FCC Eliminates Rule Requiring Itemized Passthrough Fees on Broadband Labels

The Federal Communications Commission today voted to eliminate a Biden-era rule that required Internet service providers to list all of their so-called “passthrough” fees on easily accessible broadband price labels.

Instead of advertising accurate prices, ISPs like to advertise artificially low prices and then add all sorts of fees to subscribers’ monthly bills. To prevent bill shock and help consumers compare prices, the FCC updated its broadband-label rules in 2023 to require that ISPs “itemize on the label all discretionary monthly fees that the provider passes through to the consumer.”

ISPs complained about the burden and complexity of listing all the passthrough fees they had chosen to charge. It would presumably be less burdensome for providers to advertise accurate prices, eliminating the need to charge additional fees and list them on the labels. But a few weeks ago, FCC Chairman Brendan Carr helped ISPs out by proposing to let them display passthrough fees in an aggregate “up to” amount instead of listing them all individually.

With this change, ISPs can continue advertising inaccurate prices as long as they provide the total amount of passthrough fees on broadband price labels. Separating these costs from the advertised price makes it harder for consumers to find out what they will pay each month, and gives ISPs another method of raising customer bills without announcing a price increase.

As we wrote previously, Carr also proposed letting ISPs provide links to the required price labels instead of displaying the full labels prominently on ordering pages and account portals. In addition to having less information on pricing, the new labels will be a little harder for customers to find.

Fees will be described instead of listed

The proposal was approved today. It was changed a bit since it was released in draft form, but the final order is not yet public. The vote was 3-0, with Democrat Anna Gomez joining the Republican majority. Gomez described some changes made since the proposal was released in draft form.

Gomez said she would prefer to keep requiring full itemization of fees, but thanked the chairman’s office for working with her on displaying certain kinds of information in the labels. Instead of listing every fee, she said the updated labels will provide a description of fees that are remitted to state and local governments and a description of fees remitted to third parties.

“Though I would have preferred that the labels provide a complete itemization [of fees], consumers will have the option to click on a link below to learn more about each of the types of fees and what they are used for,” Gomez said at today’s FCC meeting.

Unless the scheduled implementation date has changed since the draft was released, today’s order will take effect 30 days after it is published in the Federal Register.

Final version a compromise

A spokesperson for Gomez told Ars that under the labels’ aggregate or “up to” amount for passthrough fees, there will be one subcategory for fees remitted to state and local governments and another subcategory for fees remitted to third parties. The two subcategories will have lists of the types of passthrough fees and “a link to a provider-managed webpage that describes what each of these fees (e.g., E911 or pole attachment fees) means and what it is used for,” Gomez’s office said.

These requirements were not in the publicly released draft order but were added in a compromise, Gomez’s office told us. Carr’s draft order released a few weeks ago would have let providers display only a single number to indicate the maximum amount of fees that might be charged.

At today’s meeting, Gomez discussed how the new rules will let ISPs provide links to the labels instead of displaying them prominently. The final order “retains the requirement that providers include broadband labels in customers’ account portals,” she said. “However, we narrow that requirement to providing a hyperlink or icon rather than requiring the full label to be displayed. While my preference would have been to display the full label, my hope is that the commission, our industry partners, and consumer groups will work together to promote and advertise the concept of broadband labels such that consumers seek out this resource and use it regularly.”

Passthrough fees are not taxes, but vary by location and are “imposed by a government entity or third-party infrastructure owner rather than set by the provider itself,” the FCC said in the draft order. The fees include “state and local right-of-way fees, pole attachment fees imposed by third-party pole owners, and similar charges,” the FCC said.

In the FCC’s words, these fees “represent costs the provider chooses to pass through to consumers rather than rolling them into the base monthly price.” Ultimately, the fees are part of an ISP’s total cost of doing business and could be reflected in the overall advertised price. But ISPs choose to treat them as separate charges for the purpose of billing consumers.

The burden of listing fees

While ISPs seem to have little difficulty charging the fees when it’s time to issue monthly bills, they complain about the burden of listing all the fees on the broadband price labels. Broadband lobby group USTelecom complained to the FCC that “providers must create and update hundreds of different labels to account for geographic variability and to ensure that their systems properly queue the label specific to the proper location when the customer inputs their address.”

Previous FCC leadership implemented broadband labels in response to a directive from Congress. “Over the last few years, we have learned that when labels become cluttered with unnecessary details, they stop being the quick, easy-to-use shopping tool Congress envisioned,” Carr said at today’s meeting.

In a press release, the FCC said the previous rules resulted in “sometimes-confusing labels that strayed beyond the statutory framework Congress created, increasing compliance costs for providers in the process.” Carr said the new labels will be simpler but that “providers will still offer a label for every standalone broadband plan” with “necessary information about pricing, introductory rates, broadband speeds, and data allowances. The labels will also remain accessible and available in the languages providers use to market their services.”

Another change made today will let ISPs have their customer service reps “discuss the label conversationally over the phone, rather than reading it to consumers verbatim,” the FCC said. Gomez said phone calls remain an important point of sale, particularly for people who don’t currently have broadband service. She said the updated rules “require that critical information is conveyed over the phone, including the monthly price, inclusive of any monthly fees, the introductory rate and its duration, typical download and upload speeds, latency, data allowance, contract term, and early termination fees.”