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Alarm and Acceptance – Broadband ISPs React to New Advertising Rules

Saturday, January 23rd, 2016 (3:06 am) - Score 907
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Internet providers from across the United Kingdom have today given a deeply divided reaction to the recent proposals from Ofcom and the Advertising Standards Authority, which among other things could soon force providers to combine the cost of broadband and line rental (phone) into a single price.

It’s hoped that the new proposals, which surfaced just a couple of days ago (here), could stop the often confusing and misleading culture that some ISPs adopt when advertising their packages. For example, issues such as hidden charges, confusing discounts and only giving prominence to the broadband price, while hiding line rental costs in the small print, are all known issues.

The ASA claims to be “open minded as to how pricing should be advertised so as not to mislead consumers” and a spokesperson informed ISPreview.co.uk that they’re only at the “beginning of a process of engagement with the range of stakeholders affected by our announcement.” However their plan is still to confirm the final changes in time for them to be enforced by 30th May 2016 and that doesn’t leave a lot of time for consultation.

The ASA’s Suggestions to Broadband ISPs

· Advertise all-inclusive up-front and monthly costs; no more separating out line rental.

· Greater prominence for the contract length and any post-discount pricing.

· Greater prominence for up-front costs.

At present the only real contentions aspect in all this is the call for an all-inclusive price that combines broadband and line rental, which has plenty of merit but also overlooks the many broadband providers that do not sell or require customers to take line rental (phone) from the same provider.

The new rules also need to be flexible enough to allow interesting, but NOT misleading, promotions and to reflect the differences in how people get their connections (e.g. migrating vs having a new line installed). As ever the devil is in the detail and until we know the final approach then it will be difficult to fully understand the impact.

Naturally we wanted to know what a wider cross section of ISPs thought about the changes and unsurprisingly those that stood to benefit, such as Gigaclear, were considerably more welcoming than the ISPs that allow their customers to choose a separate line rental provider. But even some of the big ISPs appear to have their reservations because it might make them look more expensive than ISPs that sell broadband and phone services separately.

Simon Davies, Boss of IDNet, said:

“We support the move to make hidden costs more prominent but the draft proposals are too simplistic for modern market conditions – it is essential that consumers have easy access to the costs for unbundled services so they are not hood-winked into taking expensive line rental if they do not wish to.”

Joe Frost, Gigaclear’s Marketing Boss, said:

“Gigaclear welcome’s this approach, it is something we have been using since this company started and is needed as there is a lot of confusion on what their monthly charges are as many believe they only pay the advertised price for broadband, not realising that line rental and some call features are additional monthly costs.

Our monthly prices are exactly as stated on our price lists on our website, there is no line rental with our service and we do not confuse customers with an introductory price that then changes later. Our order forms state that there is a one off connection/activation cost of £100 (or £50 for a ‘reconnect’), and an installation fee should ‘self installation’ not be the preferred choice. The only area of confusion we run into occasionally is the installation cost as we cant state the exact cost until a survey has been performed. On most properties the cost is predictable, but sometimes the installers will run into a problem with an unforeseen obstacle when installing from our fibre ‘pot’ just on the property boundary to the customer premises, but these are resolved on an individual basis.

The other change that is needed is clarity on those packages that have a usage limit, whilst most publicise the monthly download allowance included, in our experience most customers don’t understand the implications of those limits on what it means practically and are then surprised and annoyed when they see a usage charge on their bill.”

Martin Pitt, Managing Director of Aquiss, said:

“Our concerns, based on the early draft information we have seen, is this will start to force all providers, via a marketing led approach, to become carbon copies of each other, rather than giving customers choice, who all have different requirements.

Whilst we understand the need for clarity for the customer, this has only been brought upon by the “big providers” themselves, who as a collective, have gone about trying to hide costs in an effort to develop headlines, rather than being upfront about the need for a line rental (in most situations) as a prominent example. I find it a little ironic that TalkTalk now proclaim they support this new approach, when they were part of the trend setters to the current problem that the ASA are trying to stamp out.

Whilst we naturally have no issues combining services into all-inclusive solutions, if that’s what the market or legislation determines, given that around 60% of customers joining Aquiss decide that they have a good relationship with another company for some of their services or would rather sample a service before committing all their eggs into one basket, is it right that a customer may then face possible hidden costs by having to terminate services elsewhere (established contracts) all because they will be forced to take an all-inclusive solution?

We don’t want our flexible, often one-to-one, customer focused business model to be devalued. Whilst this might be more pleasing for parts of industry and those governing us, its ultimately in our view going to give less customer choice, be it a consumer or business. We at Aquiss have always tried to be upfront about what a customer is buying into and always sample feedback from new customers for improvements, comments and ideas. Maybe the ASA should consider looking at how smaller providers work and force the larger providers to break services down into separate services?”

Adrian Kennard, Managing Director of AAISP, said:

“What makes adverts annoying is that some broadband offers only work when you by the “line rental” from the same company. So you see the likes of “free broadband for 6 months” with “when you spend £zillions a month on line rental with us”. OK, to be fair £17 or £18 is pretty typical for the line rental there. You can understand the problem, and I sympathise. I would say that any offer that ***REQUIRES*** line rental should include that in the headline price to be clear.

The problem is that a lot of ISPs (hundreds) sell broadband separately or independently to any “line rental”. Many do not even do “phone lines” at all, only the broadband side. Such people have no tie in that you have to get their (expensive) line rental as part of the price, and so for them, even attempting to quote an “All-inclusive up-front and monthly costs; no more separating out line rental” makes no sense.

For A&A is it tricky – we do offer (but generally do not required) “line rental” but we don’t sell a phone service on it, we sell as a “copper pair to support broadband”. So we may have to sell our Home::1 package not as £25/month but as “£35/month* including line rental of £10/month which may be considerably higher from other providers” or something whacky like that!?!?

What is needed is simple – adverts to be *CLEAR* on what they mean. If they require line rental from same provider, say so and say total. If not, say so. Avoid the stupid small print!”

A Sky Broadband Spokesperson said:

“We work hard to ensure customers are fully informed when we’re marketing Sky’s products and services and our advertising adheres to all industry guidelines. Ofcom’s recent customer service report showed our customer satisfaction levels are the highest in the industry. We will review the new research and work with the ASA to ensure our advertising is in line with any new guidance it introduces.”

Darren Farnden, Entanet’s Head of Marketing, added:

“At Entanet we think it is alarming that this ruling has been issued and is to be applied, at relatively short notice, after a woefully brief study that interviewed a mere 300 individuals across a wide demographic. Once again we also see decisions being made based on the actions and advertising clout of the largest consumer players while completely ignoring the way the broadband provision market works when you include the highly relevant smaller ISPs. The ASA and Ofcom would do well to properly understand the mechanics of the market and not make the assumption that all ISPs sell like the big providers. The ASA’s proposals arguably impact smaller ISPs and resellers enormously.

We completely agree however that it should be exceptionally easy for consumers to make a decision on which provider to use based on clear up-front cost information. Contract lengths, where they are applied, should be clearly advertised and consumers’ expectations clearly set on the pricing of their service once any discount periods have expired.

It’s not entirely possible though for all ISPs to advertise all-inclusive up-front and monthly costs that don’t include line rental. Many ISPs outside of the big providers do not require their customers to take the line rental from them. This approach often gives customers greater flexibility in choosing their broadband supplier and is a valuable offering from smaller ISPs and resellers. We do agree however that, where the larger ISPs who make line rental a condition of taking the broadband offer they are making, the line rental element (and any voice pricing on that line) should be front and centre so that consumers are not duped by attractive low-cost broadband deals that are sometimes facilitated by higher line rental costs.

The ASA has already made it difficult for smaller ISPs to compete in advertising terms through it’s poorly thought-out mechanism of only advertising broadband speeds that are achievable by the top 10% of their customers. ISPs with much smaller customer bases than the large providers are disadvantaged by this requirement purely because of the sample size. To see that the ASA is now introducing rules based on a study of just 300 out of the UK’s 23.7 million fixed broadband line users (at 2014 according to Ofcom’s Communications Data Report Data of August 2015) is amusing even though unfortunately it isn’t funny.”

Tom Mockridge, CEO of Virgin Media, said:

“The ASA has launched a review of broadband advertising. Its focus is on prices, to help consumers understand the deals on offer. We will work with the regulator to ensure that the right guidelines are in place.

However, this is only part of the picture. To properly compare different broadband offers, consumers need to assess the whole deal: price and speed. To enable this, the ASA needs to overhaul the outdated rules on broadband speed advertising. Dating back to 2011, the ASA rules allow companies advertise a headline broadband speed if it is available to only 10% of customers.

Of course, there are technical reasons why consumers might occasionally be unable to access the top speed– they affect every provider from time to time and we all work hard to fix them quickly. But according to a broadband speeds report from Which? the gap between the speeds delivered by internet providers such as BT, Sky, TalkTalk and Plusnet versus those delivered by our superior technology is vast.

The Which? report found that only 7% of customers using ADSL services could get their advertised maximum speeds, while 98% of Virgin Media customers could receive advertised maximum speeds. In fact, the average maximum speeds delivered on our network were faster than the advertised speeds. If the ASA is serious it should ensure consumers can compare broadband deals on the things that really matter, and this includes speed.”

A TalkTalk Spokesperson said:

“TalkTalk absolutely supports the ASA’s findings and we’ve already called on Ofcom to bring in all-in pricing. It’s obvious that a single headline price is much clearer and better for customers, and we’re actually already doing it on a pilot project up in York.

But until the whole market moves to single prices, any company that advertises its products like this will struggle to compete with what look like better deals from other providers. We want Ofcom to be bold and tackle this problem in their strategic review and we would absolutely support them in doing so.”

Nicholas Lansman, Secretary General of ISPA, said:

ISPA welcomes the ASA research into how consumers engage with broadband adverts, but believe that more detailed research is needed to corroborate the survey findings. Price is only one factor when a consumer chooses a service and the engagement with an advert is only one part of a purchasing decision – we urge the ASA to consider the whole customer experience when consulting on changes to its advertising guidelines.

The UK has a highly competitive broadband market and informed and empowered consumers are an important part of this. This is supported by Ofcom’s own figures that show the UK benefits from some of the most competitive broadband pricing. Beyond adverts, ISPs provide clear information if consumers engage more closely with them, for example by going to their website, visiting a shop, working with comparison and consumer websites or by calling the providers. This has not been reflected in the survey which is based on a small sample size with some of the reviewed adverts only being shown to 8 participants.

We look forward to working together with our members and the ASA on how to empower and inform consumers, and it is worth emphasising that the adverts that were used in the survey fully comply with current guidelines.”

One clear complaint that we see shining through above is the feeling that smaller providers are being unfairly penalised for the often dubious marketing practices of the big boys and that the approach won’t work unless everybody sells services in the same way, which some warn could be counter-productive by removing choice and diversity from the market.

On the flip side we also see some good suggestions, with AAISP recommending that promotions like “6 months free” should only be allowed when they include all of the package being sold (e.g. applying to both line rental and broadband on bundles). Equally the broadband and line rental price should always be shown, although this could still be done alongside a total monthly cost so as to keep everybody happy.

One other issue, which doesn’t yet appear to have been touched on by anybody, is with regards to how some of the main ISPs charge customers more if they live in areas where there is less competition (i.e. BTOpenreach is the only primary infrastructure provider); defined by Ofcom as Market A (mostly remote rural areas). The new rules may force ISPs to be clearer about this, as opposed to hiding it in the small print.

At the end of the day there’s no reason why ISPs cannot promote their pricing in a clearer way, while also being more transparent with what they’re doing / discounting. It’s just a case of ensuring that the costs are clearly presented alongside the package and not hidden in small print.

Unfortunately we did not receive a comment from BT, although they did redirect us to the ISPA’s position (above) as being reflective of their viewpoint.

Leave a Comment
2 Responses
  1. Avatar Steve Jones

    Something needs to be done in this area. It’s not surprising that ISPs raise so many objections. Businesses love to obfuscate issues like pricing behind a barrier of confusion to make price comparisons difficult. We’ve seen it in any number of markets (power, airline flights etc.) so it’s hardly unique to the telecommunications market.

    I know that the whole area is immensely complex given that (unlike electricity or gas) there are a whole bundle of services, but the misleading headlining of just single elements of the pricing has to stop.

  2. Avatar Observer

    ISPs need to be forced to state in MBps as main speed indicator since they love to say how fast you’re going to download/upload a file in. Also not to forget average latencies for regions worldwide.

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