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UPDATE FINAL Details on Automatic Compensation for Broadband ISP Faults

Friday, November 10th, 2017 (9:39 am) - Score 964
disconnected internet broadband

As expected Ofcom has today set out the final details for their new automatic compensation system, which will force UK ISPs to compensate consumers (cash or bill credits) for a total loss of broadband connectivity, albeit only under certain circumstances (e.g. the outage lasts longer than 2 working days).

The new rule, which will benefit both residential consumers and around a third of small and medium sized businesses (SMEs) who buy domestic fixed line broadband services, was a requirement of the Government’s recently passed 2017 Digital Economy Act. Under this system related customers will no longer have to go through a tedious claims process in order to seek compensation, although there are some limitations.

The system will only be applied to faults that lend themselves to being “objectively defined and measured” and which have not been caused by consumers themselves (e.g. you will not be compensated if you damage your own home wiring or aren’t at home when the engineer arrives), which in some circumstances could prove difficult to verify.

Situations Allowable for Compensation

• The Customer’s landline or broadband is not fixed quickly enough (within 2 working days) after it has stopped working; or
• The new landline or broadband service is not up and running on the day promised; or
• An engineer doesn’t arrive for an appointment as scheduled.

The final details haven’t changed much from the regulator’s original proposal, although the level of compensation has reduced a little bit. Ofcom states that the level of compensation has been designed to reflect the degree of harm suffered by consumers.

On the other hand the final payment levels may still concern both smaller ISPs with vulnerable balance sheets and bigger providers that sell budget level packages because they could easily exceed the monthly cost of the service itself (e.g. £8 per day for a total loss of service). However, given the voluntary nature of today’s agreement (see below), smaller ISPs will not now have to apply the rules unless they sign-up to them.

broadband compensation final uk isp charges ofcom

The final charges have changed as follows. The £8 charge for delayed repairs is down from £10, while the missed appointments fine of £25 has been cut from £30 and the delay to the start of a new service charge of £5 is down from £6 under the original proposals.

The new scheme is actually based on a voluntary proposal from the industry, which has been put toward by BT, Virgin Media, Sky Broadband, TalkTalk and Zen Internet (Plusnet and EE have also indicated they will join the scheme). In other words, Ofcom has decided not to impose a regulatory system but they will review the new approach one year after it has been implemented.

Some of the biggest providers had previously tried to get a less costly system introduced, although Ofcom rejected that and so the industry came back with something closer to what the regulator wanted (hence why the final charges haven’t changed much).

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

“When a customer’s landline or broadband goes wrong, that is frustrating enough without having to fight tooth and nail to get fair compensation from the provider.

So we’re proposing new rules to force providers to pay money back to customers automatically, whenever repairs or installations don’t happen on time, or when people wait in for an engineer who doesn’t turn up. This would mean customers are properly compensated, while providers will want to work harder to improve their service.”

Gillian Guy, CEO of Citizens Advice, said:

“People rely on broadband for many of their daily activities, but all too often providers fail to deliver the service their customers are paying for. That’s why we’ve been calling for consumers to be automatically compensated when they’re left without a connection through no fault of their own.

The introduction of this voluntary scheme means that consumers will no longer have to waste valuable time negotiating with providers, and is therefore welcome. However, it’s essential that Ofcom holds the broadband companies to account through strict reporting to ensure consumers receive the compensation they are entitled to. We will be looking closely at Ofcom’s full review of the scheme after 12 months to make sure it works for consumers.”

Ofcom believes that the changes will offer “incentives for providers to improve service quality“, although it’s equally likely to result in all of us needing to pay noticeably higher prices for our fixed line broadband connections. The regulator has estimated that up to 2.6 million customers could receive up to £142 million per year in automated compensation payments, which is bound to have an impact on service cost.

On the other hand most broadband faults are usually fixed within 2 working days, with many being corrected within the space of a few hours or minutes and very few require an engineer visit to your property.

Complications

However there is still the potential for confusion in the new system, particularly as consumers may sometimes demand compensation for faults that aren’t anything to do with the ISP (e.g. losses of service caused by third-party routers or bad software configuration).

Some ISPs also complain that external network issues, such as street cabinet vandalism or major flooding “are clearly beyond our control” (i.e. Openreach’s responsibility), although the impact upon the end user would still be a loss of service and that is thus likely to attract compensation if it’s not resolved in the correct time. It’s worth adding that sometimes even Openreach can have trouble identifying faults in their own network.

At this point we note that most major fixed line broadband faults tend to happen on infrastructure run by core wholesale suppliers (e.g. Openreach, TalkTalk Wholesale) and not the ISPs own network. Understandably ISPs want Ofcom to ensure that such suppliers will share the financial burden, although this is usually a contractual matter between ISPs and their suppliers.

The regulator states that “any changes to Openreach’s commitments which may be necessary to reflect the requirements of an automatic compensation scheme should be the subject of industry negotiations,” which they see as something that would facilitated by the Office of the Telecoms Adjudicator (OTA2) in line with current practice and processes (Ofcom may step in if no agreement is reached but they’ve not yet forced a change).

Another caveat in the above dispute is over the question of who takes responsibility for the impact of major network outages (MBORC), such as those caused by storms or flooding over a wide area (i.e. “force majeure-type events“). Ofcom said “our judgment is that a fair and effective automatic compensation scheme should provide for retail providers to pay compensation to consumers where the service quality failure occurs as a result of a force majeure event.

In keeping with the above position, the regulator added that they “do not have a view currently on whether the cost of force majeure-type events should ultimately be borne by the wholesale provider or retailers, especially as the issue may be no more under the former’s control than the latter’s.” However, resolving this is once again said to be a “matter for industry negotiations at the wholesale level.”

It’s also hoped that some of the above concerns may be tackled by Ofcom’s latest push for Openreach to meet even tougher service performance and quality standards in the future, which may further reduce the number of related incidents that might attract compensation.

Implementation

In terms of implementation, Ofcom recognises that introducing this will be very complex and that ISPs need time to adapt their billing systems, online accounts and call centres. As a result there will be a 15-month implementation period before it comes into effect during early 2019.

Finally, the new system will also benefit small and medium-sized enterprises (SMEs) that choose residential landline and broadband services. Ofcom will also introduce new rules to ensure all SMEs are given clearer, more detailed information upfront about what service quality to expect. This includes whether they can claim compensation when problems occur.

Matt Hancock, UK Minister for Digital, said:

“Broadband is no longer a “nice to have”, but a modern necessity, and we all know how frustrating it is when it doesn’t work.

We’ve strengthened Ofcom’s powers to make sure providers pay ​compensation when service falls short, and I’m pleased that progress is being made. It now needs to be implemented as quickly as possible for it to deliver meaningful improvements in service quality.

Ultimately, the best way to improve the customer experience, though, is for the nation to upgrade from today’s technology of “copper to the premise” to our full fibre future, and we are doing all we can to make that happen.”

Smaller ISPs may be breathing a sigh of relief over all this, although it’s worth considering that automatic compensation could in itself become a big service differentiator. A smaller provider that fails to offer it may now look less attractive to consumers, unless they join.

Ofcom’s Automatic Compensation System
https://www.ofcom.org.uk/../Statement-automatic-compensation.pdf

UPDATE 1:02pm

The boss of Andrews and Arnold (AAISP) has offered a comment.

Adrian Kennard, MD of AAISP, told ISPreview.co.uk:

“OFCOM have today published their decision on automatic compensation for broadband and phone line faults. The result is a scheme adopted only by the major ISPs to pay compensation for delayed installs, delayed fault repair and missed appointments.

As a small ISP, we are relieved at this approach as the original proposals contained a number of areas of serious concern. This is good news for consumers generally and should hopefully mean that Openeach and back-haul carriers that we use put in place systems to pay automatic compensation (though OFCOM have not insisted on this). If this happens we will be able to pass on any compensation we receive automatically to AAISP customers as well.

So, whilst not part of the scheme, AAISP customers should benefit from automatic compensation in most cases.

We also hope, as do OFCOM, that in the 15 months lead up to the scheme starting, the likes of Openreach will actually improve services so as to avoid having to pay compensation. Obviously this will benefit all ISPs and their customers, not just those in the scheme.”

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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. DaverN

    I can foresee an immediate, and obvious, problem for the telecoms industry whereby fixing a breakage is entirely out of the hands of any CP. For example, if a road traffic collision on a narrow road were to take out a telegraph pole, there might be a very long delay in getting local Council approval for a road closure which is needed in order to erect a new pole. I’m sure others can provide more examples, such as access to wayleaves over private property with an absent owner.

    Ofcom appear to be driving this through as “champion of the consumer” entirely for political reasons without considering all of the ramifications. Merely stating that it is a “matter for industry negotiations at the wholesale level”, is a cynical abdication of any responsibility on their part for consequential increases in monthly rental costs for consumers.

    • Alex Bristol

      However on the other side of the fence you need to also consider homeworkers could lose work or job, fines for later submission of tax matters, farmers having to register livestock births within time limits, therefore some people being without internet could cause hardship to them.

    • DaverN

      I entirely agree with your point about the impact of loss of service and you’ll get no argument from me on that.

      My point was to raise the question of “who pays”. Somebody has to and ultimately the costs will always end up on the end users’ rental bills. It is reasonable that whoever is responsible for a problem should pay to rectify it and price competition should encourage service providers to keep the costs of fault rectification down.

      What should happen, however, if a problem occurs that is completely outside the control or ability of a service provider to rectify? Ofcom has specifically declined to address this issue.

    • MikeW

      Perhaps it’ll be like the rail industry, where refunds are a part of train delays at a retail level, but “blame” attached to the delay dictates which organisation foots the bill.

  2. dragoneast

    Hmm fair enough point about consumers, but just perhaps we shouldn’t always leave everything to the last minute, and try to help ourselves by leaving ourselves time in case the unexpected happens. Sometimes we seem to delight, like children, in trying things on, and leaving everything to the last minute just because we can for a bit of fun to test everybody else. And affluent consumers (which includes Ofcom civil servants – that’s a misnomer for a start) never think of anyone less wealthy than themselves, who has to pick up the bill too.

    I suspect as usual this compensation isn’t going to make much difference to the people who really suffer a significant real loss, but will be just more grist to the mill of the serial complainers who make it their business to seek out trouble for want of anything more useful to do. Hopefully it might improve the levels of service for everyone but I wouldn’t bank on it. If that happens at all I suspect it’ll be an incidental effect, and probably nothing to do with it, but a result of improving technology and planning. But it will probably skew resources, and not necessarily where they are best used or most needed. But at least if it makes the politicians happy and gives them something to crow about, and keeps them off Ofcom’s back. They both need it, in their own eyes at least.

  3. Victoria Burke

    I get that all the time, unable to connect and unable to connect to server.

  4. John Miles

    If someones business depends on their broadband connection then £8 a day is not going to compensate them, and its not intended to. It’s compensation for domestic inconvenience. If their network connection is critical to their business then perhaps like any other critical part of the business they should make contingency or ‘disaster recovery’ plans e.g. alternate connection via a 4G modem.

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