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Ofcom UK Consult on Automatic Compensation for Broadband ISP Faults

Friday, June 10th, 2016 (12:06 pm) by Mark Jackson (Score 1,516)
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The UK communications regulator, Ofcom, has launched their first consultation on plans to give consumers an automatic right to compensation from their broadband ISP when things go wrong, such as due to a “loss or reduction of service.” But we might all end up paying more for our service to support it.

At present the issue of compensation for home broadband, phone and or mobile faults remain complicated and one that is often subject to the whims and contract terms of your chosen ISP. On the other hand many business broadband packages already offer with a Service Level Agreement (SLA) that will pay out compensation for significant service disruption, but such packages can also be much more expensive.

However Ofcom’s Strategic Review, which was published in February 2016 (here), proposed to change this by ensuring that all consumers should gain a right “automatic compensation” in the event of such failures. More recently the Government has promised to make it a part of their forthcoming Digital Economy Bill (here), which will be published soon.

As such today’s Call for Input represents Ofcom’s first direct consultation on the proposal, which notes that “a significant minority of consumers do experience problems with their communications services” and this can have very real consequences, such as on their ability to communicate and do business or shopping online etc.

Ofcom’s Statement

We recognise that consumers are able to seek compensation for some service quality issues today. However, our research shows a lack of awareness and uncertainty among consumers about compensation where it is available.

Further, obtaining compensation generally requires the consumer to make a complaint; they may need to ‘prove’ they have experienced poor service quality and receiving compensation will depend on the communication provider’s agreement. Where a communications provider refuses to provide appropriate redress or the consumer disagrees with the amount offered, a consumer can take the complaint to the relevant alternative dispute resolution (ADR) body or commence legal proceedings.

Making and pursuing a complaint can therefore be lengthy, involving time, effort and cost on the part of the consumer. The compensation payable may not be commensurate with the effort of making a claim. As a result, even engaged consumers who are negatively affected by a service issue may not consider it worth claiming redress. This is likely to be worse for vulnerable consumers, who may be even less likely to make a complaint.

Ofcom’s view is that an automating payment of compensation would make the current system easier and fairer to consumers, while also potentially reducing the burden on an ISPs support and complaint departments.

The regulator suggests that compensation may provide “incentives for providers to improve service quality” and may even reduce their future faults, although it should be stressed that most major outages are unexpected (e.g. accidental or criminal cable damage, storm damage, mains power cuts etc.) and so this argument has a few flaws. But it might indeed encourage faster repairs, although to do that would require more engineers and that’s an additional cost to factor.

At this point Ofcom takes the view that automatic compensation should only apply to residential consumers and smaller businesses (the latter often use domestic grade connections too), with larger businesses being left aside because they are probably already covered by an SLA.

The regulator also suggests that not all problems will be applicable for compensation and those that are allowed must lend themselves to being “objectively defined and measured.” In other words, Internet outages caused by a serious remote cable break might well be applicable, but slower than expected Internet speeds in fixed networks or frequent dropped calls could be more challenging.

Ofcom’s Statement

“Further, automatic compensation may not be suitable where resolving a service issue may require long term network investments. Consumers have a right to expect the quality of service specified in their contract and advertised in marketing material. In some cases, for example for slower than expected access line speeds in fixed networks or for frequent dropped calls in a consumer’s home, the quality provided may fall below what consumers can reasonably expect from the service.

In such cases, consumers may be better served through alternative forms of redress, such as a right to exit the contract than with automatic compensation, i.e. they might be better off switching their service package or provider.”

Similarly Ofcom said that people should not receive compensation where the “cause of the issue lies with the consumer“, such as a fault that occurs due to the equipment being used in your home.

Mind you we can perceive a grey area here as many of the big ISPs provide customers with a bundled broadband router on a sort of loan agreement, but if that device fails then who pays? Is it enough that the ISP simply be expected to replace the device, as often already happens? Ofcom will need to decide and consider the “proportionality of our intervention.”

Ultimately any compensation amounts are likely to be fairly small, which may for example reflect a proportion of the monthly fee that you pay for receiving the service (not yet decided). Never the less the proposal will all add an extra cost to service provision and one that may well outweigh any savings in other areas, which is something that the new consultation aims to clarify.

Equally there’s a useful mention in Ofcom’s consultation about tackling the supplier-side of things. For example, if BTOpenreach is responsible for a service outage then one way to balance the tables might be to also require an improvement in their compensation arrangements with ISPs. On this point Ofcom says “it is likely that the current SLAs and SLGs will need to be reviewed following the introduction of automatic compensation.”

Suffice to say that we wouldn’t be surprised if some broadband ISPs ended up raising their prices at a higher than typical rate in order to balance the books. Meanwhile Ofcom’s initial consultation will remain open until 22nd July 2016 and they will aim to propose changes by the end of this year, which will require another consultation.

UPDATE 12:42pm

Added in Ofcom’s statement that the compensation arrangements between wholesale and retail providers may need to be reviewed as a result of the changes.

4.4 Where a retail provider buys services from a wholesale supplier, there will be instances when service quality issues will be the supplier’s fault but the retailer is required to pay compensation. We would expect retailers to be able to commercially negotiate and agree wholesale service levels with their suppliers, including payments for breaches, which will ensure that the retail compensation is totally or partially paid for by the party responsible for the service issue. Currently, where Openreach has SMP such as in Wholesale Local Access markets, it is required to specify certain service standards (Service Level Agreements or SLAs) in its contracts with customers, and provide for compensation (Service Level Guarantees or SLGs27) where those standards are not met. These SLAs and SLGs are currently negotiated commercially between Openreach and its wholesale customers and it is likely that the current SLAs and SLGs will need to be reviewed following the introduction of automatic compensation.”

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29 Responses
  1. Karl

    All i see this doing causing a Chuckle Brothers style game of ‘to me to you’ with a ISP blaming Openreach for a fault and Openreach blaming the ISP.

    How the “rules” are going to decide who should pay compensation is beyond me. The flaws i see are…
    1. If say you are with Talk Talk (or any other provider except BT) and their systems fail to authenticate your connection (lets say password issues or wont assign an IP address as examples) then obviously they should pay the compensation, but are they going to freely admit they are at fault???? I suspect some will not and will try to blame it on an Openreach line fault…. The opposite could also happen…
    2. You have an Openreach line fault which keeps disconnecting your connection or worse. Will Openreach freely admit to it and pay compensation or will the blame the ISP? If they do admit to the fault then depending on what it is the system will still be flawed because….
    3. If to repair a line means digging up miles of street and replacing the line then are they really going to do that at a cost of tens of thousands of pounds? I suspect they would sooner (which business wise makes more sense but morality wise is questionable) just keep giving the customer £10 or whatever tiny figure compensation will be set at per month per individual line and be able to do it for years and still spend out less than what actually repairing things may cost.

    A nice idea in theory but as is typical with any idea in this country nowadays not thought through in any form.

    • In fairness the purpose of Ofcom’s consultation is to investigate these very issues and decide how they can be resolved. The idea itself is entirely feasible, it’s just a case of whether or not you can devise a fair and effective system around it. I’ll wait to see what they produce..

    • Karl

      The only way i think it could be “fair” is to have a third party which investigates each fault and rules who should be fixing it. I doubt can happen though as the amount of complaints never mind the time that is likely to be involved just to resolve a handful of complaints would be unfeasible.

      There is then the yet unopened can of what is a “fault”?????

      If your FTTC suddenly goes from 70Mb down to say 40Mb neither BT or Openreach currently in most cases with their Range A and B estimates would deem that a fault despite the fact your connection has a 40%+ reduction.

      I do hope they think of what i have mentioned and a lot more i have not, the chances of that though i have little confidence in.

  2. GNewton

    “a significant minority of consumers do experience problems with their communications services”

    This is very true, especially with those who are with TalkTalk or BT, see e.g. https://business.forums.bt.com/t5/Feedback-general-chat/bd-p/Intros

    Let’s hope that this planned automatic compensation scheme will be a success!

    • Karl

      Ill have to go all Fibrefred lol 😉 on you over that. The real problem with regards to this item is not the amount of complaints per ISP but who is responsible for fixing individual faults (which will always vary). In many cases forum posts do not tell half the story and many ‘complaints’ i bet many can be end user related rather than the product or line. The biggest problems are going to one of the blame game between ISPs and Openreach and defining what exactly is deemed a fault that should be compensated.

    • GNewton

      @Karl: I agree, there will be issues of a blame-game between Openreach, the ISP and the end user. However, these forum posts are often about a lack of services due to whatever underlying technical reasons, and these are common real-world issues. The goal has to be a speedy compensation for the end user, regardless of whether the line fault was caused by the ISP or Openreach.

      Ofcom is probably trying to develop strategies which will cause Openreach and other network providers to improve their access networks, or to make them more robust. This won’t be possible with current copper-based local loops as we all know.

    • TheManStan

      This will be very interesting regarding the vision OFCOM has for PIA… what happens when it’s another ISP that has knocked out another ISPs service…

    • GNewton

      @TheManStan: Good questions. However, the main point is that the end customer needs a speedy compensation if there is a line fault, even if the ISPs or Openreach can only figure it out who has caused the line issue at a later time. This will give Openreach and the ISPs an incentive to do better in the provision of a more robust broadband service.

    • TheFacts

      How much for 1 hour and 1 day?

    • GNewton

      @TheFacts: Make some proposals and get in touch with Ofcom.

  3. So if your service goes off you get compensation? I can see some people simply turning off their router for a few hours and claiming it was an outage. In general there is no way for the ISP to know or prove that was the case. I also think the idea that ISPs can negotiate with BT shows a total lack of understanding by OFCOM. A far bigger issue that needs tackling right now is SFI. We could easily get a crazy situation where an ISP has to compensate the end user whilst at the same time paying BT hundreds of pounds for and SFI engineer and no chance to negotiate with BT on that.

    Of course there is a matter of what an ISP sells. We don’t sell you 100% access to every internet endpoint and web server. But there will be cries for compensation because pornhub is down when not the ISPs fault at all.

    The whole internet is based on a “best efforts” arrangement. As an ISP the peers and carriers we deal with do not offer an SLA covering the whole internet being accessible all the time. Compensation can only harm that model and make it much harder (and hence more expensive) to offer Internet access.

    • dragoneast

      Exactly. The consumer pays for all Ofcom’s meddling. The only way that “automatic” compensation works is the way it used to, that there is a waiting period before you are eligible, and the waiting period is long enough for 98% of faults to be fixed. (Though that was in the days of analogue telephones and dial up). In which case is the light worth the candle (or vv)?

      I’m with a respected ISP, and over the last few years suffered degradation in my connection, regularly, sometimes for months at end. It was complex to sort out, but they worked hard at it. (And at one point a BT software change at the DSLAM messed up my router, but was it my router or my connection? Neither I nor the ISP could work it out). As a residential user in both cases I worked around it, and it got sorted. Should I, or would I, have wanted compensation? No, because to have a business class service I’d end up paying business charge rates. When I have a problem I wanted it sorted not “money for nowt”. Ofcom don’t seem to care about what the consumer pays. Just whose interests do they think they’re looking after? If they want to damage “Digital Britain” they’re going the right way about it. Haven’t we learnt anything from the Compensation Culture that good intentions have engendered over the last few decades? The innocent pay for the lazy (as well as the downright deceitful). But money grows on trees doesn’t it?

    • dragoneast

      Oh by the way the degradation affected many customers. So automatic compensation to all of us and great: bills through the roof. I don’t value the internet that much. Ofcom’s grand plan is to drive ordinary people off the internet. Apparently.

    • gah789

      Much of this could be dealt with by sensible de minimis provisions – i.e. someone is only eligible for compensation if they are cut-off for a minimum of 120 hours – together with evidence that it was a provider fault. These kind of conditions are standard in the case of other utilities. There will also be exemptions in the case of emergencies.

      In practice, it would simply be a variant of an SLA with rather lengthy response times, but the big operators will resist furiously so it is unlikely to happen anytime soon.

  4. FibreFred

    If your connection is so important that you would want compensation in the event of issues get one with an SLA, simple.

    How do you think SLA payouts are funded

  5. MikeW

    Is this compensation primarily meant to actually compensate?

    Or is it an indirect mechanism to punish the communication companies for failures – whether retail or wholesale – in order to alter their behaviour?

    Or does it signal a change to the way we should consider the business? That internet access is now a service that demands an underpinning of quality?

    In terms of figuring who should pay, I agree it is tricky, but it isn’t for the end user to worry or care about. Once the outage qualifies, they should be paid by their ISP. The trickiness belongs to interplay between ISP and wholesaler, and of course figuring the threshold to “qualify”.

    I note @revK’s worry about negotiating with BT, and @dragoneast’s desire to not pay, and @fibrefred’s idea of an SLA. But perhaps, if the internet has become that important to people, the “standard” contract should indeed have a compensatory SLA, which is indeed paid for. Move the industry, as a whole, away from the cheap-as-chips talk-talk model. Away from the Sky bundled-for-free model. Perhaps it is time for the previously “best efforts” industry to change its spots, and become one with the quality ethos that used to underpin quality telco voice businesses.

    The past has a telco world where the voice service had to survive no matter what; where there were plans made to keep the quality of service high enough to fulfill emergency service access requirements.

    Into this world came the young data upstart that couldn’t live with the same quality ideals. It labeled itself “best effort” and, in the mass public arena, hasn’t gone much further. It has created a “cheap bolt-on” attitude at retail level that has engendered a “can’t be bothered to fix it” attitude in wholesale, if you can get past the “what? There’s no fault here” attitude in support staff.

    Perhaps now, when the “converged networks” are starting to make a data connection as the lowest level service (rather than voice), we really ought to be rethinking the quality we expect. Perhaps it is time the whole datacomms industry stops bleating “best efforts” – at least for *some* portion of its provision.

    Is it time for the “internet” business to grow up? To come of age? To stop the excuses?

    I might not like paying for it, but I think I’d enjoy such a seismic shift in thinking.

    • FibreFred

      I agree with a lot of what you are saying, but joe public is used to paying peanuts it will be a hard sell

    • MikeW

      Hehe.

      Most people, of course, aren’t aware of there even being any quality differences between different voice services. Anything to save another farthing… which means they really need Ofcom to protect them from their own lack of understanding.

      The day that Ofcom pays more attention to quality than cheapness will be a turn up for the books.

  6. dragoneast

    It’s ironic the way that Ofcom claim their objective is to foster competition, and then whenever they see an opportunity to regulate and specify the terms between the EUs and the ISPs leap in and do so. Why can’t the market provide SLAs where there is the commercial demand for it? Or is this another political gimmick by Ofcom to justify its existence to the politicians? About time we had another one, after the last one floundered. As for the argument that “The industry needs to grow up”: how wonderful to be so well-versed in politicians’ gobbledygook.

    Might the money paid to consumers be better spent on the network, especially extending reliable fibre-based services? But of course that’s not what this is about, is it?

  7. Sunil Sood

    Also interesting as to how you would define a fault.

    Some on ECI cabinets are reporting the lack/removal of g.inp as a fault to their ISPs in the vain hope this will somehow mean they get it back sooner – but is it really a fault? I would suggest not really..

    • dragoneast

      The easiest of all is to redefine a fault; and restrict everybody’s speeds on the cab well below the attainable; and generally reintroduce data caps to stop overloading the networks. But the argument may be, why not? Perhaps broadband shouldn’t be a “how fast can you go/much can you eat” feast. That’s called growing up/a mature market isn’t it?

  8. Wondrous. Really looking forward to higher bills from this.

    • dragoneast

      . . . and worse service, as everyone concentrates their resources on the “easy to fix” and/or resisting claims, rather than identifying and repairing genuine faults. And preventative action (the best of all) flies straight out of the window.

  9. FibreFred

    I think the issue will be that for many of these faults it will require expensive investigation and too and fro between the isp openreach and end customer and that cost will outweigh the claim so it will be easier to just pay it.

    So what we end up with is increasing costs for all to cover genuine and bogus claims

  10. Wise Old Owl

    I think this is more about protecting the consumer by pushing the ISP community into upping their game when it comes to reliability and performance.

    I agree with all of what RevK said in his post and some others. Connectivity at this level is always a best efforts service at consumer prices, that’s why it’s best efforts and not a leased line guaranteed SLA type service.

    Can you imagine the outcry if consumers had to pay say £500 a month rather than £30 a month for their broadband so that the ISP could ensure a guaranteed service.

    Yeah me neither. I understand Ofcom trying to up the game for the consumer but I can only see them paying for this at the end of the day ironic really.

  11. Kenny

    Interesting, other industries that have automatic/easy compensation just results in higher costs look at the whip lash in car insurance, so if you make claims easy everyones costs go up, If you make it hard then nothing happens. The best thing to do would be to have a minimum level of universal service obligations on speed and say open reach has to have the last mile to do this and the ISP must provide the service. easier to check and report on, if not done fine them £100 a month until done.

    then the ROI is real simple to work out and all will get a basic level of service which we deserve

  12. Solarman

    Compensation cultures on the whole do not work and are just open for abuse. ISP faults are difficult to pinpoint and it just escalates into a blame game.

    Kenny made a good point, a obligated minimum level of service and speed with a fine based penalty system would fix most of these issues at the core.

  13. dragoneast

    Do we really think that BT and the ISPs aren’t trying hard enough to provide a service? Or could it be that there are genuine difficulties in trying to manage with limited resources?

    The trouble with regulations is that they distort priorities. Robbing Peter to pay Paul. I’ve seen plenty of contracts where penalties have been used as an incentive to improve performance. They’ve never worked as intended. Look at the rail industry. Or even look at bonuses in the Banks. They just move money around and increase costs. And the cover-ups.

    So I could see for instance, that with a penalty or compensation regime many more lines end up declared unviable for broadband. If provision may be problematic, don’t take the risk. And if you cap expenditure, as you’d have to, then all you have to do is waste enough resources until it becomes uneconomic.

    I’ve heard of cases where engineers have been sent out multiple times to do the same thing (and experienced it myself) – though more by accident than design. A penalty or compensation regime, subject to a cap, may end up just encouraging this sort of behaviour, deliberately. At least you’re “doing something”. The intentions may be fine, but look for the law of unintended consequences.

    Uncapped liability. Fine. No commercial company, or even Government, is going to spend unlimited money on a problem. Nor is it an answer to set a cap unrealistically high.

    But of course each of us is only worried about our own situation, not anyone else. And as long as we’re sitting pretty with the offer of free money in prospect, that’s fine.

    • Peter Dean

      “Do we really think that BT and the ISPs aren’t trying hard enough to provide a service”

      Absolutely for some parts of the service because they have no competition and so no incentive to try harder. BT have to worry a little about competing with Virgin media and that’s about it. ISPs don’t care about poor BT service because their customers will get the same where ever they go.

      I think it right that Ofcom get involved in this aspect of BT’s monopoly, although not sure automatic compensation is a good way to do it.

      Of course I mean wholesale and openreach when I say BT.

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