One of the first ways that streaming video stood out from pay-TV services was its month-to-month contract structure. Cable and satellite providers usually require customers to sign contracts of one year or more, whereas cord-cutter can cancel their service at any time, without cumbersome contract terms or huge fees to worry about.
That ease of cancelation may be coming to pay-TV users as well. The Biden Administration is set to propose new legislation that would limit early termination fees at cable TV, internet, and mobile phone companies. There’s no word on what precisely those limits might be, but the proposal could save pay-TV customers hundreds of dollars when they decide to end their service.
Companies charge a different amount when it comes to early termination fees, but they can become exorbitant quickly. Some, like DIRECTV, charge a specific amount; $20 per canceled month. Others charge a flat rate, no matter how much time is left on the contract. Xfinity charges users $110 in order to terminate a 12-month contract and $230 for a 24-month contract.
As good as the news is for consumers, it’s likely not going to bring any smiles to the faces of pay-TV executives. The reduction of early termination fees might lead to more competition in the marketplace, as cable and satellite companies might introduce subscription contracts closer to what streaming services provide.
It may also lead to a hastening in the already rapid decline of the cable and satellite industry by allowing people to get out of their agreements and move to some form of streaming for their entertainment. Household penetration of pay TV is at its lowest point since 1993, and the rate of decline is growing every quarter. If customers find themselves unrestrained by hefty early termination fees, it may bring about a new wave of cord-cutting across the United States.
President Biden may not have as much luck in enacting the new legislation as he’d like, however. The Senate is controlled by his party, but the House of Representatives is not. Republican congresspeople are unlikely to rubber-stamp anything sent to them by the White House, but particularly not legislation of this type, which will likely get pushback from deep-pocketed tech and entertainment companies like Comcast, Charter, Verizon, and others.
Still, there’s little doubt that the proposed rules would be a big help to consumers. Additionally, the legislation would also limit exorbitant fees on ticket sites such as Ticketmaster, and force airline and booking websites to show the entire cost of a ticket upfront. Cable and satellite users might see the biggest gains, however, especially those looking to get out of their long-term contracts a little bit early.