Relates to establishing a cap that limits the amount a consumer may be charged for leasing a modem from a cable or internet provider

Summary of provisions

Section 1 amends the general business law by adding a new article 28-F. Sections a95-a and 495-b determine the bill's purpose and definitions.

Section 495-c determines that cable or Internet providers shall not charge any consumer an amount which is more than sixteen percent over the actual cost of the modem device paid by the provider.

The cable or Internet provider must disclose in the initial billing correspondence (a) amount the modem costs the provider, (b) how many payments the consumers must make on the modem in total, and (c) information regarding how or where a consumer may purchase a modem at retail.

The cable or Internet provider shall not charge any consumer a monthly fee for the lease or use of a new modem beyond twelve months after the modem has been provided by the cable or Internet provider.

The cable or Internet provider shall not charge an additional or monthly fee for the maintenance of a provided modem.

Sections 495-d and 495-e determine the enforcement of the act, including civil penalties.

Section 495-f determines the private right of action.

Section 2 sets the effective date.

Justification

Internet Service Providers generate substantial sums of money through modem rentals. While some consumers opt to purchase their own modems, many choose to lease a modem through their cable or Internet providers, often citing convenience among other reasons

In late 2012, Time Warner Cable began charging its Internet service customers an "Internet modem lease fee" of $3.95 per month. Prior to this change, customers were not required to pay any sort of lease fee as Time Warner provided the modems at no charge. In a notice sent to all of its service customers, Time Warner claimed that the new lease fee would allow them to continually maintain and service their existing equipment and replace any damaged or under-performing modems. However, in fine print towards the end of the notice, the company was also giving their customers the option of avoiding the fee by purchasing their own modem from the approved list of modems at a third-party retailer and installing it themselves. While the lease fee offers the consumer free maintenance and the ability to replace a defective modem, others have claimed that this new fee is a way to

recoup lost revenue as more consumers opt out of traditional cable television packages and rely more on the Internet.

More recently, Time Warner has raised its monthly modem lease fee from $5.99 to $8, while Comcast has raised their fee from $8 to $10. In turn, Time Warner Internet subscribers will spend approximately $96 per year, while Comcast subscribers will spend $120 per year in addition to installation charges and regular service fees.

The average cost of retail Internet modem is between $50 and $200. Based on these figures, it is most cost effective for a consumer to purchase their own modem rather than renting the equipment from their cable or Internet provider, even more so considering that once the lease is over, the consumer does not own the modem after annually paying over $100 in rental fees alone.

The proposed legislation would allow a cable or Internet provider to charge a consumer an amount that is no more than 16% over the actual cost of the modem device paid by the provider. The fees therein would have to be assessed within a twelve month time period. Additionally, the bill requires that the cable or Internet provider disclose information regarding how or where a consumer may purchase a modem at retail in the initial billing correspondence.

As access to the Internet has become more of a necessity rather than a luxury, it is essential that consumers are aware of the most affordable and easily accessible options when choosing their cable and Internet service equipment.

Prior legislative history

This is a new bill.

Fiscal implications

None to the State.

Effective date

This act shall take effect immediately.