NCTA: Contract Fees Aid Savings

Washington — The federal government should permit cable operators to offer long-term contracts with early termination fees because they benefit both the industry and its customers, a cable official said Thursday.

“Barring early-termination fees in cable would only serve to squelch the offering of additional long-term options for customers and deny consumers the savings benefit such options can provide,” said Daniel Brenner, senior vice president for law and regulatory policy at the National Cable & Telecommunications Association.

Brenner's comments came at a Federal Communications Commission forum on early termination fees, or ETFs, which cable, satellite TV, and wireless phone customers pay when they break long-term contracts.

In addition to their month-to-month programs, Comcast and Time Warner have long-term deals for their voice, video and data triple play bundles that include $150 ETFs.

Brenner asserted that ETFs benefit everyone. Long-term deals help providers, who can keep down marketing and installation costs, and help consumers, who receive better rates than month-to-month customers.

“Long-term commitments reduce the costs associated with churn, the coming and going of customers who choose to terminate some or all of their services or switch to alternative providers,” Brenner said.

ETFs, especially in the wireless phone industry, have also come under attack as a vehicle for locking in consumers in a way harmful to competition.

Brenner said no cable customer is required to enter a long-term commitment coupled with an ETF to obtain any service from a cable company.

“The key to cable's approach: give customers more options when picking video, voice and data or a combination of these services,” he said. “Most importantly, residential offers that may include early termination fees are always optional and they convey value.”

Brenner said ETFs exists for a reason and eliminating them would cause providers to stop experimenting on the promotion front.

“If a provider offers an HDTV set when the customer agrees to a year-long contract, it would be unfair to allow the customer to break the agreement after a month and keep the set without the provider recovering something for the TV set,” Brenner said. “Without any fees or penalties for early termination, long-term commitments are not commitments at all.”