Ministry to Limit Fines on TV, Internet Cancellations

Limits already exist on fines that cellular service providers can charge their customers for leaving the fold.

A bill that would set strict limitations on penalties paid by customers of communications companies - including cable and satellite television, Internet providers and landline telephone service providers - for canceling their contracts will be discussed by a government panel on Sunday.

Limits already exist on fines that cellular service providers can charge their customers for leaving the fold.Now the Communications Ministry is seeking to impose strict limitations on the rest of the communications industry.

Moshe Kahlon
Ofer Vaknin

"There is no reason why a customer who wants to switch to another company and take advantage of better terms should have to pay a penalty," said Communications Minister Moshe Kahlon (Likud ), who called the proposed legislation, to be discussed in the Ministerial Committee for Legislation, part of a broader effort to make it easier for customers to switch companies and increase the power of the consumer.

If the bill passes the ministerial committee, it will then be submitted to a vote on first reading by the full Knesset followed by consideration by the Economic Affairs Committee and two subsequent votes before the Knesset as a whole.

Some communications companies, notably the HOT cable television firm and Yes satellite television, are expected to oppose limiting contract cancellation penalties.

The penalties currently charged sometimes have no connection to the loss suffered by the companies. Cable and satellite television customers, for example, are typically required to pay retroactive fees for benefits they received while they were customers, fees that can run as high as NIS 3,000.

In Internet service, customers canceling their contracts sometimes have to continue paying the same fees as they would have had they not terminated the service.

The proposed law would bar any cancellation penalties or payment for benefits other than continued payment on equipment that the consumer purchased from the company. Even then, however, the consumer would be allowed to continue making installment payments on the equipment rather than paying off a balance in one lump sum.

Because the legislation would hurt revenues at the television and Internet service providers, Knesset sources expect them to fight the proposed law in the Economic Affairs Committee with an army of lobbyists. Kahlon is said to be determined to pass the law during the Knesset's summer session, which begins next week and extends through July.

As of February 1, cellphone service providers cannot charge those who cancel their contracts more than 8% of their average monthly bills multiplied by the number of months left on the contract. Some cellphone service companies, however, have eliminated the penalties altogether.