[Federal Register Volume 89, Number 4 (Friday, January 5, 2024)]
[Proposed Rules]
[Pages 740-747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28622]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 25 and 76

[MB Docket No. 23-405; FCC 23-106; FRS ID 192513]


Promoting Competition in the American Economy: Cable Operator and 
DBS Provider Billing Practices

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Federal Communications Commission (FCC) proposes to adopt 
customer service protection rules that prohibit cable operators and 
direct broadcast satellite (DBS) service providers from imposing early 
termination fees and billing cycle fees on subscribers. This document 
addresses certain billing practices of cable and DBS providers that 
penalize subscribers for terminating video service or switching video 
service providers, and seeks comment on proposals to further protect 
consumers and promote competition in the video programming marketplace.

DATES: Submit comments on or before February 5, 2024. Submit reply 
comments on or before March 5, 2024.

ADDRESSES: Federal Communications Commission, 45 L Street NE, 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Katie Costello, Policy Division, Media Bureau at 
[email protected] or (202) 418-2233.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking, (NPRM) FCC 23-106, adopted on December 13, 
2023, and released on December 14, 2023. These documents will also be 
available via ECFS https://www.fcc.gov/cgb/ecfs/). (Documents will be 
available electronically in ASCII, Word, and/or Adobe Acrobat.) To 
request these documents in accessible formats for people with 
disabilities, send an email to [email protected] or call the Commission's 
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY).
    Synopsis. Introduction. This Notice of Proposed Rulemaking (NPRM) 
initiates a proceeding to consider certain billing practices that may 
have the effect of inhibiting video service subscribers from choosing 
the video services they want or result in consumers paying fees for 
video services they did not choose to receive. We propose to adopt 
customer service protections that prohibit cable operators and direct 
broadcast satellite (DBS) service providers from imposing early 
termination fees (ETFs) and billing cycle fees (BCFs) on subscribers. 
We have initiated proceedings to review how the Commission's existing 
cable customer service standards may be updated to protect consumers 
from misleading pricing and be applied to DBS providers. This item 
builds upon those efforts and addresses additional junk fee billing 
practices of cable and DBS providers that penalize subscribers for 
terminating video service or switching video service providers, and 
further protects consumers and promotes competition in the video 
programming marketplace.
    Background. Billing Practices. ETFs require subscribers to pay a 
fee for terminating a video services contract prior to its expiration 
date, making it costly for consumers to switch services during the 
contract term. Because an ETF may have the effect of limiting consumer 
choice after a contract is enacted, it may negatively impact 
competition for services in the marketplace. This billing practice has 
been used by video service providers for some time and, in 2008, the 
Commission heard from expert panelists regarding the use of ETFs by 
communications service providers, including representatives from cable 
and DBS providers. More recently, the Executive Order on Promoting 
Competition in the American Economy encouraged the Commission to 
consider ``prohibiting unjust or unreasonable early termination fees 
for end-user communication contracts; enabling consumers to more easily 
switch providers'' in order to promote competition and lower prices.
    BCFs require video service subscribers to pay for a complete 
billing cycle even if the subscriber terminates service prior to the 
end of that billing cycle. As such, BCFs penalize consumers for 
terminating service by requiring them to pay for services they choose 
not to receive. Video service subscribers may terminate service for any 
number of reasons, including moving, financial hardship, or poor 
service. Recently, some states have enacted laws restricting BCFs. The 
U.S. Court of Appeals for the First Circuit in Spectrum Northeast, LLC 
v. Frey recently decided that one such BCF regulation imposed by the 
State of Maine was not impermissible cable service rate regulation. 
Likewise, the Supreme Court of New Jersey recently reached the same 
conclusion regarding a similar New Jersey statute in the Alleged 
Failure of Altice case.
    Customer Service Standards. The 1984 Cable Act added Title VI to 
the Communications Act of 1934 (Act). Section 632, entitled ``Consumer 
Protection,'' addressed one particular type of consumer protection--
``customer service requirements,'' providing specifically that ``[a] 
franchising authority may require . . . provisions for enforcement of . 
. . customer service requirements . . .'' Although the term ``customer 
service'' is not defined in the statute, the legislative history of the 
1984 Cable Act defined ``customer service'' as ``the direct business 
relation between a cable operator and a subscriber'' and ``customer 
service requirements'' as including requirements related to ``rebates 
and credits to consumers.'' In 1992, Congress amended section 632 to 
``provide protection for consumers against . . . poor customer 
service'' in part by requiring the Commission to ``establish standards 
by which cable operators may fulfill their customer service 
requirements.'' The legislative history of the 1992 Cable Act explained 
that Congress considered cable customer service ``an area of paramount 
concern,'' and that the standards are intended to ``provide increased 
consumer protection.'' In 1993, the Commission implemented this mandate 
in section 76.309 of its rules, adopting baseline customer service 
requirements for cable operators. Although section 632 specifies 
certain topics that must be addressed in the Commission's cable 
customer service rules, such as ``communications between the cable 
operator and the subscriber (including standards governing bills and 
refunds),'' the list is not exhaustive. Because section 632(b) states 
that the standards must address these topics ``at a minimum,'' the 
Commission has broad authority to adopt customer service requirements 
beyond those enumerated in the statute. Indeed, when enacting its 
customer service standards, the Commission noted that ``we reserve the 
right to respond to particular circumstances brought to our attention 
to ensure that customer service satisfaction is achieved nationwide.''
    With regard to DBS providers, section 303(v) of the Act grants the 
Commission ``exclusive jurisdiction to regulate the provision of 
direct-to-home satellite services,'' and section 335(a) provides broad 
statutory authority to the Commission to impose ``public interest or 
other requirements for providing video programming'' on DBS providers. 
While the Commission has not adopted specific customer service 
obligations for

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DBS providers as it has for cable providers, it has adopted rules 
implementing other public interest obligations.
    Discussion. Consistent with the objectives outlined above, we seek 
comment on our tentative conclusions with respect to ETFs and BCFs. As 
more thoroughly discussed below, this includes the scope and substance 
of our proposed rules, our legal authority to adopt these rules, the 
benefits and impacts of the proposed rules, and the extent to which any 
alternatives could achieve our policy goals.
    Proposed Rules. First, we propose to prohibit cable and DBS service 
providers from imposing a fee for the early termination of a cable or 
DBS video service contract. To the extent that the existing terms of 
service between a cable operator or DBS provider and its subscriber 
provide for an ETF, we seek comment on whether to deem such a provision 
unenforceable if we were to prohibit ETFs. We seek comment on this 
proposal to regulate video service ETFs. We tentatively find that our 
proposed prohibition on ETFs is a reasonable customer service 
requirement in an area, billing practices, where the Commission 
receives hundreds of complaints annually. When the Commission first 
established its customer service standards, it acknowledged that a 
``key objective'' of the Act was to ``ensure that cable operators 
nationwide provide satisfactory service to their customers.'' We 
tentatively find that the imposition of ETFs inhibits subscribers from 
switching providers and making choices about the video services they 
wish to receive. We tentatively find that the prohibition of ETFs will 
create a standard that protects consumers from a billing practice that 
may effectively limit their ability to switch video service providers. 
Limiting such restrictions imposed on consumer choice could serve the 
public interest by allowing consumers to freely choose among providers, 
which promotes vibrant competition in the market for video services and 
encourages providers to maintain high customer service standards to 
retain subscribers to their service. Although in the past video service 
providers have generally claimed that ETFs decrease overall consumer 
costs, individual consumers maintain in general that ETFs are 
unreasonably restrictive. We tentatively find that our proposed rule 
preventing ETFs will protect consumers from billing practices that may 
deter or make it more difficult for consumers to switch providers, and 
thereby impede competition in the video marketplace. We seek comment on 
these tentative conclusions.
    We also propose to require cable and DBS service providers to grant 
subscribers a prorated credit or rebate for the remaining whole days in 
a monthly or periodic billing cycle after the cancellation of service. 
We seek comment on this proposal, and whether the specific language 
reflects our intent of relieving a subscriber from payment obligations 
as of the date the provider receives a cancellation request. To the 
extent that the existing terms of service between a cable operator or 
DBS provider and its subscriber provide for a BCF, we seek comment on 
whether to deem such a provision unenforceable if we were to prohibit 
BCFs. We tentatively find that this prohibition on BCFs is a reasonable 
customer service requirement because this practice requires consumers 
to pay for service they no longer wish to receive. As with ETFs, we 
tentatively find that prohibition of BCFs will create a standard that 
protects consumers from poor customer service, specifically, paying for 
services that have been cancelled, and that such a standard will serve 
the public interest by protecting consumers from unfair billing 
practices. BCFs impose significant costs on consumers for services they 
have cancelled and no longer wish to receive. For instance, based on 
the average price for cable service, subscribers cancelling mid-billing 
cycle could pay a significant price even after cancelling their 
service: the average monthly price for basic tier cable service is 
$42.63, for expanded basic tier service it is $101.54, for the next 
most popular cable service tier it is $115.67, and the price for 
services comparable to expanded basic tier service from DIRECTV and 
DISH average $123.52 and $90.44 per month, respectively. We tentatively 
find that our proposed rule preventing BCFs will protect consumers from 
charges for cancelled cable or DBS service they no longer want. We seek 
comment on these tentative conclusions.
    Legal Authority. We seek comment on our authority to adopt ETF and 
BCF regulations for cable and DBS providers. We tentatively conclude 
that adoption of restrictions on both ETFs and BCFs is a proper 
exercise of the Commission's authority under section 632 to ``establish 
standards by which cable operators may fulfill their customer service 
requirements.'' Section 632(b)(3) directs the Commission to establish 
standards governing ``communications between the cable operator and the 
subscriber (including standards governing bills and refunds).'' Because 
ETFs and BCFs involve cable operators' billing and refund practices, we 
tentatively conclude that these are customer service matters within the 
meaning of section 632(b)(3). In addition, we tentatively find that we 
may regulate these practices under our general authority in 632(b) to 
establish ``customer service'' standards. Although the term ``customer 
service'' is not defined in the statute, the legislative history 
defines the term ``customer service'' to mean ``in general'' ``the 
direct business relation between a cable operator and a subscriber,'' 
and goes on to explain that ``customer service requirements'' include 
requirements related to ``rebates and credits to consumers.'' We 
tentatively conclude that the proposed restriction on ETFs and BCFs 
satisfies the definition of a ``customer service requirement'' because 
billing practices governing the termination of service, such as ETFs 
and BCFs, involve the ``direct business relation between a cable 
operator and a subscriber.'' Additionally, we tentatively find that 
pro-rata refunds are properly considered ``rebates [or] credits'' given 
to consumers, which, according to the legislative history, are customer 
service matters. Furthermore, the list of topics Congress required the 
Commission to address in terms of customer service was not exhaustive. 
We tentatively conclude that fees--both those inhibiting subscribers 
from making choices about the video services they wish to receive and 
those imposing significant costs on consumers for services they did not 
choose to receive--are precisely the type of customer service concerns 
that Congress meant to address when it enacted section 632. Thus, we 
tentatively find that restrictions on such practices are within the 
statute's grant of authority. We seek comment on this analysis. We also 
seek comment on whether there are alternative or additional statutes or 
arguments that provide a legal basis for our authority to adopt this 
customer service requirement for cable operators.
    We also seek comment on our authority to adopt ETF and BCF 
regulations for DBS providers. We tentatively find that restrictions on 
ETFs are in the public interest because the fees unreasonably inhibit 
competition and consumer choice among video service providers. We 
tentatively find that restrictions on BCFs are in the public interest 
because the practice imposes fees on subscribers for services that they 
did not choose to receive and that the fees can be significant. 
Excluding DBS from these rules would mean that their subscribers would 
remain vulnerable to these practices. Do

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we have authority under section 335(a) to adopt ETF and BCF regulations 
for DBS providers? Do we have authority under other provisions of Title 
III? We also seek comment on whether we have--and should exercise--
ancillary authority under section 4(i) of the Act to adopt such 
regulations and whether it is necessary to undertake this regulation 
for the Commission to effectively perform its responsibilities under 
the foregoing primary sources of statutory authority? By doing so, we 
will ensure uniformity of regulation between and among cable operators 
(regulated under Title VI and by various state consumer protection laws 
and local franchising provisions) and DBS providers (under Title III), 
thereby preventing DBS providers from gaining a competitive advantage 
over their competitors through the use of ETFs and BCFs. We seek 
comment on this analysis. We also seek comment on whether there are 
alternative or additional statutes or arguments that provide a legal 
basis for our authority to adopt these customer service requirements 
for DBS providers.
    Finally, as noted above, based on the language and structure of 
section 632, Congress authorized the Commission to establish customer 
service requirements, and franchising authorities to adopt additional 
laws above and beyond the Commission's baseline requirements. 
Therefore, we tentatively find that this proposed rule would not 
preempt existing state and local laws that prohibit ETFs and BCFs or 
otherwise exceed the requirements we adopt in this proceeding, so long 
as they are not inconsistent with Commission regulations. We seek 
comment on this analysis.
    Rate Regulation versus Customer Service Regulation. In Spectrum 
Northeast, LLC v. Frey, the First Circuit determined that a state 
regulation prohibiting BCFs substantially similar to the prohibition we 
propose here is not rate regulation pursuant to the Act. We tentatively 
conclude that this same analysis (as described in further detail below) 
applies to our proposed BCF prohibition. We seek comment on this 
tentative conclusion. While Spectrum Northeast, LLC v. Frey addresses 
the issue of whether a BCF prohibition is impermissible rate 
regulation, the court did not address ETFs. We tentatively conclude 
that cable ETF regulations are not rate regulations under section 623 
of the Act. We seek comment on this tentative conclusion. The statute 
does not define the term ``rates'' or explain the meaning of the phrase 
``rates for the provision of cable service'' for purposes of section 
623. Historically, the Commission's cable rate regulations have not 
covered service termination fees or termination rebates. The Commission 
has previously found the regulation of fees similar to the proposed 
regulation of ETFs and BCFs is not rate regulation. For instance, the 
Commission has found that limits on late fees are considered customer 
service regulation and not rate regulation. And, in practice, the Media 
Bureau and its predecessor bureau (the Cable Services Bureau) have 
found that local regulations similar to the proposed ETF and BCF 
regulations herein, were not properly categorized as rate regulation 
and therefore not pre-empted. Such findings have included local 
regulations that address unreturned equipment fees, pay-by-phone fees, 
late fees, returned check fees, and other miscellaneous cable 
subscriber charges that were found not to be included as part of the 
Commission's rate regulations. Thus, we tentatively conclude that 
Commission practice and precedent supports the notion that ETF 
regulations also are not rate regulation.
    Furthermore, our tentative conclusion is consistent with recent 
court precedent. In the First Circuit's recent decision in Spectrum 
Northeast, LLC v. Frey, the court determined that a state BCF 
regulation is not rate regulation pursuant to the Act. The Maine 
regulation was enacted after a cable company implemented a new practice 
of declining to provide refunds when cable service was terminated prior 
to the end of a billing cycle. The regulation then required cable 
operators to issue prorated credits or rebates for the days remaining 
in a billing period after termination of cable service. The court 
determined that the federal preemption of cable rate regulation ``did 
not extend to the regulation of termination rebates'' and concluded 
that the Maine law is not a law governing ``rates for the provision of 
cable service'' but rather is a ``consumer protection law'' that is not 
preempted. The court based its decision on four aspects of the 
structure and legislative history of the Act. First, the court 
explained that the legislative history of the Act and the Commission's 
regulations ``focused on preempting monthly `rates' charged for the 
provision of basic cable service'' and do not ``suggest that the term 
`rates for the provision of cable service' includes termination fees or 
termination rebates.'' Second, the court noted that Congressional 
silence concerning termination fees or rebates is ``particularly 
significant'' because Congress included regulation of rates for 
``installation'' fees, but not termination fees, as rates ``for the 
provision of cable service.'' Third, the court observed that Congress 
acknowledged multiple potential sources of competition but did not 
identify termination credits as being controlled by effective 
competition. Instead, termination credits encourage competition ``by 
prohibiting cable companies from creating artificial barriers to 
switching between competitors by charging consumers beyond termination 
of service.'' Finally, the court found that Congress expressed a 
purpose to ``preserve state consumer protection laws'' despite 
preempting the regulation of ``rates for the provision of cable 
service,'' and this favors ``a narrow reading of the scope of the 
preemption provision.''
    The New Jersey Supreme Court also recently concluded that a New 
Jersey statute banning BCFs was not rate regulation preempted by 
federal law. The New Jersey code states that ``[b]ills for cable 
television service shall be rendered monthly, bi-monthly, quarterly, 
semi-annually or annually and shall be prorated upon establishment and 
termination of service.'' In Alleged Failure of Altice, the Supreme 
Court of New Jersey concluded that New Jersey's BCF regulation does not 
regulate cable rates or control the rates for the provision of cable 
service. The court based its decision on the ``ordinary meaning'' of 
the text from the New Jersey statute and the Cable Act. The court 
determined that ``the plain and ordinary meaning of rate regulation . . 
. is not so broad as to encompass all laws that affect or concern cable 
prices.'' With regard to the New Jersey BCF regulation, the court 
concluded that ``the challenged regulation does not even indirectly 
affect the actual rate Altice charges . . . the regulation merely uses 
the rate that the cable provider sets to enforce a price proportional 
to the quantity of service provided.''
    With regard to cable ETFs, we tentatively conclude that the courts' 
logic in Spectrum Northeast, LLC v. Frey and Alleged Failure of Altice 
applies to the ETF regulation we propose in this NPRM. Similar to a 
BCF, an ETF is assessed upon termination of service, i.e., it concerns 
the time period when cable service ends. Thus, a restriction on ETFs 
does not appear to cap the amount a cable operator can charge for the 
provision of cable service; rather, it regulates only the charge that a 
cable operator may impose on a customer after the customer has elected 
to terminate service. Further, we tentatively find that the structure 
and legislative history of the Act does not support treating ETFs as a 
form of rate

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regulation, just as the courts found with regard to BCFs. Also, we 
tentatively find that an ETF does not fall within the plain and 
ordinary meaning of rate regulation, similar to the court's reasoning 
regarding BCFs. Thus, we tentatively conclude that regulation of ETFs 
is not ``rate regulation.'' In addition, our tentative conclusion is 
consistent with case law evaluating whether State regulation of 
cellular telephone ETFs is preempted by federal rate regulation. In In 
re Cellphone Termination Fee Cases, the California Court of Appeals for 
the First District concluded that a cellular telephone ETF regulation 
was not preempted by federal law. Although the court was not addressing 
cable rate regulation specifically, it was addressing a similar 
statutory provision that carves out the universe of ``other terms and 
conditions'' from rate regulation of wireless services, similar to how 
``consumer protection'' and ``customer service'' is distinct from rate 
regulation in the cable statute. The scope of both carveouts appears to 
be similar in nature and includes billing issues, consumer protection, 
and customer service. The court concluded that the ``purpose in 
adopting the cellular telephone ETF was to control churn'' and prevent 
customers from leaving, and because the State law invalidating the ETFs 
had ``only an indirect and incidental effect on . . . rates,'' it was 
not preempted by federal law. We find this reasoning and that of the 
BCF cases discussed above to be applicable to the question of whether 
cable ETF regulations are rate regulations under the Act, and 
tentatively conclude that they are not. We therefore tentatively 
conclude that, consistent with case law and the Commission's own 
precedent, regulations concerning cable ETFs also are not rate 
regulations. Thus, we tentatively find inapplicable section 623's 
prohibition on the Commission's regulation of ``the rates for the 
provision of cable service'' in franchise areas where effective 
competition exists. Nearly all, if not all, cable operators now face 
effective competition and are not subject to rate regulation. However, 
there is no such prohibition found in section 632's customer service 
provision. Accordingly, the applicability of ETF and BCF regulations 
are not affected by the existence of effective competition in a 
community. We seek comment on this analysis.
    Implementation. We seek comment on how to tailor our rules to best 
protect consumers and promote competition. As an initial matter, we 
seek specific comment on the interplay of our proposed rules and any 
state or local ETF and BCF regulations. To what extent are State and 
local authorities currently regulating ETFs and BCFs with respect to 
cable and DBS services? Do local authorities have adequate resources to 
enforce the proposed rules effectively? To the extent the Commission 
were to enforce its own rules in individual cases, how could it best 
coordinate enforcement with local authorities?
    We also seek specific comment from State and local authorities on 
our proposed prohibition on cable and DBS ETFs and BCFs as proposed in 
appendix A. Should we adopt something less than a total ban and allow 
variations within States or communities? Given our shared jurisdiction 
with local authorities over cable customer service issues, we seek 
comment regarding their local subscriber complaints and regulation 
experiences. We seek comment on what enforcement mechanisms should be 
implemented at the federal level. We also seek comment on what 
enforcement mechanisms have been or could be implemented at the local 
level and how those might inform enforcement mechanisms at the federal 
level. To the extent we adopt a ban on DBS ETFs and BCFs, would this 
need to be enforced by the Commission given that DBS providers are not 
required to have local or state franchises? If so, are there additional 
rules we should adopt to ensure an effective enforcement scheme?
    If the Commission adopts the proposals to ban ETFs and BCFs, what 
is a reasonable amount of time for cable and satellite providers to 
implement this change? How should our proposed rule banning BCFs be 
implemented for the benefit of current subscribers? Do operators 
require time to implement changes to their current billing systems? 
What effect, if any, will our proposed rule banning ETFs have on 
consumers' existing contracts? If commenters argue that our proposed 
rule should apply only to new contracts entered into after its 
effective date, what are the legal and policy justifications for 
treating agreements of existing customers differently than new 
customers? Should there be a grace period to accommodate existing 
contracts with ETF provisions? If so, what effect, if any, will our 
proposed rule have on existing ETFs? In lieu of the rules proposed in 
appendix A, we seek comment on whether the Commission should, on the 
other hand, adopt more detailed cable and DBS regulations that include 
grace periods, limiting or extenuating circumstances, or other factors 
for determining when an ETF or BCF might be appropriate. Is there any 
justification for less than a total ban on ETFs and BCFs? For example, 
should our rules exempt small cable operators or rural cable operators? 
Any party advocating for an exception should explain the reason they 
believe a carve-out from the prohibition is necessary. We seek comment 
on these issues.
    To the extent cable or DBS video service is part of a bundled 
package with non-video services, could ETF and BCF rules be applied to 
the entire bundle, and if so, under what authority? We therefore seek 
comment on enforcement issues relating to an ETF or BCF ban when video 
services are bundled with non-video services. With respect to cable, 
does permitting state and local government enforcement of an ETF or BCF 
ban conflict with other sections of Title VI of the Act or the scope of 
local franchise authority under Title VI when video services are 
included as part of a bundle? We recognize that section 624(b)(1) 
provides that franchising authorities ``may not . . . establish 
requirements for . . . information services.'' Does this provision 
limit franchising authorities' ability to enforce a Commission-
established ban on ETFs or BCFs when video services are part of a 
bundle with non-video services? We seek comment on these issues.
    State of the Video Marketplace. We seek comment on how cable 
operators and DBS providers currently handle ETFs and BCFs. As noted 
above, BCFs are a more recent development than ETFs. Were there changes 
in the video marketplace that prompted introduction of ETFs and/or 
BCFs? Are there video service providers who currently do not impose 
ETFs and/or BCFs? Are there providers that offer multiple subscription 
choices including plans with and without ETFs? Are providers offering 
long term contracts at reduced prices without ETFs? If so, what other 
differences are there between offerings with and without ETFs? How 
likely are consumers to elect a plan that does not include ETFs when 
such offerings are available? If such offerings are available, what is 
the cable operator's or DBS provider's rationale for offering that plan 
or option? Would the absence or presence of an ETF impact a consumer's 
choice of provider? Are there any cable operators or DBS providers that 
offer multiple subscription choices including plans with and without 
BCFs? If so, what is the cable operator's or DBS provider's rationale 
for offering that plan or option? Are there cable operators or DBS 
providers that only impose BCFs in certain circumstances

[[Page 744]]

and not in other circumstances? If so, what are the circumstances in 
which the BCF is not imposed? What is the cable operator's or DBS 
provider's rationale for not imposing the BCF in those circumstances? 
Would the absence or presence of BCFs impact a consumer's choice of 
provider? How would prohibiting or limiting cable operators and DBS 
providers from imposing ETFs and/or BCFs change providers' current 
customer services?
    Cost/Benefit Analysis. If a ban on ETFs were implemented, we expect 
consumers to benefit because they would have the ability to switch 
video service providers more easily and cancel video service without 
cost. In addition, a ban on BCFs would benefit consumers because it 
would prevent consumers from paying for services they choose not to 
receive. If ETFs are eliminated, would video service providers still 
choose to offer long term contracts for reasons other than price, for 
instance in order to avoid churn? Could the elimination of ETFs alter 
the price of long term contracts and if so how? What would be the 
impact of such changes on consumers? If video service providers were to 
decide not to offer long term contracts or to offer them at higher 
prices, would the higher prices be offset by the consumer savings in 
avoiding ETFs? How would these possible outcomes affect low-income and 
new consumers? Further, would eliminating ETFs and BCFs affect billing 
cycles? We seek comment on how the Commission should assess the 
likelihood and magnitude of these potential benefits and costs to 
consumers.
    We also seek comment on how a ban on ETFs and BCFs would affect 
competition among video providers. By reducing consumer switching 
costs, could a ban on ETFs foster competition between developing online 
video services and cable and satellite video providers? For example, 
might consumers who have signed multi-year contracts with cable and 
satellite video providers benefit from earlier opportunities to choose 
among all options? Would this additional choice enhance competition? 
For cable and satellite video customers, what are the shares of 
customers with month-to-month, one-year, two-year, or other service 
agreements subject to ETFs or BCFs?
    We also seek comment on any potential costs that would be imposed 
on regulatees if we adopt the proposals contained in this NPRM. Do 
these costs differ between large and small cable providers? Would a ban 
on ETFs and BCFs impose substantial or unnecessary burdens on small 
cable operators? Further, would a ban on ETFs limit entry by new 
providers by limiting their ability to recoup upfront costs through an 
ETF? Would a ban on ETFs and BCFs have a positive impact on video 
service provider negotiations with broadcast stations and cable 
networks for programming by allowing consumers more freedom to switch 
providers to obtain preferred programming? Could programming costs be 
affected by a ban on ETFs and BCFs? What amounts do cable and DBS 
operators charge for early termination fees? Comments should be 
accompanied by specific data and analysis supporting claimed costs and 
benefits.
    Digital Equity and Inclusion. Finally, the Commission, as part of 
its continuing effort to advance digital equity for all, including 
people of color, persons with disabilities, persons who live in rural 
or Tribal areas, and others who are or have been historically 
underserved, marginalized, or adversely affected by persistent poverty 
or inequality, invites comment on any equity-related considerations and 
benefits (if any) that may be associated with the proposals and issues 
discussed herein. Specifically, we seek comment on how our proposals 
may promote or inhibit advances in diversity, equity, inclusion, and 
accessibility, as well the scope of the Commission's relevant legal 
authority.
    Ex Parte Rules--Permit-But-Disclose. The proceeding this Notice 
initiates shall be treated as a ``permit-but-disclose'' proceeding in 
accordance with the Commission's ex parte rules. Persons making ex 
parte presentations must file a copy of any written presentation or a 
memorandum summarizing any oral presentation within two business days 
after the presentation (unless a different deadline applicable to the 
Sunshine period applies). Persons making oral ex parte presentations 
are reminded that memoranda summarizing the presentation must (1) list 
all persons attending or otherwise participating in the meeting at 
which the ex parte presentation was made, and (2) summarize all data 
presented and arguments made during the presentation. If the 
presentation consisted in whole or in part of the presentation of data 
or arguments already reflected in the presenter's written comments, 
memoranda, or other filings in the proceeding, the presenter may 
provide citations to such data or arguments in his or her prior 
comments, memoranda, or other filings (specifying the relevant page 
and/or paragraph numbers where such data or arguments can be found) in 
lieu of summarizing them in the memorandum. Documents shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with rule 1.1206(b). 
In proceedings governed by rule 1.49(f) or for which the Commission has 
made available a method of electronic filing, written ex parte 
presentations and memoranda summarizing oral ex parte presentations, 
and all attachments thereto, must be filed through the electronic 
comment filing system available for that proceeding, and must be filed 
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). 
Participants in this proceeding should familiarize themselves with the 
Commission's ex parte rules.
    Filing Requirements--Comments and Replies. Pursuant to Sec. Sec.  
1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, 
interested parties may file comments and reply comments on or before 
the dates indicated on the first page of this document. Comments may be 
filed using the Commission's Electronic Comment Filing System (ECFS). 
See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 
24121 (1998).
    Electronic Filers: Comments may be filed electronically using the 
internet by accessing the ECFS: https://apps.fcc.gov/ecfs/.
    Paper Filers: Parties who choose to file by paper must file an 
original and one copy of each filing. Filings can be sent by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission. Commercial 
overnight mail (other than U.S. Postal Service Express Mail and 
Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, 
MD 20701. Postal Service first-class, Express, and Priority mail must 
be addressed to 45 L Street NE, Washington, DC 20554. Effective March 
19, 2020, and until further notice, the Commission no longer accepts 
any hand or messenger delivered filings. This is a temporary measure 
taken to help protect the health and safety of individuals, and to 
mitigate the transmission of COVID-19. During the time the Commission's 
building is closed to the general public and until further notice, if 
more than one docket or rulemaking number appears in the caption of a 
proceeding, paper filers need not submit two additional copies for each 
additional docket or rulemaking number; an original and one copy are 
sufficient.

[[Page 745]]

    Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980, 
as amended (RFA), requires that an agency prepare a regulatory 
flexibility analysis for notice and comment rulemakings, unless the 
agency certifies that ``the rule will not, if promulgated, have a 
significant economic impact on a substantial number of small 
entities.'' Accordingly, the Commission has prepared an Initial 
Regulatory Flexibility Analysis (IRFA) concerning the possible/
potential impact of the rule and policy changes contained in this NPRM. 
The IRFA is set forth below. Written public comments are requested on 
the IRFA. Comments must be filed by the deadlines for comments on the 
NPRM indicated on the first page of this document and must have a 
separate and distinct heading designating them as responses to the 
IRFA.
    Paperwork Reduction Act. This document does not contain any 
proposed information collections subject to the Paperwork Reduction Act 
of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not 
contain any new or modified information collection burden for small 
business concerns with fewer than 25 employees, pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4).
    Providing Accountability Through Transparency Act. Consistent with 
the Providing Accountability Through Transparency Act, Public Law 118-
9, a summary of this document will be available on https://www.fcc.gov/proposed-rulemakings.
    People with Disabilities. To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer and Governmental Affairs Bureau at (202) 418-0530.
    Initial Regulatory Flexibility Act Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the 
possible significant economic impact on small entities of the policies 
and rules proposed in this Notice of Proposed Rulemaking (NPRM). The 
Commission requests written public comments on this IRFA. Comments must 
be identified as responses to the IRFA and must be filed by the 
deadlines for comments specified in the NPRM. The Commission will send 
a copy of the NPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA). In addition, the 
NPRM and IRFA (or summaries thereof) will be published in the Federal 
Register.
    Need for, and Objectives of, the Proposed Rules. The NPRM initiates 
a proceeding to consider billing practices that inhibit video service 
subscribers from choosing the video services they want and that result 
in consumers paying fees for video services they choose not to receive. 
The Commission has received numerous complaints from cable and DBS 
subscribers about two billing practices: early termination fees (ETFs) 
and billing cycle fees (BCFs). An ETF is a fee that a provider charges 
a subscriber when the subscriber terminates its service contract prior 
to its expiration. ETFs remove consumer choice, negatively impacting 
competition for services in the marketplace. A BCF is a fee that 
subscribers pay when they cancel service prior to the end of a billing 
cycle and the service provider refuses to refund a pro-rated share of 
the billing cycle charge for the unused service. BCFs harm consumers by 
requiring them to pay for services they did not choose to receive. Both 
of these fees place a financial burden on subscribers and can create 
barriers to competition. The proposed rules in the NPRM will prevent 
the imposition of ETFs and BCFs, protecting consumers and promoting 
competition.
    Legal Basis. The proposed action is authorized under Sec. Sec.  1, 
4(i), 303(v), 335(a) and 632(b), of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 303(v), 335(a) and 552(b).
    Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply. The RFA directs agencies to provide a 
description of, and where feasible, an estimate of the number of small 
entities that may be affected by the proposed rule revisions, if 
adopted. The RFA generally defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act (SBA). A small business 
concern is one which: (1) is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA.
    Cable and Other Subscription Programming. The U.S. Census Bureau 
defines this industry as establishments primarily engaged in operating 
studios and facilities for the broadcasting of programs on a 
subscription or fee basis. The broadcast programming is typically 
narrowcast in nature (e.g., limited format, such as news, sports, 
education, or youth-oriented). These establishments produce programming 
in their own facilities or acquire programming from external sources. 
The programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. The SBA small business size standard for this industry 
classifies firms with annual receipts less than $41.5 million as small. 
Based on U.S. Census Bureau data for 2017, 378 firms operated in this 
industry during that year. Of that number, 149 firms operated with 
revenue of less than $25 million a year and 44 firms operated with 
revenue of $25 million or more. Based on this data, the Commission 
estimates that a majority of firms in this industry are small.
    Cable Companies and Systems (Rate Regulation). The Commission has 
developed its own small business size standard for the purpose of cable 
rate regulation. Under the Commission's rules, a ``small cable 
company'' is one serving 400,000 or fewer subscribers nationwide. Based 
on industry data, there are about 420 cable companies in the U.S. Of 
these, only seven have more than 400,000 subscribers. In addition, 
under the Commission's rules, a ``small system'' is a cable system 
serving 15,000 or fewer subscribers. Based on industry data, there are 
about 4,139 cable systems (headends) in the U.S. Of these, about 639 
have more than 15,000 subscribers. Accordingly, the Commission 
estimates that the majority of cable companies and cable systems are 
small.
    Cable System Operators (Telecom Act Standard). The Communications 
Act of 1934, as amended, contains a size standard for a ``small cable 
operator,'' which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than one percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' For purposes of the Telecom Act Standard, the 
Commission determined that a cable system operator that serves fewer 
than 498,000 subscribers, either directly or through affiliates, will 
meet the definition of a small cable operator. Based on industry data, 
only six cable system operators have more than 498,000 subscribers. 
Accordingly, the Commission estimates that the majority of cable system 
operators are small under this size standard. We note however, that the 
Commission neither requests nor collects information on whether cable 
system operators are

[[Page 746]]

affiliated with entities whose gross annual revenues exceed $250 
million. Therefore, we are unable at this time to estimate with greater 
precision the number of cable system operators that would qualify as 
small cable operators under the definition in the Communications Act.
    Direct Broadcast Satellite (``DBS'') Service. DBS service is a 
nationally distributed subscription service that delivers video and 
audio programming via satellite to a small parabolic ``dish'' antenna 
at the subscriber's location. DBS is included in the Wired 
Telecommunications Carriers industry which comprises establishments 
primarily engaged in operating and/or providing access to transmission 
facilities and infrastructure that they own and/or lease for the 
transmission of voice, data, text, sound, and video using wired 
telecommunications networks. Transmission facilities may be based on a 
single technology or combination of technologies. Establishments in 
this industry use the wired telecommunications network facilities that 
they operate to provide a variety of services, such as wired telephony 
services, including VoIP services, wired (cable) audio and video 
programming distribution; and wired broadband internet services. By 
exception, establishments providing satellite television distribution 
services using facilities and infrastructure that they operate are 
included in this industry.
    The SBA small business size standard for Wired Telecommunications 
Carriers classifies firms having 1,500 or fewer employees as small. 
U.S. Census Bureau data for 2017 show that 3,054 firms operated in this 
industry for the entire year. Of this number, 2,964 firms operated with 
fewer than 250 employees. Based on this data, the majority of firms in 
this industry can be considered small under the SBA small business size 
standard. According to Commission data however, only two entities 
provide DBS service--DIRECTV (owned by AT&T) and DISH Network, which 
require a great deal of capital for operation. DIRECTV and DISH Network 
both exceed the SBA size standard for classification as a small 
business. Therefore, we must conclude based on internally developed 
Commission data, in general DBS service is provided only by large 
firms.
    Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. The NPRM proposes to adopt rules that prohibit 
cable and DBS service providers from imposing ETFs and BCFs. This may 
impose new or additional compliance obligations on small entities. When 
subscribers wish to terminate their services contract prior to its 
expiration date, small entity cable operators may need to use 
additional accounting and finance processes to determine the prorated 
credit or rebate to provide subscribers for the remaining days in a 
billing cycle. These operators must then determine how to return this 
fee to the subscriber. The NPRM seeks comment on any potential costs 
that would be imposed on regulatees and whether a ban on ETFs and BCFs 
would impose unnecessary burdens on small cable operators. The 
Commission anticipates the information received in comments including 
where requested, cost and benefit analyses, will help identify and 
evaluate relevant compliance matters for small entities, including 
compliance costs and other burdens that may result from the proposals 
and inquiries made in the NPRM.
    Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. The RFA requires an 
agency to describe any significant alternatives that it has considered 
in reaching its proposed approach, which may include the following four 
alternatives (among others): (1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for such small entities; (3) the 
use of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    To assist in the Commission's evaluation of the economic impact on 
small entities, as a result of actions that have been proposed in the 
NPRM, and to better explore options and alternatives, the Commission 
seeks comment on whether any of the burdens associated with the 
compliance requirements described above can be minimized for small 
entities. An alternative option that may reduce burdens on small 
entities considered in the NPRM is whether the Commission should adopt 
more detailed cable and DBS regulations that include grace periods, 
limiting or extenuating circumstances, or other factors for determining 
when an ETF or BCF might be appropriate. Additionally, the Commission 
seeks comment on whether potential costs associated with a ban on small 
entities imposing ETFs and BCFs would impose unnecessary burdens on 
small cable operators. The Commission expects to more fully consider 
the economic impact and alternatives for small entities based on its 
review of the record and any comments filed in response to the NPRM and 
this IRFA.
    Federal Rules that May Duplicate, Overlap, or Conflict with the 
Proposed Rule. None.
    It is ordered that, pursuant to the authority found in Sec. Sec.  
1, 4(i), 303(v), 335(a) and 632(b), of the Communications Act of 1934, 
as amended, 47 U.S.C. 151, 154(i), 303(v), 335(a) and 552(b), this 
Notice of Proposed Rulemaking is adopted. It is further ordered that 
the Commission's Office of the Secretary, Reference Information Center, 
shall send a copy of this Notice of Proposed Rulemaking, including the 
Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 25

    Administrative practice and procedure, Satellites.

47 CFR Part 76

    Television.

Federal Communications Commission
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 25 and 76 as 
follows:

PART 25--SATELLITE COMMUNICATIONS

0
1. The authority citation for Part 25 is revised to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 310, 319, 
332, 335, 605, and 721, unless otherwise noted.

0
2. Amend Sec.  25.701 by revising the introductory text of paragraph 
(a) and by adding paragraph (g) to read as follows:


Sec.  25.701  Other DBS Public interest obligations.

    (a) DBS providers are subject to the public interest obligations 
set forth in paragraphs (b), (c), (d), (e), (f) and (g) of this 
section. * * *
* * * * *
    (g) Customer service obligations. A DBS provider shall not charge a 
subscriber a fee for terminating a DBS services contract before its 
expiration date. A DBS provider must provide a subscriber a prorated 
credit or rebate for the remaining days in a billing cycle after the 
cancellation of DBS service.
* * * * *

[[Page 747]]

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
3. The authority citation for Part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 
303a, 307, 308, 309, 312, 315, 317, 325, 338, 339, 340, 341, 503, 
521, 522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 
549, 552, 554, 556, 558, 560, 561, 571, 572, 573.

0
4. Amend Sec.  76.309 by adding paragraph (c)(5) to read as follows:


Sec.  76.309  Customer service obligations.

* * * * *
    (c) * * *
    (5) A cable operator shall not charge a subscriber a fee for 
terminating a cable services contract before its expiration date. A 
cable operator must provide a subscriber a prorated credit or rebate 
for the remaining days in a billing cycle after the cancellation of 
cable service.
* * * * *
[FR Doc. 2023-28622 Filed 1-4-24; 8:45 am]
BILLING CODE 6712-01-P