The FCC is considering a new rule. It would abolish early termination charges for services like DIRECTV. This policy would let consumers end their contracts at any time. They could do so without paying penalties. DIRECTV is concerned that this may cause it to increase its prices.
In a recent letter to the FCC, DIRECTV argued that the rule could raise its costs. They said the investment in new equipment for each subscriber could be as much as $700. They plan to recover this cost over the contract. They say that no early termination fees would complicate recouping these costs. This would happen if consumers ended their service early.
Purpose of Early Termination Fees
DIRECTV detailed in their letter the purpose of early termination fees (ETFs). ETFs distribute satellite equipment and setup costs across a prolonged period. These expenses generally fall between $450 and $700 per new subscriber. DIRECTV also noted that they do not apply ETFs after the initial two years. When a customer agrees to conditions that include the fees, the company waives them. For example, getting new equipment or a discounted retention offer. They stressed that, without ETFs, they might have to cover these costs upfront. Or they might have to raise monthly fees. These changes could hurt low-income consumers.
DIRECTV says the FCC’s proposal aims to help consumers switch providers. But it could accidentally make it harder and cost more for new customers to access DIRECTV. This rule has yet to be implemented. But its expected enactment could hurt many companies. They now offer equipment at reduced costs due to long-term contracts. It allows millions of consumers to break free from lengthy contracts.