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ISPs Raise Concern Over Automatic Compensation for Broadband Faults

Thursday, August 11th, 2016 (12:47 pm) - Score 941
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Ofcom’s proposal to give residential and small business consumers in the United Kingdom an automatic right to compensation from their broadband, phone or mobile provider when things go wrong (here), such as due to a “loss or reduction of service“, has drawn widespread concern from ISPs.

At present providers are not required to compensate residential customers for service faults, although some will occasionally credit for such problems and others may only pay out following a lengthy complaint process. Meanwhile those taking a proper business service should ideally be covered by a Service Level Agreement (SLA) that will usually pay out compensation, although related packages are often much more expensive.

Due to this the regulator has proposed to improve the current approach by adopting an automatic system of compensation, which they claim would be fairer for consumers and may provide “incentives for providers to improve service quality.” But the initial feedback from ISPs to Ofcom’s consultation highlights a plethora of concerns and we’ve summarised a few of those below.

Both Three UK and Vodafone are quick to warn that it would be very difficult to extend such a system to Mobile networks because of the many different variables involved in delivering both indoor and outdoor mobile reception, where a customer may often lose signal / service while moving around due to a variety reasons (e.g. going underground or passing through a notspot).

The trouble, they say, is often with identifying the cause in the first place and establishing who is actually at fault (e.g. if somebody suffers a dropped call, without realising that the other end of that call simply hung-up). “It is identifying these impacts that is at best difficult and at worst impossible without having the end-user initiate the discussion,” said Vodafone. The operator also touched on the issue of quality versus incentives.

Vodafone said:

Ofcom also assumes that automatic compensation would further incentivise service providers to improve service quality. On the contrary, it is also plausible that if the cost of implementing the regime is high, service providers my have to sacrifice service quality in order to invest in compliance measures.

Further, excessive cost of implementation/identifying root cause of each fault would lead to price rises to ultimately fund the costs of compliance. Whereas leaving quality of service to market forces in a competitive mobile environment both permits innovation to improve services and drives down prices.”

Meanwhile SSE, which also offers a fixed line broadband and phone service, suggested that the compensation should come from the party at fault, which for example would effectively shift the responsibility to Openreach (BT) or whoever is operating the underlying infrastructure (assuming that’s the part of the network that’s actually at fault). The UK Internet Service Providers Association (ISPA) and AAISP similarly suggested that Ofcom should take a close look at this aspect.

SSE said:

“It is totally unacceptable to design a compensation system for network and wholesale issues that does not directly entail network and wholesale CPs having to pay out the principal compensation amounts. This would undermine the incentive properties of the compensation system and lead to a distortion of retail competition in the market.

It is unrealistic to expect retail-only CPs to negotiate successfully with large upstream wholesalers holding Significant Market Power, such as Openreach. While large retail CPs might have more success, smaller ones would not and could suffer significant financial harm as a result of the framework that Ofcom has initially proposed..”

AAISP said:

“It is crucial that carriers that are responsible for back-haul and broadband circuits — the suppliers to many ISPs — have the same definition of faults and provide at least the same levels of compensation to the ISPs to pass on to end users.”

Naturally BT Group’s response disagreed with the above, which perhaps highlights the difficult position of being both the country’s largest ISP and its largest network supplier to third-party ISPs via Openreach.

Ofcom has already said that the compensation arrangements between wholesale and retail providers may need to be reviewed, although so far the regulator appears to be taking a hands-off approach to this aspect.

BT said:

“The question of whether retail CPs receive commercially-negotiated redress payments from their suppliers when things go wrong does not need to be considered by Ofcom in the context of a consultation on consumer compensation. The relationship between a retailer and its wholesale suppliers, and the commercial arrangements between them, whether the latter are regulated or not, is an entirely separate matter to the relationship between the retailer and its end customers.

Openreach is by no means the only wholesale supplier to retail CPs, and it would be massively complex if Ofcom were to attempt to ensure a correlation between the amounts of compensation that may or may not be received by retail CPs through commercial negotiation with suppliers, and the terms on which those retail CPs choose to offer compensation to their end customers.”

All of the respondents also called for more clarity from Ofcom on precisely what would or would not constitute a fault that could attract compensation, especially since many faults won’t have been caused by the ISP itself. On this point Ofcom has already indicated that not all problems will be applicable for compensation and those that are 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 broadband speeds probably wouldn’t. Likewise the regulator has indicated that compensation “may not be suitable where resolving a service issue may require long term network investment” (that’s a pretty big catch-all if you think about it generally).

Elsewhere the ISPA suggested that compensation should not take the form of a financial payment. Instead they proposed that it could come from reductions to a customer’s bill “as this would be a more straightforward and efficient process,” while Gigaclear echoed support for this idea and proposed that it come in the form of “service credits“.

The ISPA also proposed that the amount of compensation must be capped to prevent it from resulting in higher prices for everybody or discouraging investment in the building of new networks.

The ISPA said:

“ISPA would highlight that increased competition within the UK over the last 10 years has improved consumer choice and reduced prices, resulting in very low broadband prices, some of the lowest throughout Europe. While we agree with Ofcom about the importance of broadband in everyday life, we would suggest that any compensation should be within reason.

If ISPs are forced to pay large amounts of compensation, they will need to make up for the financial shortfall elsewhere, with the likely result higher prices for consumers. We would suggest that there should be a cap on any compensation that can be awarded, similar to the cap offered in the event of an electricity power cut.”

Meanwhile Gigaclear pointed out that the new system could create a potential conflict with Ofcom’s existing Alternative Dispute Resolution (ADR) process, where unresolved consumer complaints can be handed to an independent ombudsman. This can result in heavy costs for the ISP regardless of whether they win or lose the case, which is a problem that could be exasperated by the proposed compensation scheme.

Gigaclear also suggested that compensation should be “automatic where fault fixing is delayed beyond what is reasonable and where service quality is regularly below advertised levels, as long as the source of the problem can be identified as within the provider’s (or their wholesale supplier’s) control, measured and audited independently.”

Suffice to say that Ofcom appear to face a minefield of challenges in delivering the proposed system, not least with the problem of defining relevant faults, identifying responsibility for those faults and then distributing compensation without causing all consumers to pay significantly higher prices for their service. Separately Entanet has added a few related thoughts on its blog.

You can see a full summary of the ISP feedback below and Ofcom aims to set out their proposed approach by the end of 2016.

Consultation Responses (Ofcom’s Call for Input)

* BT

* AAISP

* Gigaclear

* ISPA

* SSE

* Vodafone

* Three UK

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he is also the founder of ISPreview since 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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7 Responses
  1. captain.cretin

    BT must be pissing their pants at the thought of this, as 90% of the fixed line internet faults I have had come down the crap BT equipment in the cab/exchange, or shoddy joint boxes in the line.

    • wirelesspacman

      To be honest, I doubt that they will be as they already blatantly ignore their SLA obligations to “automatically” pay compensation on the EAD circuits they provide – and I know this from my own bitter experience dealing with those clowns over many years.

  2. dragoneast

    And I thought the Regulator abolished fixed compensation because it didn’t improve service quality. It was just another cost to be added to the budget, and paid for by the customers. Oh, and they could take the credit for reinventing it of course (after everyone had forgotten)!

  3. karl

    “In other words, Internet outages caused by a serious remote cable break might well be applicable, but slower than expected broadband speeds probably wouldn’t….”

    Surely a cable break is not the fault of the ISP? Why should they be paying compensation when they have no control over the broken cable or when it is fixed.

    Ofcom IMO have finally totally lost the plot.

  4. Curious

    So, here goes.
    Customer calls ISP, reports fault on day 1. ISP reports fault to Wholesaler.
    Wholesaler ‘identify fault’ and arrange engineer to location of fault.

    No engineering availability from wholesaler (which, let’s face it, if it isn’t Virgin, it’s going to be Openreach) for 3 days.

    Day 4, engineer goes to rectify fault, only to find he isn’t trained, and another engineer is needed. Send back to works control for specific appointed eng.

    Specific appointed eng. visits fault and resolves.

    6 days without service for the customer. ISP still pays rental to Wholesaler regardless, then has t pay compensation to customer due to length of time taken to resolve.

    Where in this chain is the ISP at fault for resolution taking 6 days?

    I agree there should be compensation, but the compensation should come from WHOMEVER is responsible.

    If there is a cable break, who owns the cable? They should pay.
    If, however, it is identified the ISP raised the fault incorrectly (wrong fault type etc.) or they delayed in raising the fault to wholesale, then they should be held responsible.

    It is irresponsible to place all of the risk/blame onto the ISP, as there will be claims left, right and centre.

    There needs to be structure from top to bottom (wholesaler & ISP).

    • MikeW

      “Where in this chain is the ISP at fault for resolution taking 6 days?”

      Because, in reality, it could be a 9 day process.

      The customer might report the issue to the ISP on day 1, but progression into their “faults” team can then take 3 days before they look in enough detail to decide it warrants being passed on to the wholesaler. Plusnet and TalkTalk spring to mind.

      Or … Some faults don’t just require (say) a new engineer, organised within Openreach, but instead bounces back to the ISP before progress can be made. If the ISP doesn’t react quickly, then more delays occur … again, attributable to the ISP.

      Or … The worst case is where an appointment (or repeat appointment) needs to be made with the subscriber. Such issues have to bounce back to the ISP and to the consumer. How often do you hear of ISPs being good at proactively calling the consumer?

      “There needs to be structure from top to bottom (wholesaler & ISP).”

      Agreed. Though the structure needs to include the customer.

      Each layer needs their own SLA terms, which dictates response times and compensation. If the ISP purchases a service from the wholesaler with a 3-day response time, then there will be no compensation for 3-day fixes. If the ISP adds on their own 3-day response time, then they can only sell a 6-day SLA to their consumers.

      Today, consumers aren’t aware of SLA terms at all. And, even if you purchase a service with a decent SLA at the wholesaler, you aren’t made aware of how long it takes to get through the ISPs internal systems to even start that clock ticking.

      Have we ever seen adverts that push the SLA benefits of their service, headline or small print? Have we seen ASA have to resolve a dispute over such adverts?

      The problem is that, on one hand, consumers want a cheap service, but on the other hand, good service costs money. Most ISPs are chasing the people wanting “cheap”, and aren’t motivated to mention the knock-on impact to service.

    • karl

      “The customer might report the issue to the ISP on day 1, but progression into their “faults” team can then take 3 days before they look in enough detail to decide it warrants being passed on to the wholesaler. Plusnet and TalkTalk spring to mind.”

      I highly doubt that would happen if they were subject to having to compensate for those 3 days. They would be passing complaints as quick as possible to the wholesaler.

      I agree with Curious, far more likely BT take 3 or more days to send an engineer, and even when they do its either the wrong one, nothing he can do when he arrives (IE fault needs more work beyond his remit/ability) or some other reason it does not get fixed. Oh and thats if the engineer bothers to turn up at all, Ofcom should know all about that though seeing as they had a report and told Openretch to get thereself in order and fix faults quicker. Why they now think others should be paying fines for their lateness is bizarre to say the least.

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