Broadband labelling schemes, such as those with traffic light symbols, have become increasingly popular to help with greater transparency and fairness. Designed well, they can promote competition, and encourage take-up of faster speeds among consumers
Regulators are using labelling schemes to improve transparency for consumers. They are designed to provide more information about the product and/or reduce the risk of misleading advertising. Labels are likely to provide more clarity, but may not always serve their intended purpose in markets where customers face a limited choice of ISPs or technologies.
In the US, the FCC has recently proposed ‘nutrition labels’ that communicate the key features of a broadband service, so that consumers have a clearer idea of what they are getting without having to go through the fine print of terms and conditions. While useful, it does not address the fundamental problem that many US households cannot choose from more than two ISPs.
In Italy, the regulator AGCOM adopted a labelling scheme for broadband advertising, which makes a clear distinction between full-fibre and other types of connections. This has resulted in ISPs avoiding using the term ‘fibre’ unless they are advertising an FTTH connection. However, shortcomings have emerged whereby some customers may not always be clear on what they are getting unless they know which technologies are available at their precise address.
Operators in the EU and UK have to provide their customers with a contract summary ahead of purchase. This is done after consumers have assessed their options. Regulators in some countries, such as Germany, are going further where operators have to show information sheets of each service when customers browse offers.
A labelling scheme in the UK is not on the agenda for now, although Ofcom should consider introducing one as a way to improve awareness of gigabit-capable broadband. Now could be the right time for the introduction of a labelling scheme, to encourage take-up of gigabit services as availability increases.
In the US, the FCC is considering ‘nutrition labels’ to address poor transparency of broadband services
Under the Biden administration, the FCC is adopting a more consumer and competition-oriented approach to internet policy compared to the Trump era. In the last year, the White House has repeatedly indicated its intention to tackle the problems of affordability and choice that affect the US broadband market. US broadband prices are among the highest in OECD countries, and price concerns are considered among the main reasons why many Americans avoid internet use altogether. In July 2021, the White House directed the FCC to improve transparency for broadband customers, noting that actual prices can sometimes be up to 40% higher than advertised. The FCC was also told to ensure consumers have more choice (currently the vast majority of American households do not have more than two options of ISP). In response to Biden’s directions, the FCC is poised to revive the use of ‘nutrition labels’ for fixed and mobile broadband services. The FCC tried to adopt these labels in 2016, but abandoned the idea under Trump.
The FCC will define the content of the labels through consultations with stakeholders over the coming months, though it’s proposing that they include at least the items in the 2016 proposal. These cover aspects such as monthly prices (indicating whether there is a promotional price for an introductory period), typical upload and download speeds, traffic management practices, and privacy policies, among others. The FCC is also seeking comment on whether the labels should include information about services that are part of a bundle (e.g. video, telephony). The labels will be displayed at point of sale (i.e. on operators’ websites when a consumer browsers service options).
Promisingly, the FCC is proposing to make these labels a requirement – unlike the 2016 proposal in which they were voluntary. Currently, ISPs face relatively limited transparency requirements, and can disclose the same information in fine print or in ways that consumers find difficult to access. The labels should therefore help consumers find out more about the service they intend to purchase, but they are unlikely to address the problem of high prices without improvements in competition at the retail level. The White House itself notes that prices where users can choose between two ISPs can be up to five times as high as elsewhere. It is then no wonder that it is directing the FCC to prevent ISPs from making deals with landlords that limit tenants’ choice (a seemingly common practice in the US) and to address the issue of high termination fees, which are a barrier to switching.
In Italy, labels help distinguish connections that are full-fibre from those that aren’t, but consumers can still be misled
In Italy, in 2019 the regulator AGCOM implemented a different labelling scheme to regulate the advertising of fibre broadband connections. With this decision, AGCOM ensured that consumers have more clarity as to whether they are purchasing an FTTH (or full-fibre) connection as opposed to one where fibre is mixed with other technologies (e.g. FTTC, FWA). To achieve this, AGCOM set out a ‘traffic light’ scheme where ISPs can use a green label for FTTH in association with the word “fibre” (“fibra” in Italian). FTTC and fibre-based FWA connections warrant an amber label, and operators can only use the word “fibre” if they add that it is “mixed with copper” or “mixed with radio”. Fixed copper connections and copper-based FWA are marked as red.
Not only do ISPs use these labels on their websites, but also in their TV advertising. However, the way in which they show the labels in TV ads varies, with some operators making it somewhat prominent and others adding it to the fine print at the bottom of the screen, which can be particularly hard for some viewers to see. AGCOM’s requirement to specify the technology mix has had the effect of deterring operators from using ‘fibre’ in marketing non-FTTH connections. For example, TIM markets its FTTC offers as “Executive Mega” or “Premium Mega”, whereas the FTTH offer is called “Executive Fibre”. Similarly, Fastweb refers to an “ultrafast connection” for its FWA offer, as opposed to “ultrafast fibre” for its FTTH. This should ensure consumers are clearer on whether what they are subscribing to is a full-fibre connection or not.
Operators have generally given prominence to full-fibre products in their advertisements, which you would expect, however this has thrown up some possible unintended consequences. For example, if a customer is initially shown a product with a green label, but then redirected to one with a yellow label if FTTH is not available at their address, they could still believe they are buying a full-fibre product. Monitoring the impact of this practice will be important, especially at a time when coverage of full-fibre is still relatively limited in Italy. When AGCOM completed the testing phase of the scheme, it noted that operators can still market a fibre offer even where this is not available, as long as they tell the consumer to verify availability at a specific address. Vodafone is perhaps the most transparent in telling customers what they will get, since it only shows the label with the relevant colour after the address has been verified.
At the EU level, operators now have to provide consumers with a contract summary before purchase
From 2020, the new European Electronic Communications Code (EECC) introduced transparency measures related to contracts. These are similar to the US labelling scheme in terms of information that must be made available, however operators only need to provide a contract summary before customers sign the contract. The EECC established a template for these contracts, which should not be longer than one single-sided A4 page (or three pages in the case of bundles of services). Among other information, the summaries need to include the main characteristics of each service provided, and the respective prices for activating the service and for any recurring or consumption-related charges. If the billing period is other than monthly, operators have to also include the price per month. They also need to indicate the duration of the contract and the conditions for its renewal and termination.
Contract summaries differ from labelling schemes such as the one proposed in the US, in that they provide information at a point when the customer is about to sign a contract – i.e. after they have received advertising information and largely made up their mind about the service they want to purchase. However, it is worth noting that the EECC also requires regulators to make comparison tools available to consumers for free in each country, which should go some way to help improve transparency and information for consumers.
Individual countries within the EU are free to adopt rules that go further than the EECC. For example, since 2017 the German regulator BNetzA has required ISPs to provide “product information sheets” with key elements of each offer, and created a template operators need to follow. For a broadband service, operators need to indicate minimum, typical, and maximum speeds available. They also have to indicate notice periods for contract end, and monthly charges during and after a promotional period. Operators can still refer to maximum speeds when advertising on their websites – but a link to the fact sheet is available next to each offer.
In the UK, Ofcom should consider a labelling scheme to increase awareness and take-up of gigabit-capable broadband
Ofcom implemented the EECC despite the UK’s exit from the European Union. As a result, from June 2022 UK operators have to provide a contract summary similar to that of their counterparts in the EU. Like the EU contract summary, this information only needs to be provided ahead of signing a contract, and not in advertising. However, it is an essential condition for the conclusion of a contract – customers cannot give consent if they have not received the summary.
A broadband labelling scheme is not forthcoming in the UK for the time being, although Ofcom is working to improve consumer information on gigabit-capable broadband. The regulator has convened an industry working group to develop common terminology for broadband services. In the proposed plan of work for 2022/23, Ofcom looks set to continue this work, noting that it aligns with the recommendations of the Gigabit Take-up Advisory Group (GigaTAG). The group was set up in August 2020 to look into how to stimulate demand among consumers and businesses for gigabit-capable broadband. Ofcom’s work (and in part GigaTAG’s) follows the decision of the Advertising Standards Authority (ASA) not to change the rules around the use of the term ‘fibre’ in advertising. In 2017, the ASA allowed ISPs to refer to fibre for connections partly based on other technologies (e.g. FTTC). This was despite the Government pledging that it would work with regulators to ensure that broadband advertising accurately describes the technology used. CityFibre sought a judicial review of the ASA’s decision, but lost in 2019.
In its final report in June 2021, GigaTAG found that lack of awareness of gigabit-capable connections was a problem among consumers (e.g. respondents saying they have a full-fibre connection even in areas where it is not yet available). GigaTAG recommended that industry should develop consistent terminology and use cases to define gigabit broadband and its benefits in a clear and understandable way. Should Ofcom take on board the recommendations of GigaTAG, it could consider developing a labelling scheme based on a ‘seal of approval’ to identify gigabit-capable connections. Unlike the scheme adopted in Italy, this could be based on measures of user experience such as speed, rather than technology. This could be the right time for the introduction of a labelling scheme, since availability of gigabit-capable broadband is growing while copper connections are still widely available. In fact, a scheme that increased consumer awareness could accelerate migration to gigabit-capable broadband. Better informed consumers could start demanding gigabit-capable broadband in areas where it is currently not available, thereby creating an incentive for operators to ramp up their investments in those areas.
