Charter pricing doesn’t let customers save money by buying different modems.
Charter is trying to convince the Federal Communications Commission to backtrack on a plan that would force cable providers to charge a separate fee for cable modems.
Charter is unusual among cable companies in that it doesn’t tack on a cable modem rental fee when offering Internet service. But FCC officials don’t think that’s good for consumers, because the price of Charter Internet service is the same whether a customer uses a Charter modem or buys their own.
FCC Chairman Tom Wheeler’s latest proposal for new cable box rules would require companies to list fees for equipment used to access video. The FCC is clearly hoping that Charter will create a separate fee for cable modems and lower the base price of Internet service by a corresponding amount, thus letting customers save money in the long run by purchasing their own modems. (Separately from modems, Charter already charges monthly fees for the use of its TV set-top boxes.)
“As part of the proposal, all pay-TV providers are required to be fully transparent about the cost consumers pay for leased equipment used to access video programming,” an FCC spokesperson told Ars. “The goal is to uncover hidden fees and give consumers the ability to make informed choices. If a consumer chooses to purchase their own equipment at retail, our rules would require they no long have to pay for the built-in cost on their bill. We look forward to input from the Commissioners on this aspect of the proposal.”
The FCC’s proposal was spurred partly by a modem maker called Zoom Telephonics, which complained that Charter’s pricing would discourage subscribers from buying their own modems. Zoom lodged its complaint when Charter bought Time Warner Cable and Bright House Networks, which previously had separate modem rental charges that were waived when customers bought their own modems.
Charter argues that it doesn’t pass the cost of the modem on to consumers. “Our pricing is competitive and comparable to other providers,” Charter told Ars. In addition to the base price, other providers “charge a modem fee of around $10. Our service isn’t $10 more expensive. We don’t bake in a modem fee, we include it for free with the service.” In a blog post, Charter said, “If transparency is the ultimate goal of the FCC’s provision, we would be more than happy to specifically note on our customers’ bills that our modems are free.”
Charter is the nation’s second largest cable company after Comcast, with 21.8 million Internet subscribers and 17.3 million TV subscribers.
Enforcement questions unanswered
We asked Charter if it could charge a separate modem fee and reduce the cost of its Internet service by the same amount but did not receive an answer. Charter apparently would not be allowed to list the modem price as zero. But the full FCC proposal has not been released publicly, and it isn’t clear how the FCC would force cable companies to list the true cost of equipment rather than just charging a nominal fee to comply with the proposed rule. We asked the FCC for more information on that but haven’t received any.
Charter executives met with FCC officials last week, telling them that the plan “would actively harm consumers by creating a new fee that the vast majority of subscribers would need to pay.” Charter described its position in an ex parte filing.
Charter pointed out that the FCC order approving Charter’s purchase of Time Warner Cable and Bright House Networks “explicitly prohibited Charter from charging a separate modem fee as part of the discounted broadband services offer that Charter will soon begin offering to eligible low-income customers. The Commission’s proposal to now require providers to impose a separate modem charge is fundamentally at odds with the policy the Commission endorsed in the [merger] Order and underscores the arbitrary and capricious nature of the Commission’s proposal.”
Charter’s discount service is required to offer speeds of at least 30Mbps downstream and 4Mbps upstream and a cable modem for no more than $14.99 a month. The FCC’s proposed rule would not void the merger condition, a commission spokesperson told Ars.
The FCC is scheduled to vote on the cable box rules on September 29. The rental fee issue is part of a larger proposal to help consumers save money on set-top box fees. Cable companies objected to an earlier plan that could have forced them to provide video and programming information to makers of third-party hardware or applications. The TV providers pitched an alternative plan in which they would be required to build their own applications for third-party devices, thus letting customers watch TV on set-top boxes like the Apple TV or Roku.
Wheeler dropped his original plan and accepted the cable industry proposal, but he has insisted on some changes that the industry is fighting against. Wheeler also may need to make changes to get the vote of fellow Democrat Jessica Rosenworcel, who holds the swing vote. Cable providers could sue if they don’t like the final outcome, just as they did when the FCC passed net neutrality rules.
Disclosure: The Advance/Newhouse Partnership, which owns about 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.