One of the most frustrating things for cable customers is that the advertised price for monthly service is not what they actually pay each month.
The major players including Comcast, Charter Communications (NASDAQ:CHTR), and Time Warner Cable (NYSE:TWC) add extra fees on top of the listed price on a monthly basis. The terms and costs can vary from company to company, but all three of these companies charge something called a broadcast fee. That's a surcharge designed to offset the fees the cable providers pay in order to retransmit the major broadcast networks to their customers.
It's hard to dispute that this is a real expense for the pay-TV companies that they are justified in charging their subscribers for. Where it gets dicey is the fact that these are standard monthly surcharges -- not one-time or occasional extra fees -- yet they are almost never included in the advertised monthly price for cable packages.
That's where the Federal Communications Commission appears to be taking issue with big cable. The federal agency is looking for justifications from the industry as to why it should allow the practice to continue, Multichannel.com reported.
What are broadcast fees?
In the early days of cable, pay-TV providers did not pay to retransmit over-the-air broadcast networks: the channels you can get for free at home with an antenna. That changed in 1992 when the Cable Television Consumer Protection and Competition Act was passed, requiring the broadcast networks to consent to any retransmission.
Charter explained how that has caused its costs to rise on its website:
As a direct result of local broadcast, or "network-affiliated," TV stations increasing the rates to Charter to distribute their signals to our customers, we will be passing those charges on as a Broadcast TV Surcharge, in the Taxes and Fees section of the billing statement. These local TV signals were historically made available to Charter at no cost, or low cost. However, in recent years the prices demanded by local broadcast TV stations have necessitated that we pass these costs on to customers.
As I said above, nobody disputes that the costs are real and that cable companies have the right to pass them on. It's a question of how they are shown on bills.
What is the FCC doing?
Essentially, the FCC thinks cable companies should include these mandatory fees (there are others besides the broadcast fee in many cases) in their advertised prices in order to be transparent to potential customers. The cable companies clearly disagree and feel that breaking down the fees on subscribers' bills is more than enough.
"Some MVPDs may raise subscribers' total monthly bills using these fees without raising the advertised package prices," the FCC said. This creates a potential transparency issue in the eyes of the FCC.
"Do video-related fees cause consumers to pay prices higher than some MVPDs advertised rate for video services?" the FCC asked. "How are such fees disclosed to consumers prior to becoming a customer or prior to the inclusion of a new fee on a consumer's bill?"
The FCC is giving cable companies until Sept. 21 to argue that they should be allowed to continue this practice.
"We seek comment on the competitive strategy associated with adding video-related fees as opposed to raising monthly subscription prices," said the commission, as reported by Multichannel.com.
What does this mean for consumers?
It's hard to see the cable industry coming up with an argument that justifies this practice. These aren't special fees. They are regular, ongoing charges. It's reasonable for the cable companies to show a breakdown of its prices on its bills -- to pass some of the blame onto its broadcast network partners -- but it's silly to advertise a price that does not include these fees.
It's a simple matter of truth in advertising. It's one thing to say $19.99 a month before taxes as consumers generally understand that taxes are charged. Running ads touting a $19.99 or $49.99 price tag without mentioning that subscribers will never pay that price seems dishonest and a blatant attempt to bait and switch.
The FCC is almost certain to agree, which should lead to changes in not only your cable bill, but in how pay-TV providers advertise.
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