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Ofcom Scrap Easier Switching Between Openreach, KCOM, Virgin Media and Sky

Friday, July 14th, 2017 (10:50 am) by Mark Jackson (Score 1,239)
confused uk consumer

Ofcom has started a new consultation that aims to find ways of improving consumer engagement and encouraging more switching in the Broadband, TV, Mobile and Phone market. But they’ve also given up on making it easier to switch between separate network platforms (e.g. Openreach, Virgin Media and KCOM).

Comparing broadband, phone and TV providers can often result in a headache of confusing choices and not everybody shops around for the best deal. A survey conducted by the regulator found that the proportion of “engaged” consumers – those who have actively switched, shopped around or negotiated a new deal in the last 2 years – varies significantly across communication markets.

For example, just 7% of consumers taking landline telephone services on their own are considered to be “engaged“, which compares with 16% for standalone Pay TV or 22% for dual-play bundles (e.g. broadband and phone) and 39% for triple-play (e.g. broadband, phone and TV or mobile).

Less-engaged consumers typically pay higher prices for their service, which often occurs by remaining loyal to a provider or failing to negotiate a lower price. This happens because most providers only offer their cheapest prices (discounts) for the first 12 – 24 month contract term and after that the price you pay tends to rise, often significantly.

Lindsey Fussell, Ofcom’s Consumer Group Director, said:

“We want to help telecoms and TV customers take full advantage of the products and deals out there.

Too many people are deterred from shopping around, often staying on contracts that don’t suit their needs. So we plan to make things easier, by breaking down the barriers that prevent customers from engaging in the communications market.”

As a result Ofcom has launched a new Call for Inputs that is seeking views on how to improve the market so that consumers are more likely to become “engaged” and swap around. The regulator has also proposed some examples of possible changes, although at this stage they aren’t making any formal proposals.

The consultation is due to run until 15th September 2017 and Ofcom then expects to announce their next steps for increasing engagement during Spring 2018, which will be followed by “real-world” trials of possible measures to test how effective their proposed changes are in changing people’s behaviour.

Ofcom – Examples of Poor Engagement

1. Ease of leaving current service or provider: some contract terms may deter people from switching. For example, when people take more than one service from their provider, companies may impose different contract end-dates for each one. This could mean consumers need to pay a charge to exit one of their services early, or delay switching until the later contract ends.

Possible action: we are considering whether information about exit terms or contract lengths currently provided to consumers at the start of a contract is sufficiently clear. An alternative solution could be to require that all elements of a bundle have the same contract end-date. We are also assessing whether handset locking practices dissuade or delay people from changing mobile provider.

2. Confusion about when to engage: people may not be fully aware of when to review their existing deal. Many consumers allow contracts to ‘roll over’ after the minimum term expires.[2], when they could have saved money by switching or renegotiating their contract.

Possible action: we are considering whether consumer engagement could be improved if providers were to prompt customers by informing them that their contract is coming to an end.

3. Uncertainty about services and needs: some people may lack confidence identifying a deal or package that meets their needs. They might be uncertain about their usage requirements, or struggle to understand the range of tariffs available. These customers may end up paying higher prices for deals which exceed their actual needs. Similarly, people who underestimate their use may receive unexpectedly high bills, having exceeded their monthly voice or data allowance.

Possible action: we are examining whether pricing information could be presented on a more comparable basis. We are also exploring if consumers should be given details about their current service and personal usage in a standard format, so they can identify and compare offers more effectively.

On the other hand it’s worth pointing out that a lot of consumers may choose to stick with their existing ISP because they’re happy with the service, which isn’t a bad thing unless the provider makes a habit out of penalising such subscribers with aggressively higher prices (sadly this is all too common among the largest players). Some providers also continue to be very vague with their post-contract pricing.

Another hindrance to consumers becoming more engaged is the sheer complexity of the market, where some networks are physically separate and so seamless switching is not always possible. On that point we come to some bad news..

The Failed Switching Proposal

Buried at the bottom of Ofcom’s announcement is a disappointing update on last year’s proposal (here), which outlined plans for a process where customers switching landline, broadband or pay-TV services between different networks (e.g. Openreach to Virgin Media or KCOM) might only need to contact the provider they were moving to, who would then coordinate the switch on their behalf. Ofcom also wanted to extend this approach to Pay TV platforms, such as Sky’s Satellite etc.

At present if you want to switch your fixed line broadband and phone service between ISPs that use Openreach’s (BT) national telecoms network then it should be a fairly simple Gaining Provider Led (GPL) process, which as above means that the customer must initiate the switch via their new provider (instead of your existing ISP). See our Guide to Switching.

Unfortunately the above method doesn’t work for switches between ISPs on different (physically separate) networks, such as moving between Openreach’s platform and Virgin Media’s cable network or KCOM’s FTTP/ADSL in Hull. The technical challenges make this a lot harder to achieve in a seamless GPL fashion and so instead customers often have to follow a cancellation and re-provide process, which can result in extra downtime and costs.

The bad news is that Ofcom has not been able to make their proposed solution work.

Ofcom’s Statement

Having carefully considered all of the evidence, we have decided that it would not be proportionate and justified to make changes to the process for switching services between Openreach, KCOM, Virgin Media and Sky.

In reaching our decision, we’ve taken into account the amount it would cost industry providers to implement our proposed changes, and the benefits to consumers.

We’ve concluded that the costs are significantly higher than originally estimated, and consider that pursuing our proposed changes would not be in consumers’ best interests at this time.

We are now focused on addressing the wider problems that consumers face outside the formal switching process, and will aim to remove any barriers preventing customers from getting a better deal.

The regulator estimated that the costs to industry to implement their proposed reforms would be around £110 million over 10 years, which they feared might result in higher prices for consumers or a reduction in the operators’ ability to invest in their networks / quality of service.

In fairness we’re not at all surprised to see this outcome, given the technical challenges involved, although to some it will still feel like a kick in the teeth. Lest we forget that the Government also made a lot of noise about pushing for similar improvements but in the end the costs were too high.

UPDATE 15th July 2017

Budget ISP TalkTalk is not happy.

A TalkTalk Spokesperson said:

“Ofcom’s abrupt u-turn on telecoms switching is a major blow for consumers. Ofcom’s own research shows that nearly 8 in 10 people who consider changing providers don’t do it because it’s so difficult, leaving consumers suffering poor service and high prices.

After years of promising action, it is disappointing that Ofcom has instead bowed to industry pressure and decided that protecting the status quo is more important than protecting consumers.”

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