Regulators around the world have recently expressed concern that mobile operators do not provide consumers with sufficiently clear and comparable information, hindering consumers’ ability to get a better deal. On 17 September 2020, the regulators in New Zealand and in the Netherlands sent the same message to their industry.
In the UK, Ofcom has adopted a co-regulatory approach, through which it secured commitments from operators to make improvements. It passed rules that require operators to tell out-of-contract customers about the options available to them, and made it easier to start the switching process through a simple text message.
The European Electronic Communications Code that will come into force across the EU in December 2020 will introduce clear requirements to make sure consumers have comparable information available to them. National authorities will have to make sure they have access to an independent comparison tool, free of charge.
New Zealand requires operators to publish more comparable information
The Commerce Commission of New Zealand has engaged in a Retail Service Quality programme as a result of recent amendments to the Telecommunications Act. As part of that, it completed a study of the mobile market in September 2019, which found there needed to be improvements to address consumer engagement and possible inertia. In parallel, the Commission ran a mobile bill review to identify the extent to which consumers could save money by changing their purchasing behaviour. On 17 September 2020, the Commission sent the findings of the review to operators. The mobile bill review found that 64% of consumers did not change plans during the 12-month review period. A quarter of post-paid consumers could save an estimated average of NZD11.60 ($7.73) a month by moving to a cheaper plan that would still cover their usage. It also found that 7% of all residential consumers spent a relatively high amount on mobile services, given their usage, and that these consumers could potentially save an average of NZD48.65 ($32.43) a month.
To address these issues, The Commission required operators to improve consumer choice by facilitating comparisons of different mobile plans, and encourage the industry to start working on a ‘consumer data right’, enabling them to share usage, spend and product information with competitors and comparison services. Initially, the Commission expects the industry body, the Telecommunications Forum, to take a self-regulatory initiative towards these objectives, though further action could follow based on the industry response to the Retail Service Quality programme.
While the industry will take the opportunity to adopt a self-regulatory approach, there could be some pushback on the Commission’s demands. Vodafone noted that the Commission’s report confirms that telecoms is one of the most competitive sectors in the country, and that the figures find that 36% of consumers who bought base plans switched during the 12-month period, which is more than a third of the total and much higher than sectors such as electricity or banking, where churn is around 20% and 14%, respectively. The operator also noted that New Zealand consumers pay less than the OECD average for mobile services. Spark issued a similar response, saying it already provides customers with monthly information on their usage, and that customers’ choices also depend on value added services which are not factored into the Commission’s analysis.
The ACM in the Netherlands has similar concerns
On the same day as the Commerce Commission’s letter to mobile operators, the Dutch regulator, the ACM, voiced similar concerns about mobile services in the Netherlands. On 17 September 2020, the ACM called on mobile operators to make improvements in the way this information is presented, so that consumers can make informed decisions more easily. The latest annual consumer satisfaction survey published by the ACM shows that Dutch consumers continue to be very happy with the service they get. With regard to mobile services, 87% of consumers say they are satisfied with the overall service they get, and 84% are satisfied with the price-quality ratio. Nonetheless, comparing information between providers is still seen as a challenge – while most consumers (57%), find it easy to understand information about prices and conditions of a mobile subscription, a sizable minority says this information is not comparable between operators (49%). When taking a mobile subscription, Dutch consumers generally look for information that helps them make the right choice, such as the monthly fixed cost (68%), the length of the contract (47%), and the quality and reliability of the network (45%). They also look at the process for transferring their number (42%), and an insight into their own consumption (41%). Only 31% of consumers look at the speed they can get from a network.
For the time being, the ACM has not announced specific regulatory action. It could end up taking a leading role in coordinating between operators, unless they agree on self-regulatory initiatives to improve consumers’ ability to compare. The Dutch Telecommunications Act sets out requirements for the information operators have to provide to consumers before concluding a contract. While it does not oblige operators to provide this information in a comparable way, it empowers the Government to make ‘ministerial regulations’ so that providers disclose ‘transparent, comparable, adequate, current, clear and complete information’ on applicable rates, costs charged upon termination, and general terms and conditions.
Ofcom in the UK has secured commitments from operators through its ‘fairness’ agenda
For some time, the UK regulator Ofcom has had concerns similar to those of the Commerce Commission of New Zealand. Ofcom’s research across the fixed and mobile sectors showed that UK consumers often stay on their contract once its minimum length has expired, without seeking better deals – either by contacting their provider, or by switching to another operator. As a result, they often pay more than they should for the services they get (collectively, Ofcom estimated they overpay £182m a year). This resulted in the launch of the ‘Fairness framework’ in June 2019, a co-regulatory initiative led by Ofcom, to which the country’s main providers signed up from the outset.
Among other commitments, operators pledged to give customers ‘a fair deal’ with clear, easy to understand prices; to support customers to make well-informed decisions with clear information about their options before, during, and at the end of their contract; and to ensure customers can take up, change and leave their services quickly and smoothly. Ofcom plans to publish a progress report before the end of 2020, to track how operators have delivered on their promises. Outside the main commitments to fairness, Ofcom also secured a commitment from mobile operators to reduce bills for out-of-contract customers. These commitments were taken up by EE, Vodafone, O2, and MVNOs Tesco and Virgin Mobile, whereas Three decided not to apply any discount.
Ofcom has gone beyond the co-regulatory approach to make sure consumers are encouraged to engage with their service provider. Broadband, phone, and TV customers now have the right to be notified 40 days ahead of the end of the contract, and be shown the best deals available to them. Changes were also made to the switching process, which consumers can now start through a simple text message. While switching remains donor-led, customers will now be able to request a porting authorisation code (PAC) by SMS, to which operators have an obligation to reply within a minute. Finally, Ofcom is proposing to separate the sale of airtime from that of the handset, as part of the implementation of the European Electronic Communications Code (EECC).
The European Electronic Communications Code introduces a comprehensive set of consumer protection measures
The EECC will come into force on 20 December 2020. It reforms the EU regulatory framework for telecoms, and introduces a package of new protections for consumers. These measures include end-of-contract measures similar to those introduced by Ofcom in the UK, so that customers are aware of how prices change, and of the options available. The EECC also requires that customers are told, before signing up to a bundled mobile contract, the price at which they could buy the handset and airtime elements separately from that provider. This means that, before taking up a contract, consumers will be given information about the cost of the airtime without the handset (i.e. the closest equivalent SIM-only deal), and, where the provider sells handsets directly, the total cost of the handset.
With regard to switching, the EECC retains the 24-month limit on contracts for airtime, but also extends that limit to bundled contracts, including ‘linked split contracts’. These are contracts where customers who want to switch airtime provider must immediately pay any remaining charges on their handset contract, rather than paying it off over time as originally agreed, even if they are out-of-contract on their airtime. Limiting the length of such contracts to 24 months makes sure that customers’ ability to switch is protected.
The EECC introduces clear provisions related to transparency, comparison of offers and publication of information. Article 103 requires national authorities to ensure that end users have access free of charge to at least one independent comparison tool which enables them to compare and evaluate different broadband and mobile services, with regard to prices, tariffs, quality of service. The comparison tool needs to be operationally independent from service providers, and ensure providers are given equal treatment in search results.
