The Federal Communications Commission has taken a step toward prohibiting early termination fees charged by cable and satellite TV providers. If given final approval, the FCC action would also require cable and satellite providers to provide a prorated credit or rebate to customers who cancel before a billing period ends.

The new rules are being floated in a Notice of Proposed Rulemaking (NPRM) that the FCC voted to approve yesterday in a 3–2 vote, with both Republicans dissenting. The NPRM seeks public comment on the proposed rules and could lead to a final vote in a few months or so.

"Today's action proposes to adopt customer service protections that prohibit cable operators and DBS (Direct Broadcast Satellite) providers from imposing a fee for the early termination of a cable or DBS video service contract," the FCC said. "Additionally, the NPRM recommends the adoption of customer service protections to require cable and DBS providers to grant subscribers a prorated credit or rebate for the remaining whole days in a monthly or periodic billing cycle after the subscriber cancels service."

FCC Chairwoman Jessica Rosenworcel said, "Consumers are tired of these junk fees. They now have more choices when it comes to video content. But these friction-filled tactics to keep us subscribing to our current providers are aggravating and unfair. So today we kick off a rulemaking to put an end to these practices."

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Cable lobby group NCTA-The Internet & Television Association opposes the plan and said it will submit comments to support "consumer choice and competitive parity."

"We do not support banning consumers from choosing a service plan with discounted rates in exchange for long-term service agreements that may include early termination provisions," the NCTA said. "The FCC should understand that its proposals would amount to rate regulation and result in consumers having fewer options."

Republican laments “march toward regulating rates”

FCC Republican Brendan Carr objected to what he called a form of rate regulation. "I cannot sign on to the Biden administration's inexorable march toward regulating rates," he said.

Carr pointed out that traditional MVPDs (Multichannel Video Programming Distributors) "are bleeding market share to new, unregulated competitors," namely online streaming services. He also accused the FCC of exceeding its regulatory authority.

"It's clear that the Administration has decided that the FCC is going to regulate rates, no matter how competitive the market and without regard to the FCC's legal authority," Carr said. "We saw it in big proceedings like net neutrality and digital equity, and we see it in more targeted proceedings like this one." Carr was referring to recent 3–2 votes on net neutrality regulations and rules that prohibit discrimination in access to broadband services.

Simington argued that consumers will end up paying more because contracts with early termination fees have discounted monthly rates. He asked whether the FCC believes that cable and satellite providers "will, out of their gracious love of consumers, voluntarily fully retain today's long-term contractual discounts while merely doing without ETF revenue." He said the FCC's "so-called 'pro-consumer' proposal today requires angelic forbearance on the parts of MVPDs to have actual pro-consumer effect."

"Does the commission imagine that the invisible hand of this highly regulated market will keep contractual prices level after ETFs [early termination fees] are removed—those same market forces that the commission evidently discounts today by undercutting the commercial judgment of MVPDs)?" Simington asked.