By David Lazarus, LOS ANGELES TIMES
May 23, 2019
The most-hated businesses in the country, according to the American Customer Satisfaction Index, are pay-TV companies and internet service providers, which frequently are one and the same.
Impressively, these industries have found yet another way to make customers despise them.
Charter Communications’ Spectrum, the biggest pay-TV provider in Southern California, and AT&T, the state’s largest internet service provider, are currently informing customers that refunds no longer will be offered if service is canceled before the end of the billing cycle.
In the past, each company’s bills were prorated, which means you paid only for the services you used. If you canceled, you’d get money back for the unused portion.
Now Spectrum and AT&T are saying that if you cancel early, tough patooties. They’re keeping the money.
“Effective on or after June 23, 2019, and consistent with the Terms and Conditions of Service, Spectrum will no longer provide a pro rata credit for services sold on a monthly basis that are canceled prior to the end of the current billing month,” the company announced in recent bills.
AT&T’s DirecTV service did the same in January, and AT&T is now following suit with internet access.
“Starting July 15, 2019, subject to applicable laws, your recurring service(s) and fees won’t be prorated if you cancel the above services(s) on any day other than the last day of your billing cycle,” AT&T’s latest notice says.
Comcast still prorates bills, as does Cox Communications. Frontier Communications prorates bills in California for its FiOS TV service, but not for its internet and landline phone services.
“It’s bad enough that companies charge consumers for products they don’t want,” said Emily Rusch, executive director of the California Public Interest Research Group, referring to programming packages containing dozens of channels subscribers may have no interest in.
“Now, by eliminating refunds for canceled service, they want to charge customers for products they’ll never use,” she told me. “That’s not only unfair, but it’s also a surefire way to anger current customers and scare off potential ones.”
Carmen Balber, executive director of Consumer Watchdog, a Santa Monica advocacy group, said that “it’s no shocker cable and satellite companies have found another way to fleece their customers. But yet another ripoff is bound to drive more people into the arms of the streaming services.”
Actually, that’s not necessarily an improvement in this regard. Most streaming services, such as HBO Now and Sling TV, don’t prorate either. They just cut off at the end of the most recent billing cycle.
Dennis Johnson, a Charter/Spectrum spokesman, declined to explain why the company is dropping prorated bills.
He said only that “this is a common approach to billing among other providers of monthly subscription services, including wireless and video streaming services.”
Which is to say, Johnny took a cookie so I took a cookie. Most parents will agree this isn’t a very satisfactory defense of cookie consumption.
Full disclosure: The Los Angeles Times partners with Spectrum for a nightly TV show.
Ryan Oliver, an AT&T spokesman, said DirecTV and internet prorating were stopped “so we have a consistent policy for these consumer services and our postpaid wireless service.”
AT&T is thus saying it wanted to make everything consistent with its wireless service, which doesn’t prorate.
I asked Oliver why the company didn’t just make the wireless service consistent with the other services and prorate them all. Why charge customers for services they don’t receive?
He didn’t reply.
Telecom companies typically say that if you don’t want to throw money away, simply wait until the end of the month before canceling. That way you get to keep enjoying the service right up to the last minute.
“Preposterously, they try to spin it as something beneficial for their customers, as though paying for days after they no longer want the service is somehow a perk,” said Joe Ridout, California legislative advocate for Consumer Action.
Moreover, it doesn’t address common situations such as people moving or switching providers. It’s just money being paid for a service you’re no longer getting.
Good old-fashioned greed is undoubtedly a factor. Why give cash back to people who are canceling a service? What are they gonna do, cancel again?
Perhaps more important, shareholders aren’t happy that cord cutting is taking a big toll on pay-TV subscriber payments. The leading pay-TV providers lost nearly 3 million more subscribers last year, according to Leichtman Research Group.
Most telecom companies are trying to offset the subscriber losses by jacking up fees for broadband internet access (take that, cord cutters!). Holding back formerly prorated payments to departing customers should please shareholders as well.
“What better time to squeeze your customers than when they’ve already decided to leave?” said Balber at Consumer Watchdog. “What do they have to lose?”
However, this is a patently unfair practice.
There are circumstances when not refunding an up-front fee is warranted. For example, booking an appointment with a doctor or dentist and then failing to show up. They can’t fill your slot at the last minute. Their time has value.
Other than such examples, it’s hard to think of any way a service provider can justify charging you for a service you don’t receive — aside from simply not wanting to give your money back.
Yet that has steadily become the default setting for many if not most businesses. (The L.A. Times, I’m pleased to report, will refund your remaining subscription payment if you cancel before the end of a billing period.)
Would it financially harm Spectrum or AT&T to return money for unused cable or internet service? Of course not. Just as a gym wouldn’t lose money by not having its equipment used, or a wireless company wouldn’t be damaged by people not utilizing its airwaves.
Not prorating bills obviously works in businesses’ favor — it’s free money. They can argue that as long as they disclose such practices upfront, they’re not misleading consumers.
I’d argue this is yet another example of people being offered needed services on a take-it-or-leave-it basis by large companies with few competitors, which seems the very definition of an unfair business practice.
If I were a state lawmaker, that’s the kind of thing that would get my attention.
David Lazarus is an award-winning business columnist for the Los Angeles Times, focusing on consumer affairs. He also appears daily on KTLA-TV Channel 5 and is a part-time radio host. His work appears in newspapers across the country and has resulted in a variety of laws protecting consumers.