Ofcom adds some colour to ‘fairness’ campaign

It might sound like a political punchline, but the ‘Fairness Framework’ from Ofcom is starting to take shape, though whether it forces telco transparency remains to be seen.

The Fairness Framework is effectively incremental progress to address what some would suggest is an unfair dynamic between buyer and seller in the wider communications industry. While there is a gluttony of comparison websites which bill themselves as a means to cut-through the white-noise generated by the telcos, it is still an arduous campaign to find the best deal available, and then subsequently get out of current contracts.

Most would consider themselves above the risks and pitfalls of suspect and nefarious contracts, though campaigners believe this is not the case. In September last year, the UK Citizens Advice Bureau (CAB) launched a super-complaint with the Competition and Markets Authority (CMA) suggesting service providers over-charging renewing customers to bring in an extra £4.1 billion a year.

In today’s announcement, Ofcom has provided more detail on the ‘Fairness Framework’.

Firstly, Ofcom has be conducting a review as to how to create a mechanism to ensure clearer, fairer deals for people who pay for mobile services and handsets together. Final proposals will be made public over the next couple of weeks.

Secondly, the team is currently reviewing broadband pricing practices, attempting to understand why some pay more than others for similar or exactly the same services. Vulnerable members of society are the ones who at the greatest risk here. Another initiative ties into this area, attempting to force the telcos to provide clear, honest information for broadband shoppers. Ofcom is also attempting to introduce rules which will compel service providers to be more transparent when their initial contract is up and explain their best available deal.

Another initiative will allow mobile phone customers to switch provider with a text message, while there are plans underway to introduce a new compensation scheme to provide money back for broadband and landline customers when things go wrong.

For the moment, the majority of this announcement should be attributed to the ‘work in progress’ column. Some of these initiatives will be written into regulation sooner rather than later, though most will still have to be cast out for public consultation. This is a mid-year report card more than anything else.

That said, it’s not a bad thing. In opposition to the stance of the telcos, Ofcom is attempting to be as transparent as possible with its work.

This is the objective of Ofcom here; transparency. For years, the telcos have operated partly behind a curtain of obscurity. Contracts were complicated due to a lack of transparency, and this is what Ofcom is looking to tackle. It is nice to see progress is being made, but we’re not quite there yet.

Loyalty penalties for broadband, mobile and TV finally tackled

Ofcom has introduced rules which will aim to tackle ‘penalties’ imposed on renewing customers by broadband, mobile and content providers.

As part of the new rules, providers will have to inform customers 10 to 40 days prior to the end of the customers contract, the period where financial penalties would be applied for changing providers. In the notification, customers will be told the end date of the contract, differences in contract pricing moving forward, termination conditions and availability of cheaper deals.

Although customers will still have to be proactive in contacting rival competitors for better deals on the market, the hope is a more transparent approach with spur consumers into finding the best possible option. Telcos will have a year to ensure the right business processes and technologies are in place to action the rules.

“We’re making sure customers are treated fairly, by making companies give them the information they need, when they need it,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

“This will put power in the hands of millions of people who’re paying more than necessary when they’re no longer tied to a contract.”

The initial idea was put forward back in December, with the belief as many as 20 million UK consumers have passed their initial contract period and could be paying more than necessary. The Department of Digital, Culture, Media and Sport escalated the issue in February with a public consultation aimed at moving the industry towards a position where loyalty was rewarded, ending aggressive cultures towards customer acquisition.

In September last year, the UK Citizens Advice Bureau (CAB) launched a super-complaint with the Competition and Markets Authority (CMA) suggesting service providers over-charging renewing customers to bring in an extra £4.1 billion a year. Research commissioned by Broadband Genie has found many over 55s could be paying too much for their broadband service but lack the knowledge or confidence to choose a new package.

“Pre-emptive alerts and information about broadband and TV contract periods are good news for consumers since many have in effect been paying a premium for their loyalty once out of contract,” said Adrian Baschnonga, EY’s Telecoms Lead Analyst. “Today’s rules pave the way for a more proactive dialogue between service providers and their customers, which can unlock higher levels of satisfaction in the long term.”

While it will certainly take some work to bed in, such rules have the potential to move attitudes in the industry to prioritise customer retention over acquisition to meet profitability objectives. Much research points to this being a more rewarding approach to business, though few in the telco space practice this theory.

“uSwitch’s research found that the aggregate cost of out-of-contract charges to telecoms consumers is £41 a second,” said Richard Neudegg, Head of Regulation at uSwitch.com. “This is why time is of the essence – everyday spent waiting for these notifications to be rolled out, another £3.5 million is overspent on these services – meaning that more than £350 million has already been wasted since the consultation closed in February.

“While it has been a long time coming, this is an important step by the regulator to address what has long been a clearly unacceptable gap in the rules, penalising consumers to the tune of millions.”

This is a step in the right direction, but it will take more to ensure telcos shift their culture. The idea of customer acquisition over retention is deeply engrained in every aspect of the business and will define how the business operates. That said, progress is progress.

UK consumers are not convinced by zero rating gimmicks

The telcos want us to spend more money with them, that is a given, but it appears the latest move to bribe consumers with zero rating offers is not working in the UK.

It’s been a slow creeping trend over the last couple of years, but the telcos are making less money. Whether it was the increasing irrelevance of voice minutes, or erosion of generated-cash through SMS, the data frenzy has been killing profits. It’s a cruel irony that the OTTs are using the very networks which the telcos have spent billions on to destroy the profit margin, but it is one which the industry has come to accept.

Monetizing data tariffs, and encouraging users to scale up to more expensive unlimited plans, was one way these trends could have been reversed. But according to new data from uSwitch, users are not convinced by new data plans that offer unlimited use of certain apps, favouring cheaper deals as opposed to the unlimited options.

“While these packages will be spot on for a large number of a mobile users – in particular younger users – they can feel a little restrictive,” said Ernest Doku of uSwitch. “For the older demographic that might not necessarily want to stream content on-the-go or who don’t use messenger apps, there will likely be little in this new provider battleground that stands out.”

Only 19% would switch to a contract with unlimited data usage on certain apps, with this number dropping to 11% for over-55s. 18-34 year olds were more receptive to the idea, with 26% open to changing providers. As 79% of adults now use on-demand services such as Netflix or BBC iPlayer, the telcos are making a fair assumption that these unlimited data tariffs would be appealing, but it does show sometimes statistics do not back up what was promised.

Mobile operators are increasingly turning to perks, such as free subscriptions or zero-rating offers, to attract new users, but it seems the UK are focused on the basics. 61% of the respondents to the research would change for a cheaper deal, 30% would change for better coverage and 23% would change for more flexible deals.

The last reason is an interesting one, and perhaps an encouraging statistic for Vodafone and Three. Both have launched more flexible, month-by-month plans (VOXI for Vodafone and Smarty for Three), which target more cash-conscious consumers.

That said, the statistics do also indicate one thing; to be a good mobile provider, you have to have a network which performs consistently well, and offer services at a good price.

This is a welcomed discovery for Telecoms.com, as it indicates the users of the UK cannot necessarily be bought off with gimmicks and advertising. The user is focused not on the short-term benefit of a free-service, but more of the performance of the telco, which will arguably have a greater impact on the users life.

But the smoke and mirrors should not be seen as a surprise. Why are telcos focusing on gimmicks and the cheesy endorsements of past-it celebrities, which make the brand look cheap and unappealing? Because you don’t have to spend as much on a second-rate celebrity as you do on making sure your network is up to scratch.

Perhaps this is another indication the telcos are shying away from actually investing for the long-term? Maybe it shows us the management team are more interested in short-term pleasures than longevity and sustainability? Or it might just say that the telcos don’t care about customer experience, just as long as they pay up once a month?