Charter is suing Maine to block a new state law that requires prorated refunds when cable customers cancel service mid-month, claiming that the requirement is a form of rate regulation and is preempted by federal law. The preemption question will be at the heart of the case, but Charter also told the court that its no-refund policy prevents its prices from rising even more than they usually do.

“Charter’s decision not to provide a partial-month rebate for cancelling subscribers reflects the fact that Charter’s service is sold on a monthly basis,” the company, which operates Spectrum TV service, said in its complaint against the state government. “It also reduces administrative costs and thus ultimately reduces the upward pressure on rates for Charter’s continuing subscribers.”

Charter further said that its policy minimizes price increases “for continuing subscribers by reducing costs associated with implementing pro-rata rebates for mid-month cancellations.” Charter said that subscribers who cancel in the middle of a monthly billing period can continue to receive the service until the end of the month.

Charter made a similar argument in a motion for preliminary injunction, saying that its no-refund policy “reduce[s] its transaction and back-office costs and thereby ease[s] upward pressure on rates for existing and future subscribers.”

Charter also claimed that its no-refund policy “leads to simple bills that are easier for subscribers to understand.” The company complained that the state law requires it to “modify its billing system… to create an exception for cable television service in Maine, just one of the services it provides there” and to “re-train personnel in its regionally based customer service centers to address cable-related inquiries from Maine.”

Charter also claims that having to change its billing systems and training “would be particularly onerous now” because of the ongoing COVID-19 pandemic and would “divert attention and resources from ensuring continuity of service during the current crisis.” Separately, Charter’s labor practices and management of employees during the pandemic are being examined by the New York attorney general’s office. Charter initially refused to let call-center employees work at home during the pandemic. It later partially relented, but hundreds of employees got sick.

Charter calls law “quintessential rate regulation”

Whether Charter’s no-refund policy reduces prices or benefits customers with bills that are “easier to understand” may not have a major impact on the case. Charter argues that the Maine law, which is scheduled to take effect on June 16, is preempted by a US law governing regulation of cable TV services.

The US Cable Act “expressly bars states and localities from regulating the rates of a cable operator where the Federal Communications Commission has determined that the operator faces effective competition from other video providers,” Charter said.

“The FCC has specifically found that Charter faces effective competition in Maine,” Charter’s lawsuit continued. “The FCC subsequently established a presumption that all cable operators in the country are subject to effective competition, a presumption that has not been challenged by the State or any of the towns in Maine that serve as cable ‘franchising authorities’ under federal law.”

The FCC made that decision in June 2015, and it was upheld by an appeals court ruling in July 2017. The FCC ruled that cable TV providers face effective competition nationwide mainly because of the widespread availability of satellite TV service from DirecTV and Dish. The shortage of competition for high-speed broadband didn’t factor into that decision because it related only to TV services.

While that FCC ruling prohibits local rate regulation, Maine officials could argue that the state law requiring pro-rated refunds for customers who cancel is not a form of rate regulation. We contacted the Maine attorney general’s office about Charter’s lawsuit today and will update this article if we get a response.

Charter argued that the Maine law “is quintessential rate regulation” because it requires Charter “to charge subscribers by the day by mandating a credit for each day of the month the subscriber does not wish to pay for service.” Referring to a case involving Altice and New Jersey, Charter said, “A federal court recently enjoined enforcement of a similar proration requirement on preemption grounds.”

In that case, US District Judge Brian Martinotti in the District of New Jersey granted Altice’s request for a preliminary injunction, explaining that “Altice has a reasonable probability of success in the eventual litigation” because “a requirement that service providers prorate bills is a type of rate regulation.”

Charter: Our competitors do it, too

Charter also argued that the Maine law is unfair because it targets cable TV providers without affecting satellite TV companies or streaming video services.

“Charter’s practice of whole-month billing, including for terminating subscribers, also brings its rate policies in line with those of its competitors, which include satellite providers such as DirecTV and Dish, and Internet-delivered multichannel video providers such as Sling TV, AT&T TV Now, Hulu + Live TV, Amazon Prime, and Netflix, none of which, per their terms of service, prorate their services,” Charter wrote in its lawsuit. “None of these other providers is subject to Maine’s new proration requirement.” That discrepancy exists because the Maine law is targeted at companies with cable franchise agreements.

Charter used to give prorated refunds to customers when they canceled but eliminated that consumer-friendly policy in fall 2019. DirecTV owner AT&T did the same in January 2019. The no-refund policies are particularly onerous for customers who move from one home to another early in a billing period.

Maine also faces a lawsuit from Comcast and other companies seeking to overturn a law that requires them to offer à la carte access to TV channels. The US District Court in December granted an injunction preventing the law from taking effect while the lawsuit continues. Maine appealed the order granting a preliminary injunction.

Disclosure: The Advance/Newhouse Partnership, which owns 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.

https://arstechnica.com/?p=1676380