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Ofcom UK Ponders Personalised Broadband and Mobile Pricing

Tuesday, August 4th, 2020 (1:09 pm) - Score 4,467

The UK telecommunications regulator, Ofcom, has launched a new discussion document that explores the potential impact of “personalised pricing” on broadband ISP, phone and mobile services (i.e. when providers adopt the ability to set different prices for different customers, based on individual characteristics).

Personalised pricing is a complicated area and one that Ofcom intends to explore as part of their work to encourage the fair treatment of consumers (here). In short, modern algorithms and AI / machine learning systems – based on data about our behaviour, interests and preferences – are increasingly giving firms the ability to personalise prices in more sophisticated ways.

These developments could give communications providers the ability to set different prices for different customers, based on individual characteristics and a prediction of how much someone is prepared to pay,” said Ofcom. But the regulator also recognises that such things can have both “risks and benefits” for customers.

In theory some consumers could benefit from such a system as they may be offered a lower price for a service that might otherwise be more expensive (e.g. if you take a mobile plan with a huge allowance, but have no history of using all that, then you may be ripe for a cheaper deal). But on the flip side others may end up paying more for the same service and thus grows a risk of “unfair” price discrimination.

At present various UK laws already place constraints on how businesses can use personal data held on customers and individuals (e.g. Data Protection Act / GDPR, Consumer Rights Act, Equality Act etc.), which provide consumers with protection and legal recourse where their rights have been infringed. Suffice to say that any changes to these would have to be very carefully considered.

ofcom uk personalise prices 2020 pros and cons

We’d add that it would be difficult or expensive for smaller broadband and mobile providers to implement such systems, which might leave them at a competitive disadvantage. Similarly price comparison sites, which tend to rely on a fairly linear model of pricing for their engines, would be presented with the incredible difficulty of trying to accurately compare a market where there could be several different prices for every product (each provider may also have its own unique algorithm).

At present most people will have little awareness of personalised pricing in the UK since it’s a fairly new concept for the telecommunications market. The principle is at least fairly easy to grasp, as per above. Despite this Ofcom’s research found that most people “felt personalised pricing was ‘unfair’, with a lack of transparency about how the price would be calculated and uncertainty about whether they had a good deal.”

Equally if there was transparency then there’s uncertainty around whether or not people would understand what was being explained.

Ofcom – What might mitigate concerns for consumers?

Our research found that the potential benefits of personalised pricing did not outweigh participants’ concerns. With the exception of lower prices for low income households, there was a lack of faith in possible benefits, including expanding access to new or varied services.

When asked what would overcome participants’ concerns, only banning the use of financial data or the practice of buying in other data appeared to help, though participants still questioned how this could work and felt that further clarity was needed.

Greater transparency around what data is used and how it fed into results was seen to be useful. However, it was still unclear to participants how their result would compare to the ‘market norm’ or ‘average’. The ability to compare prices using price comparison websites was seen as helpful, although participants were unsure about how they could be used to get a personalised recommendation. Outcomes had the potential to raise questions and cause frustration where participants knew that they were paying more than others for the same product.

Better explanation of the collection or use of personal data upfront was thought to provide useful reassurance but did not overcome concerns about specific types of data being used, for example, financial or demographic data.

The case study in the research presented a customer who opted out of sharing their data and therefore was not offered a lower personalised price. In response the ability to ‘opt out’ of data sharing was not seen by participants to be a positive outcome, as they considered that people could be penalised for not sharing their data.

Personally, we’re not huge fans of the Personalised Pricing idea, where there appear to be too many cons and realising the pros, without discrimination, would seem likely to make the whole market a lot more complicated to understand. Ofcom’s discussion paper broadly echoes all these concerns and merely notes that they will “continue to monitor how personalised pricing develops in the future as technology evolves.”

At this point it’s probably worth noting that a degree of personalising pricing already exists in the market, albeit set more by a provider’s sales and retentions staff via individual negotiation (haggling) than automated systems. Granted it’s not quite the same thing, but there are similarities.

Ofcom are separately consulting on their initial thoughts for a new initiative called “Open Communications“. This would enable people and businesses to share their own data – for example, what products they use, the price they pay and how much data they use – with comparison sites or other providers, to receive recommendations about the best products for their needs.

Enabling people to share their data could make this process quicker, easier and more effective. However, it is critical that data is shared securely, and that customers have control over what data they share, who they share it with and how it is used,” said Ofcom.

Leave a Comment
24 Responses
  1. joe says:

    “Personalised Pricing idea”

    I realised the free market was a bit of a dirty word for regulators but does it need a new name…

    1. Hmp says:

      It’s very good this is Been done but I think alot and further needs to be done ok as it’s a broken market and all the services need to and have to be very very and why is there long contracts.

      I think 12 months is well long and if you decide to say change then not have lots of obstacles ok.

      Say you take 18 months but the current situations the company needs to be be very very fair with you.

  2. a welshman says:

    i dont fancy this idea at all , the more info they have the more likely chance they would be hacked

  3. Moss says:

    reminds me of personalised prescriptions in the health systems, it could go either way if this is implemented in the future in terms of British internet service providers.

  4. Phil says:

    Crazy idea and just a way to make it very hard to compare different companies tariffs and essentially returns us to metered data, where how much we use of the allowance we’ve paid for, changes the price we pay.

    Also isn’t personalised pricing already available in a more transparent way, so that if you don’t use 10Gig of data a month you simply switch to a different tariff that has a lesser allowance and cheaper price.

    This new system will just mean the customer ends up paying more, either because shopping around and comparing prices is harder, or being offered a discount to stay on a higher priced tariff where it would be actually be cheaper to drop down to a different tariff with a lower maximum data allowance.

  5. AndyC says:

    Excellent idea in principle,
    Logistical knightmare to manage,
    Loads of complaints when it doesn’t go the customers way……

    Bit like the fibre and 5g rollouts as a whole.

  6. Ian says:

    The ISP’S would love this it would be a no claims bonus for ISP customers

    Those on good lines and technically competent who don’t call the ISP get a good price.

    Those on bad lines long lines or the technically incompetent get priced out of the market as the ISPs don’t want them as customers. This happens already to some extent.

    What worries me the most ,is that Ofcom thinks this could be good for customers

    1. JP says:

      Happens to some extent? Please elaborate……

      Currently working for a telecoms company and involved in broadband complaints we make no distinction between those with good stable lines and those who don’t. Plus all of the engineering work and fault fixing is done through Openreach anyway and they are not allowed to favour one provider over another not even a customer (based on a standard commercial relationship).

    2. david says:

      So where do people on AA fit in?

      Don’t need to call – but can chat to the staff anyway

      Same deal as now? i’e everyone pays the same?

      Genuinely interested

  7. Mr C. Y. Nical says:

    So if, for example, you’re an MP, you might get it really cheap or free, or maybe even the supplier paying you to take it. In return for said MP lobbying for something that supplier wants at some point in the future, or maybe already in the past.

  8. AnotherTim says:

    There will some characteristics that they won’t be able to take into account – race, religion, gender, etc. However, it would need careful regulation to avoid abuse – for example would it be acceptable to charge less for connections to properties in a street where there is a choice of VM (or altnet) and OR than in a neighbouring street where there is only OR? Or to charge more for a rural property than an urban one (even though the speed may be lower)? Or charging more for customers receiving benefits (more likely to miss a payment)?

    1. Surplus says:

      What do you think they’re checking for when they ask: “How long have you lived in the UK” and the answer choices are: “since birth” or “x years”.

      Combine that with nationality, which they also ask, and you’ve got a pretty good way to tell .

      The law says, but the practice is something else. Of course, they’re allowed to keep their algorithms secret, so you can’t really tell what they’re doing, but you may find you’re randomly selected for rejection, higher rates etc very often and for no obvious reason.

  9. CarlT says:

    How absurd.

    If they’re really that concerned just have ISPs charge per GB. I am not aware of anything where people get the same product at different prices depending on various automated factors.

    There are budget and premium options for a reason.

    1. Adam says:

      Car insurance?

    2. Surplus says:

      Erm, hotel rooms lol. Train tickets. Credit cards.

    3. Orbit says:

      Sky do this for sure (on the retention’s side as mentioned).

      So long as there’s competition between companies and they don’t make comparing deals an impossible nightmare, it probably won’t make any difference. However it feels like the ‘vulnerable’ (which I assume they mean elderly), will be the ones least likely to know they are being overcharged and the least likely to switch companies – so it feels like Ofcom should be cracking down on this, rather then promoting it.

  10. Meadmodj says:

    So three people in the same street receiving the same level of service all paying different amounts. OK we do have differencies between ISP offerings but do we really want pricing to to become even more complex where customers of the same ISP are charged differently.

    Are they proposing charging by data usage, time of day tariff or something?

    1. Buggerlugz says:

      Bit like those on water meters paying more than those on standing charge for water isn’t it? Or like Electricity and gas companies charging differently depending on location.

      Totally unfair to everyone.

  11. Gareth says:

    How would that work with UK equalities and discriminations acts? Giving charging some people less or more than others isn’t equal, surely?

    1. joe says:

      Its legal. Its always happened. If you haggle you get a better deal

  12. Buggerlugz says:

    Great idea, it’s high time they did this.

    Set pricing would work better for everyone. The likes of Virgin Media would charge a set fixed fee for everyone for each broadband speed, tv package and phone package. Add them together, that’s your monthly price.

    Its a level playing field. No customer should be paying more than another just because they live in another part of the country, in a wealthy area or spoke to retentions.

  13. Surplus says:

    Hope this idea dies quickly.

    I can’t imagine paying more for data because I have a “thin data usage history file” and pose a risk to the ISP’s bytes so I need to be billed more.

  14. Buggerlugz says:

    Here’s an idea. All ISP’s sit down decide a fixed price for each 100mbps of speed, then they all charge the same. 100mps costs £x, 200mbps cost £x. Every single customer pays the same, no haggling, no reductions for length of customer, no fixed term contracts. Anyone can leave at any time.

    Its then down to who provides the best levels of service and reliability who succeed in the marketplace the other companies simply die off.

    I’d go with this.

  15. Malbatross says:

    Personalised pricing should have been implemented years ago. I pay for a 40Mb fibre broadband connection but because of my location to the cabinet I only receive 7Mb. Why should I be charged the same amount as the person receiving the full 40Mb?
    If you went to a petrol station and paid for 40 litres of fuel and only received 7 you would kick up a stink in no time. You should pay for what you get!!!

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