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This week, the Federal Trade Commission filed a complaint against the satellite pay TV provider DirecTV, alleging deceptive advertising. The FTC charges that DirecTV violated the FTC Act in many instances by failing to clearly and prominently disclose various “gotchas” in subscriber contracts, including that customers are locked into services for two years, and that an extra fee for premium channels kicks in automatically unless subscribers proactively cancel the option.
A federal court in San Francisco will decide if DirecTV is guilty as charged, and if so how much the company will owe in fines and payments to customers. Regardless of the outcome, however, the complaint exposes pretty much everything that’s misleading, hated, and just plain wrong with the way pay TV providers—DirecTV as well as Comcast, Time Warner Cable, and the rest—reel in subscribers in and then get them on the hook for a lot more money than they’d anticipated.
Specifically, the case calls attention to the following annoying and atrocious practices routinely employed by virtually all pay TV providers.
Loads of fine print. “It’s a bedrock principle that the key terms of an offer to a consumer must be clear and conspicuous, not hidden in fine print,” FTC Chairwoman Edith Ramirez said in the press release announcing the complaint against DirecTV. Yet to this day, details regarding DirecTV’s plans, including a requirement to keep the service for 24 months or face a cancellation fee up to $480, are explained in typeface that’s minuscule compared with the $19.99 monthly rate. It’s also confusing that while it’s necessary to subscribe for 24 months, the $19.99 rate is only valid for half that time. What happens after the first 12 months have ended?
Exploding bills. “DIRECTV does not clearly disclose that the cost of the package will increase by up to $45 more per month in the second year,” the FTC complaint states. This strategy—drawing in subscribers with a cheap rate, then jacking it up as soon as possible—is the consensus business model of all the major pay TV providers. What this commonplace tactic shows is that these companies value new subscribers over older, more loyal ones. It essentially punishes loyal customers who accept the bill hikes without complaint, while giving price breaks to newcomers and people who threaten to jump ship to a competitor. Assuming that’s a possibility, of course.
Difficult to change or cancel. DirecTV hits subscribers with a big fee if they try to drop the service before the allotted two-year introductory period has ended. The widespread use of “retention specialists” whose job is to stop customers from canceling or downsizing plans, as well as various cancellation or change fees, plus the fact that most Americans only have one or two pay TV options where they live all help to conspire to keep subscribers paying whichever provider they currently have.
Surprise fees. The cancellation fee cited by the FTC is only one of many charges that drive pay TV subscribers crazy. The others include a dizzying roster of taxes and fees for things like modems or some vague “Voice/data Equipment.”
Overall deception and opaque pricing. How much will your total monthly bill come to after all taxes and fees? What’s the exact breakdown on fees? When will introductory prices rise, and what rate will they rise to? For that matter, what’s the full price for various package plans in your neck of the woods? Good luck finding answers to any of these spelled out clearly and prominently on a pay TV provider ad or website.
The providers prefer to keep customers in the dark, and you can see why: If people knew how much their bill would actually be, and how quickly and significantly the monthly rate will soar, they’d be a lot less likely to sign up in the first place.