Speech for Consumers and Citizens in the Communications Sector conference
September 16, 2013
MONDAY 16 SEPTEMBER 2013
Ed Richards, Chief Executive, Ofcom
I’m delighted that we are hosting this event today together with the Communications Consumer Panel, and to welcome you all to Riverside House. And the reason for that is that consumers are at the heart of everything Ofcom does.
Our principal duty under the Communications Act is to further the interests of consumers and citizens in communications markets, so all our activities are focussed on good consumer and citizen outcomes. More than just a statutory duty – we have tried to ensure that this focus is deeply embedded in the culture of the organisation.
I am going to talk about how the consumer and citizen focus I’ve just described translates into the work we do with reference to some of our current priorities.
How has the consumer landscape changed over the past 10 years?
Having a focus on consumers is great, but what does that mean for a regulator? We regulate across a range of communications services, from the postal service to your broadband connection. Most of the services we regulate are provided in competitive markets, and competition can generally be relied upon to deliver good consumer outcomes.
I think it’s worth reflecting how services and consumer expectations have changed during the 10 years Ofcom has been here.
- In 2003, most connections to the internet were through a dial up connection with only around 2 million customers connected to broadband, which was supplied to consumers with an expectation of receiving a ‘maximum’ speed of 1 or 2 Megabit per second. According to our latest research, we now have almost 22 million broadband connections, with 3.3 million of these connections operating on what we class as superfast speeds.
- In 2003, no-one had even heard of twitter, let alone use it as a method to feedback or complain. Now just under half (45%) of UK adults claim to have accessed social networking sites in the previous quarter. And this figure rises to about 75% for younger adults.
We have seen over time that consumers are generally happy with the services that they receive. Across the services we regulate, we have consistently recorded satisfaction levels at around 90%.
At a time when many households are finding it hard to make ends meet, we have also been able to report a general fall in prices across this period, and our reports into international price comparisons show that UK prices compare favourably.
Supply side successes
We know that some of these good outcomes are the results of regulatory initiatives. In the fixed voice and broadband markets, competition, innovation and choice at the retail level has been significantly enhanced by regulation to ensure non-discriminatory access to the upstream network.
A good example of this is Local Loop Unbundling, where regulatory mandate created the ability for CPs to install their telecoms equipment in local exchanges. The result was investment in networks and increased choice and value for consumers.
So regulatory interventions can create or help to create a competitive landscape in which consumers do well.
Demand side issues that require regulation
But, even where there is competition and choice, there can be market failure from the demand side and this is why we continue to dedicate resources to ensuring consumers are able to engage effectively in the market, and are protected from harm.
Broadly speaking, this work is targeted in three areas:
- Firstly, when consumers are unable to make effective choices because they don’t have access to the right information or find it difficult to switch. The regulator has a role to ensure that consumers are empowered and have the skills, confidence, and tools to engage with the market, and that barriers to switching are removed.
- Second, consumers must be protected from scams and unfair practices. And they must be able to get effective redress when things go wrong.
- Third, we have a role to help citizens and consumers who are unable to participate or face barriers to participation – for example as a result of low income or disability.
I’m going to talk about each of these, starting with empowerment.
Good information is a key component in markets which function well.
We can sometimes use consumer information to address problems; for example, by alerting consumers to scams or explaining how to switch suppliers or make use of cooling-off periods. The information can take various forms, including consumer guides, information passed through consumer stakeholders, or media outlets.
An example of this is our recent work on unexpectedly high bills. We have worked with the media to provide information on the use of mobile phones abroad and provided advice to consumers on how they can reduce the risk of receiving a higher than expected bill when they return home.
Transparent price information is important, and we are mindful that one consequence of choice can be that there can be complex tariff options which are difficult to compare with one another, particularly when services are bundled together. We continue our work with third party price comparison sites to accredit those who meet our criteria for provision of accurate information (Simplify Digital, BroadbandChoices, Billmonitor, Mobilife, Broadband.co.uk and Cable.co.uk). We are currently reviewing the effectiveness of the accreditation scheme having consulted on proposed improvements in May.
Transparent information on service quality is also important, but the market doesn’t always provide the information that consumers find most useful. It is the job of the regulator to facilitate provision of information, or to provide it ourselves, where the market fails to do this.
I am a keen believer in the maxim ‘what gets measured gets done’. There is a growing consensus that the introduction of comparative metrics to measure certain key services can incentivise better performance. Not only can information signal to consumers which provider has the best performance – it can also provide an incentive to providers to avoid the reputational risks of being ‘named and shamed’.
We are alert to the potential of comparative information and we have continued to dedicate resources to the publication of the performance information which matters most to consumers.
The market moves fast, and therefore so do the information needs of consumers. Consumers and their representatives, industry and regulators are increasingly focused on transparency of a number of performance metrics.
For example, we recently published research on the effectiveness of traffic management information provided for consumers by ISPs. We found that information is reasonably well understood by those consumers who use it but, overall, there is low awareness of traffic management. So our work on traffic management is now focused on whether awareness needs to improve and, if so, how.
Naturally now the attention of mobile data users is shifting towards what new 4G networks could mean for them. And I can tell you now that we plan to measure the speeds performance of 3G and 4G mobile networks following the launch of 4G services at the end of 2013 for publication early in 2014.
A vital function of our work for consumers is to protect them from scams and unfair practices. We have sought to ensure that consumers are protected at all stages of their relationship with their provider.
We have intervened to protect consumers who have entered into contracts or signed up to services to which they have not fully consented. We have introduced regulations that have reduced instances of both fixed and mobile mis-selling. And we prohibited rollover contracts when we found that the opt-out mechanism resulted in consumers inadvertently entering new contract periods.
We also protect consumers who wish to leave their contract, and have introduced rules on broadband migrations to make it easier to switch, and we reduced Early Termination charges in fixed and broadband contracts.
Another area of harm that we are tackling as a priority is nuisance calls. This is a challenging area and the problem has grown in recent years – many more smaller companies now generate harm, and sometimes hide their identity using invalid numbers, making it harder to track them down. We are, therefore, now focussing attention on working with industry and other regulators including the Information Commissioner on a number of potential solutions, including making call tracing easier. We acknowledge that tackling nuisance calls will continue to be a real challenge but we are determined to ensure that consumers are protected from this source of detriment in the future.
A further issue that has caused concern to consumers is unexpectedly high bills or ‘bill shock’. Research from 2012 identified that just under one in ten mobile contract consumers received a bigger bill than they were expecting in the previous 12 months. Although in many cases, it is a matter of a few pounds, we have seen cases where some consumers received bills for hundreds and even thousands of pounds more than they expected.
We identified that a major cause was roaming charges. As more consumers use internet enabled devices abroad, the risk of generating unknown data roaming charges increased. Last year the European Commission introduced important consumer protections including usage alerts and a limit on data roaming spend both within and outside Europe, and we have ensured UK providers are complying with these important consumer protection measures
We are also concerned that consumers currently face unlimited liability for any unauthorised use of their lost or stolen phone up to the point they notify their operator. So we were pleased to see that the Government’s July policy paper ‘Connectivity, Content and Consumers’ recommends action in this area including a possible limit on a consumer’s liability for unauthorised use of a lost or stolen phone similar to the protections already in place for unauthorised use of debit and credit cards.
Through the introduction of targeted regulation and subsequent enforcement, we have created an environment where consumers are at less risk of harm. We need to remain vigilant to the risk of new threats and we will continue to take further action when it’s necessary.
We will do our utmost to meet that challenge.
When things go wrong for consumers, it is important that they can get effective redress, and if they don’t get it from their provider, they need to have recourse to an alternative dispute resolution (ADR) mechanism. I understand that Mairi will talk to you about this, with a focus on the CCP’s new research.
Ofcom has been active in ensuring that consumers can access fair, transparent and effective complaints handling processes, and we have implemented obligations on CPs to ensure that consumers can have their complaints resolved quickly and effectively.
All CPs are required to provide ADR facilities for their customers, and we approve two ADR schemes for electronic communications and one for post.
Tackling barriers to participation
The third key component of our consumer agenda is tackling barriers to participation. Our objective here is to promote the widest possible availability of services and promote opportunities to participate in all of our sectors.
Our work on availability covers the ability of networks to deliver communications services wherever people need them. For example, earlier this year we established that the needs of postal users are met by the current universal service.
In telecommunications the USO is a well established regulatory measure to ensure that all citizens have access to fixed voice services, but we are conscious that it does not apply to other services that we may now consider to be essential.
Today, consumers use their broadband connection to access health and education, government facilities, as well as e-commerce, social activity and entertainment.
Therefore, whilst broadband access is not formally in the scope of the USO, we are concerned about both gaps in availability and any barriers to participation for high speed data services on fixed, and increasingly mobile networks.
Ofcom is involved in tackling gaps in access to broadband and mobile services in a number of ways.
Working closely with the Government through DCMS, we used the 4G license auction to secure good mobile coverage across the UK – 98% indoor coverage by 2017 but expected to deliver in 2015. New 4G infrastructure will also enable deeper deployment of 2G and 3G and hence improved coverage. This is in addition to the current work to address 2G not spots through the mobile improvement plan (MIP).
And building on the work to improve the availability of services, we have been active in reducing barriers to participation. We know that barriers can arise for a number of reasons, including media literacy skills gaps, affordability and usability of equipment and services.
So our work on usability includes some of our work for disabled users, particularly those with hearing impairments for whom we know that the market does not always deliver. That is why we have created a requirement on CPs to introduce Next Generation Text Relay by April next year allowing users to access the service using smartphones, tablets and PCs. And we are working with the UK Council on Deafness, DCMS and communications providers to encourage the provision of video relay services for users of British Sign Language.
Transforming the switching experience
I am going to close by returning to consumer empowerment and specifically, switching, on which we made an important announcement last month, and on which our own Government and the European Commission have also both announced their views recently. Switching is important for the success of the industries we regulate and to help drive growth in our economy.
In the UK we have one of the most competitive communications markets in the world. This delivers choice of service and innovation to consumers and has pushed down prices, contributing positively to living standards in the UK, during a period in which the cost of living has faced upward pressure in many other sectors.
At the same time the communications markets and the services we regulate enable the movement and exchange of vast amounts of information and data – the raw material for the information economy – providing a key source of economic growth.
But our research shows that consumers can’t necessarily take full advantage of the choices available to them. This is because of the difficulties they face when trying to change their provider.
Last month, we announced new measures to make the process easier for consumers switching between providers on the BT Openreach network. This will harmonise all fixed voice and broadband switches to a single process where the gaining provider manages the transfer.
Our evidence shows that gaining providers are better placed and better incentivised to manage a switch on behalf of the consumer. Ofcom is not alone in taking this view; the Government made it clear in its recent strategy paper that it would support moves to this type of process, and the European Commission last week published its proposals for regulation of communications in the single market, making it clear that switching processes across Europe should be led by the gaining provider. (I am delighted that Peter Eberl from DG Connect has joined us today, and Peter will be talking about the Commission’s proposals shortly.)
Improving switching of voice and broadband services on one network is a step in the right direction. But more is needed. Consumers who buy three communications services from a single provider need to be able to switch their bundle easily, not just the broadband and voice parts. Again, both the Government and the Commission have indicated that this is an area of concern. And what about switching between different network infrastructure – to and from cable for example?
Today, I would like to set a new challenge to ourselves and to every industry player. This is to transform the switching experience in the consumer interest and to support a more competitive market; to remove the inconvenience, delays and uncertainty that currently can bedevil consumers when trying to change their provider.
The industry should work with us to remove the remaining barriers to switching and, in doing so, deliver a system that enables consumers to fully take advantage of the competitive market that they are part of.
Meeting this challenge will be an essential way through which we can ensure that the communications sector continues to deliver real improvements in value for money during a time when the cost of living is so important to millions of people across the UK and Europe.
 2004 CMR http://stakeholders.ofcom.org.uk/binaries/research/cmr/telecoms.pdf Figure 26:
 Ibid, Figure 27:
 Fig. 5.33 2013 CMR
 Para 3.24 2013 CMR
 Para 4.4.4
 Page 339 2013 CMR
 Fig 1.2 2013 CMR
 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down measures to complete the European single market for electronic communications and to achieve a Connected Continent, and amending Directives 2002/20/EC, 2002/21/EC and 2002/22/EC and Regulations (EC) No 1211/2009 and (EU) No 531/2012