Leading cable multi service operator (MSO) Comcast Corporation (CMCSA - Analyst Report) has agreed to pay $2.3 million to the Federal Communications Commission (FCC) as a settlement for its unlawful billing practices. Interestingly, this is the largest amount the FCC has ever levied as a penalty.
Many customers at Comcast were billed for services and equipment without their knowledge. Moreover, even after discovering the charges, the customers usually opted for the painfully slow process of getting a refund. Even customers who refused opting for any extra service or upgrade were charged for the unrequested services. This illegal practice is termed as ‘negative option billing’ in the industry where companies provide services and charge customers without the latter’s consent.
Comcast stated that the FCC did not find any intentional wrongdoing and thus the company had to cough up a penalty for some isolated cases. Moreover, Comcast has agreed to step up customer service in order to put a check on such incidents.
The Bottom Line
Apart from the hefty fine, such practices will dent Comcast’s reputation to a large extent. At the time when pay-TV providers like Comcast, Charter Communications Inc. (CHTR - Analyst Report) and AT&T Inc. (T - Analyst Report) are grappling with high customer churn, thanks to the growing popularity of over the top (OTT) streaming services from companies like Netflix Inc. (NFLX - Analyst Report) , such incidents are sure to act as a dampener. Moreover, Comcast is set to launch its wireless service next year and hence should work on enhancing customer service in order to handle similar issues better.
Comcast currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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