McCaskill Eyes Follow-Up Pay-TV Hearing on Programming, Retrans Costs

Sen. Claire McCaskill, D-Mo., already is eyeing a likely fall pay-TV hearing to springboard off of Thursday’s first Senate Homeland Security Permanent Subcommittee on Investigations (PSI) hearing on its ongoing pay-TV investigation, she told reporters, doubting legislation will be the primary outcome but devoted to more learning. Thursday’s hearing focused on billing line items and how consumers go about negotiating with pay-TV company representatives, specifically targeting overcharging practices of Charter Communications and the now Charter-owned TWC, but McCaskill’s appetite wasn't satisfied.

“Now we want to look at the content part of this, the programming costs, the retransmission costs, what is going on in pay TV in that space and hopefully have another hearing on that in the fall,” McCaskill told reporters. “We’re going to continue the investigation into content and programming cost and how that is getting passed on to the consumer and people who are being force-fed sports when they don’t want it and what that’s costing consumers, we’re looking at all those issues now.”

Neither McCaskill nor PSI Chairman Rob Portman, R-Ohio, judged legislation imminent or likely. Portman told us Wednesday he saw more legislative relevance on the state level, but that legislation is possible. “I’m not anxious to try to legislate a bunch of answers to these problems because there’s always unintended consequences and competition is important,” McCaskill told reporters. “I think we’ve already accomplished some of it. We’ve seen [companies] modify their behavior just based on our investigation. Sometimes just a bright light of attention brings about better behavior. … It may be eventually there might be some limited legislation but it’s too early to even speculate on that.” McCaskill, also a Commerce Committee member, told us there has been no coordination with Commerce on the effort.

PSI released an investigation report, as expected (see 1606220065). But McCaskill released some information unilaterally. In addition to the 16-page joint Portman/McCaskill staff report, McCaskill released her own 62-page staff report, exhibits and a 15-minute recorded excerpt of her frustrated 26-minute call with a pay-TV provider from two days earlier. PSI “reviewed thousands of documents, and interviewed countless witnesses,” said Portman, who confirmed Wednesday that last year PSI subpoenaed the companies testifying for information. Industry executives repeatedly apologized for what some said were problematic past struggles and committed to working to improve.

Customer Concerns

During the hearing, McCaskill blasted officials from AT&T, Charter, Comcast and Dish Network and a former TWC executive on rates that are never advertised publicly. She said the “secret sauce” to getting better prices from industry is customer anger. “In fact, many of you don’t even put what the price is going to be after the promotional price -- do any of you disagree with that?” she asked, eliciting no objections. She mentioned pay-TV workers who privately had a script when dealing with customers, prompting them to offer lower prices when customers are angry and falsely saying an offer was the lowest price when the script contained lower prices in exchange for more anger. “That’s the kind of stuff that’s driving people through the wall,” she told witnesses. “How does a customer know when they’ve gotten the best deal? … I kept getting mad and I eventually got $120 back.” She asked for a commitment to advertise the lowest price possible and was greeted with silence. She asked for such publication on the company websites and encountered silence again.

“Nobody in their right mind’s going to publish that,” Sen. Rand Paul, R-Ky., interjected. He didn’t ask witnesses questions but spent several minutes questioning the premise of the hearing, given Americans’ low opinion of Congress, which he said was lower than that of pay-TV companies. “Sure, this is an important problem,” Paul said of the hearing topic. “It’s frustrating. … I just think we need to put this hearing in perspective and not get too carried away.” He said the house may not be “on fire,” and competition, which he believes is “vibrant” in this space, can resolve problems. McCaskill later disagreed the market is overall competitive: “One of the things that we didn’t get a chance to point out today is there’s still places in the country, some urban areas if you’re in an apartment, or in some rural areas where you can’t get broadband, there are very limited choices on pay TV,” she told reporters. “We still have an issue of how much competition is there for all America when it comes to pay TV services, and that’s why hearings like this are so important.”

“During the time period examined by the subcommittee, Time Warner Cable and Charter Communications -- who have just recently merged with each other -- made no effort to trace equipment overcharges they identified and provide refunds to customers,” Portman said in his opening statement, a point he grilled witnesses on throughout the hearing. “Instead, their practice has been to just pocket the past overcharges.” He repeatedly mentioned 40,000 Ohio customers he said were overcharged in 2015 when industry executives downplayed overall overcharging. TWC “will overbill its customers nationwide an estimated $2 million for equipment charges in 2016, and, even after discovering those billing errors, will fail to do the work required to offer a full refund,” Portman said.

He also slammed Charter’s practices. “Until August 2015, the company did not run any systematic audits to reconcile its billing records with equipment records,” he said. “That means that overcharged customers could not even receive a prospective correction of their bill unless they spotted the problem themselves and contacted Charter. Just recently, Charter began taking steps to identify equipment overcharges currently on its system. But even though it has identified overcharges, removed erroneous charges from future bills since August 2015, until today, Charter has not provided any refunds or notice of the problem to consumers -- just like Time Warner Cable.”

“Our audit into overcharges over the past nine months determined the existing systems were more than 99 percent accurate,” Charter Communications Executive Vice President-Customer Operations Kip Mayo testified. “Out of 11 million boxes, we've found approximately 63,000 boxes, less than 1 percent, where customers were overbilled.”

Mayo said overcharged Charter customers identified will be notified and receive a 12-month credit for equipment fees. The cable operator “will proactively issue a one-month credit to any customer that the current monthly process reveals was overcharged” for TWC customers, she said. “Why wouldn’t you have the same policy? A month for one and a year for the other?” Portman questioned. Mayo said “it’s our responsibility to produce an accurate bill” and a 100 percent accuracy rate. She’s still “getting my arms around” the TWC billing and packaging systems given the recent closing. Former Time Warner Cable Executive Vice President John Keib told Portman he agreed with the senator’s contention the companies should notify and give customers a fuller refund for any past overcharges. “We’re actually undercharging the customers significantly more than we overcharge them,” Keib said, pointing to many millions of dollars in credits given out annually. “You shouldn’t undercharge either. You should have business practices that take care of that,” Portman countered. “What I’m suggesting is if you’ve overcharged, and you find out about it, you ought to make them good.” The “good news” is that Charter and TWC committed to improve, Portman said, mentioning the credits.

More Objections

McCaskill and Portman questioned witnesses on the placement of broadcast TV and regional sports network surcharges on customer bills. They said the items are sometimes placed not among the video charges but lower, in another section along with FCC fees that make them seem like government fees. “Don’t they belong up above though, don’t they belong with your part of the bill?” she asked AT&T Entertainment Group Senior Vice President-Product Management Rasesh Patel, who conceded this was a fair point. “It’s nondiscretionary,” Charter’s Mayo said of the fees. She said the goal isn't to make the charges seem to come from government but to avoid the confusion of customers thinking they could cancel such fees. “Isn’t it true that all of these were previously in your video charges?” McCaskill asked witnesses, saying the change happened about two years ago for the companies present with the exception of Dish. McCaskill also hounded witnesses about what she considers the problem of charging disconnection fees for removing unwanted services, the subject of her phone call with an unidentified provider this week. Dish Network Senior Vice President-Operations Kathleen Schneider confirmed that longer-term customers may be charged high-definition fees but not newer ones. “If they call in, yes, we waive it,” she told McCaskill. “Once again, hide the ball,” McCaskill said. “This is exactly what I’m talking about. Nobody knows how to get the best price from you. … And I think it has to do with being mad, which is really bizarre to me.”

“Customer confusion over billing results in significant costs to us,” said Comcast Senior Vice President-Customer Service Tom Karinshak. “It dramatically increases the number of customer calls that we receive, and our own data shows that it’s a major source of dissatisfaction among our customers.” He listed steps Comcast has taken, such as emailing customers summaries of their orders. Comcast is making changes such as implementing “a new, cloud-based platform that gives employees a better, holistic view of the customer’s account history,” he said.

Sens. James Lankford, R-Okla., and Tammy Baldwin, D-Wis., reported hearing of pay-TV concerns from constituents. Lankford has “had people call my office who have been incredibly frustrated at not getting attention with their cable provider,” he said, saying his office’s prompting has helped get attention for these callers. “Why does it take literally an act of someone in Congress to try to get attention on someone who has a billing problem, especially for senior adults who call our office?” Lankford said it's “intolerable” that senior citizens may be taken advantage of on pay-TV billing. He also asked about the rising cost of content, which AT&T’s Patel told him is a serious issue. “The cost of the content has actually exceeded the pricing that we’ve passed on to the consumer,” Patel said. Baldwin said a “consistent complaint” she’s heard for years is the need to rent a set-top box rather than buy one. “The admission today by a cable executive … that many customer overcharges are the result of swapping customers' set-top boxes they force them to rent, is just the latest indication that the FCC must act to unlock the box and set consumers free,” said Incompas CEO Chip Pickering, who didn’t testify, in a statement.