Online consumer cancellation law threatens broadband monopolies

7 April 2016 by Steve Blum
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That’s not the AT&T logo about to explode, is it?

Sometimes the simplest laws bring the biggest changes. That might be the case for a proposal from California assemblyman Mike Gatto (D – Los Angeles) to make it as easy to cancel broadband or video service as it is to sign up for it. Assembly bill 2867 adds one sentence to California consumer protection law

If a cable or Internet service provider enables an individual to subscribe to its services through an Internet Web site, it shall also enable all of its customers to cancel their subscriptions through the Internet Web site.

A one-click disconnect puts consumers’ fingers on a trigger that can blow a giant hole in service providers’ financials. Churn is the leading killer of business models in subscription services businesses. It’s the rate at which subscribers leave. The cold math involved means that a rising churn rate stops growth, raises marketing and other subscriber acquisition costs and can send a company into a death spiral.

That’s what killed muni WiFi utilities back in the day, as I’ve previously written. It’s holding back overall growth of broadband adoption in the U.S. And it’s what drives Comcast customer service reps to go feral on dissatisfied customers.

It’s also a sign of a competitive market, with customers facing fewer barriers to switching and providers aggressively poaching each other subs. That would be less true, of course, in the duopoly market that cable and telephone companies have lobbied themselves into, and not at all where pure monopolies can be found. But punching a hole in the surly walls Comcast, AT&T and their brethren use to fence in customers is a useful step in the right direction.

Gatto is well positioned to move his bill through the California legislature – he’s the chair of the assembly’s utilities committee. But that also makes him well positioned to either benefit from cable and telephone lobbyists’ largesse, or become their target. They will fight it like they’ll fight no other piece of legislation in Sacramento this year. His enthusiasm, or lack thereof, depends on which side he’s on.