include the following:
- Price -- the full monthly service charge. Any promotional rates should be clearly noted as such, specify the duration of the promotional period, and note the full monthly service charge the consumer will incur after the expiration of the promotional period.
- Other Fees -- all additional one time and/or recurring fees and/or surcharges the consumer may incur either to initiate, maintain, or discontinue service, including the name, definition, and cost of each additional fee. These may include modem rental fees, installation fees, service charges, and early termination fees, among others.
- Data Caps and Allowances -- any data caps or allowances that are a part of the plan the consumer is purchasing, as well as the consequences of exceeding the cap or allowance (e.g., additional charges, loss of service for the remainder of the billing cycle).
It's actually full disclosure, which is something the ISPs have been reluctant to do. If this rule stands, it will not only bring clarity to consumers in the form of their bill, it will also change how Internet service providers advertise their products.
"[T]hese disclosures may have been required in certain circumstances under the existing transparency rule in order to provide information 'sufficient for consumers to make informed choices,'" the FCC wrote. "Here, we now require that this information always be disclosed."
It's hard to make the language any more clear than that.
It's not quite a done deal
Unfortunately for consumers, the new truth-in-billing/transparency rules won't go into effect immediately, according to Ars Technica. A number of the rules in the net neutrality ruling including bans on blocking, throttling, and paid prioritization take effect 60 days after publication in the Federal Register, the tech site reported.
The disclosure requirements, however, require additional approval by the Office of Management and Budget to comply with the Paperwork Reduction Act.
That's a formality that likely won't get in the way of these rules being put into place and that's very good for consumers. Soon, when your broadband bill shows up, it won't cause your heart to leap into your throat and your stomach to grow queasy.
Your bill will be what you expected and that's good for consumers, and ultimately probably protects the ISPs against their darkest instincts.
Daniel Kline has no position in any stocks mentioned. He wrote this while waiting out a four hour flight delay in Atlanta. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.