Telecommunications companies should prepare for junk fee regulation

Legislation aimed at regulating telecommunications operators is in the works and companies should hasten to prepare for what’s to come. A bill introduced to the Senate in March 2023 proposes to do away with “junk fees,” which are financial charges that President Joe Biden denounced in his State of the Union address. These could include early termination fees, which are widely utilized across the industry to recover up-front costs incurred for equipment, installation, and activation. A current draft of the legislation puts the onus on the Federal Communications Commission to establish the specifics. The proposed rules uniformly apply to operators offering voice, broadband, television, and wireless; whether satellite is included is unclear. If enacted, the Junk Fee Prevention Act would prohibit providers from charging a fee or imposing an “excessive or unreasonable” requirement on consumers for terminating a covered service early, but there is room for debate on how to define those terms. Industry associations need to mobilize to help influence language included in the law so that it does not prevent their members from recovering real costs and preserving the value of their investments. It may be useful to present arguments to regulators in a way that also addresses transparency in billing. The challenge for most telecom operators, however, is that early termination fees aren’t “junk.” In most cases, they represent real costs that need to be recouped in order to survive and grow.

[Dan Hays is a principal with PwC and leads the firm’s enterprise strategy consulting practice for the technology, media, and telecommunications sector]