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Cable company fighting pro-rata refunds pushes back at 3rd Circuit

New Jersey law says customers should not have to pay for unused service, but a local cable provider has been refusing to refund subscribers who cancel early.

PHILADELPHIA (CN) — A New Jersey cable company urged the Third Circuit on Thursday to affirm a ruling that says the state tramples federal law with a regulation that would make it refund customers a pro-rata amount if they cancel their service early.

The Garden State had long been enforcing the proration requirement before a new cable company, Altice, hit the market in 2016. Everything seemed to be operating smoothly until the New Jersey Board of Public Utilities began receiving complaints from Altice customers saying that the company was charging them for a full month of service even if they canceled before the month had ended.

An investigation by the board found that Altice had decided, without board approval, to ignore the proration requirement, and instead charge customers for the full month, no matter when they terminate their service. The board swiftly ordered Altice to refund the affected customers and hit them with a $10,000 fine.

Altice sued the board in 2019, alleging that the proration requirement violates the federal 1984 Cable Act. Last March a federal judge agreed with Altice, finding the act to preempt New Jersey’s proration requirement.

Defending the requirement Thursday, Deputy State Solicitor Alec Schierenbeck stressed to the panel that it does not violate the Cable Act because the requirement does not regulate prices for cable companies.

“New Jersey’s rule doesn’t alter the rates of Altice,” Schienrenbeck said. “It just pro-rates them.”

U.S. Circuit Judge Patty Shwartz noted she thought the Cable Act was designed to allow cable companies to compete with non-cable companies, such as those who stream live television.

Schierenbeck agreed, but added that the Altice’s competitors under the Act are other cable providers and suggested Altice take it up with Congress if it has concerns about federal law.

“There's a lot of cord cutting happening,” said Schierenbeck. “They should go to Congress to seek a change to the Cable Act if they think this scheme is outdated.”

Representing Altice, Jenner Block attorney Matthew Hellman noted that customers who cancel early still get to use the service for a full month.

Shwartz, an Obama appointee, appeared confused on how that could be true if a customer returned their cable box in the middle of the month when they canceled the service.

Hellman said it was because there are many other ways you can access Altice’s services.

“If you return your cable box and move to Colorado, somewhere Altice does not even operate, you can still watch the service on a different device,” said Hellman.

Despite a win in New Jersey federal court, Altice has a dark cloud looming over them from the First Circuit. Earlier this month the Boston-based appeals court held that a Maine law that also requires cable providers to give a pro-rata refund to customers who cancel their services early does not violate the Cable Act.

Indeed, U.S. Circuit Judge Timothy Dyk said it would be “difficult to conclude” that a pro-rata law regulates rates for cable companies.

Hellman nor Schierenbeck immediately responded to email seeking comment.

The panel did not indicate when they will reach a decision as the case has been petitioned to go before the New Jersey Supreme Court, though it is not clear if or when that will happen. 

U.S Circuit Judges Thomas Hardiman and Brooks Smith, George W. Bush appointees, rounded out the panel.

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