The U.S. Federal Communications Commission on Tuesday announced that Comcast would pay a record US$2.3 million fine to settle its investigation into whether the cable operator improperly charged customers for services and equipment they never approved, a practice known as "zero billing option."
Federal law bans cable operators from charging customers for unauthorized equipment or services.
"It is basic that a cable bill should include charges only for services and equipment ordered by the customer -- nothing more and nothing less," said Travis LeBlanc, chief of the FCC's enforcement bureau. "We expect all cable and phone companies to take responsibility for the accuracy of their bills and ensure their customers have authorized any charges."
The FCC received numerous complaints that Comcast charged customers for unauthorized equipment, including set-top boxes, digital video recorders. Some received premium channels they had not ordered. In many cases, customers specifically declined certain items and were charged for them anyway.
Customers complained that they sometimes received unordered equipment in the mail, got bills with charges they found only after close review, or were notified by email of changes they did not request.
Some customers also reported spending hours on the phone with Comcast trying to resolve the issues.
Under the terms of the consent decree, Comcast must abide by a five-year compliance plan. The agreement calls for Comcast to notify customers of new equipment or upgrades separately from regular bills. It allows customers to block new services automatically and requires the company to implement new dispute resolution procedures.
Comcast has been "laser-focused" on improving its customer service, the company said. It acknowledged that past shortcomings in its customer service and lack of clarity in its billing resulted in unnecessary customer frustration and confusion.
Comcast had initiated improvements even before the FCC's Enforcement Bureau began its investigation two years ago, it claimed. It disagreed with the bureau's legal theory and added that the probe found isolated errors and complaints rather than intentional wrongdoing.
The overbilling problem was the subject of hearings on Capitol Hill led by Sen. Rob Portman, R-Ohio, and Sen. Claire McCaskill, D-Mo., respectively the chair and ranking member of the Permanent Subcommittee on Investigations.
Overbilling has been a widespread problem throughout the cable and satellite industry, the subcommittee reported. Senate hearings in June and related investigations found that Charter overbilled its customers by $5.3 million annually, and Time Warner Cable overbilled by $12.5 million over a six-year period. The companies agreed to give credits to thousands of customers as a result of the findings.
Legislators last month urged the FCC to examine practices of the cable industry, based on committee testimony and reports.
The Comcast investigation could have a short-term impact on the company's relationships with its customers, suggested telecom analyst Jeff Kagan, considering the increased number of cord-cutting options available to the public.
"Yesterday, cable television companies simply didn't care about what customers thought of them since there was no other choice. However, during the last decade we have seen competition grow and take away share from Comcast and all cable television companies," he told CRM Buyer.
That said, "it would be naive to think that Comcast or any other incumbent will clean up their act because of the FCC's actions," said broadband analyst Craig Settles.
"Even though this is a 'record breaking' fine," he told CRM Buyer, "in the corporate world this is a cost of doing business that is easier to pay than the cost of cleaning up the problem."