The consumer and citizen at the heart

11 June 2015

Sharon White, Ofcom Chief Executive

Which? Conference, 11 June

I am delighted to be here today in such distinguished company. I am very grateful to Richard Lloyd and his team at Which? for being such generous hosts today.

I joined as Ofcom Chief Executive at the end of March and this is my first speech in my new role.

Introduction

I was very clear that I wanted to make consumers and citizens the subject of my first public speech.

Serving the interest of consumers and citizens – by which I mean individual customers and businesses as well as the wider public – is at the very heart of Ofcom’s work.

It is set out in Ofcom’s founding statute – the 2003 Communications Act:

“It shall be the principal duty of Ofcom, in carrying out their functions;

a) to further the interests of citizens in relation to communications matters; and
b) to further the interests of consumers in relevant markets, where appropriate by promoting competition.”

When Ofcom was established, access to a reliable internet connection or mobile phone was a ‘nice to have’.

Now it is essential to the functioning of the economy, to the way people work and live their lives. It has become a necessity in the same way as gas or electricity or running water.

And as public services are increasingly delivered on-line and communities connect to each other through social networks, communications are becoming fundamental to civic life. 

People legitimately expect and demand more from their communications than ever before. Service failure, where once an inconvenience, can today be very costly for people in terms of loss of business, disrupted access to public services or social isolation.

And it is the most vulnerable – people who are socially, economically or geographically dislocated – who are at greatest risk of being left behind.

One of my top priorities as Ofcom Chief Executive is to work with government, consumer groups, industry, and other interested parties to ensure that the benefits of a burgeoning and buoyant communications sector can be enjoyed by all.

In my remarks today I want to cover three areas:

First, Ofcom’s approach to consumer issues and how it has evolved over time;

Secondly, the progress made over the last decade; and

Thirdly, how Ofcom plans - working with others - to improve our collective response.

Ofcom’s approach

So let me begin with Ofcom’s approach.

As a regulator, Ofcom has a very distinct role to play in furthering consumer and citizen interests.

We are not government: we do not set policy. For instance, policies that guarantee universal broadband access.

We are not a consumer advocacy group, unlike Which? that plays such a critical and impressive role as an advocate for the consumer.

As a regulator, our job is to ensure that markets work for consumers and citizens, principally by encouraging competition.

Where markets don’t work well enough – or where competition alone isn’t enough to secure good outcomes for consumers – then we have powers to intervene.

We are a light touch regulator. We regulate only when there is not a better alternative. And whenever we do step in, we need to demonstrate that the benefit to consumers outweighs the cost of intervention.

Ofcom’s approach has evolved over time.

In our early days we were particularly focused on action to promote competition:

  • So, for example, we opened up choice in the broadband market by requiring BT to supply wholesale providers like TalkTalk and Sky.
  • And we reduced mobile termination rates in order to bring down charges for calls to mobile phones, helping to level the playing field between small and large operators.

We have also taken enforcement action against companies engaged in scams and other bad behaviour:

  • Taking action against the firms that make nuisance calls, imposing fines of up to £750,000. An issue Which? is rightly campaigning on.
  • We have also issued fines up to £3 million - including to Three, TalkTalk and BT - for bad complaints handling, issuing bills for services that had not been provided and delays.
  • We’ve driven down mis-selling.
  • And we intervened to ensure price changes in contracts are transparent, and that consumers can walk away from contracts if they are not.

Over time, we have increasingly sought to make consumers more empowered by giving them the data and tools to make informed choices:

  • So in 2009 we started publishing broadband speeds.
  • Since 2011 we have published data on the complaints that we receive in Ofcom against the major communications providers.
  • In 2011 we sped up the process to switch your mobile phone number to a new provider, and banned contracts for landline and broadband services that automatically rolled forward.
  • This year we will complete work to make landline and broadband switching easier.

We have also used our regulatory tools to widen the availability of communications to people who for reasons of vulnerability or geography risked being left behind:

  • we mandated changes to the text relay service, the service which provides voice to text translation for people whose hearing is impaired, so that it now works on a range of devices at home and on the move.
  • In our auction of spectrum – the valuable radiowaves necessary for wireless communication – for 4G mobile, we stipulated that one successful bidder had to provide mobile coverage for at least 98 per cent of the UK by 2017.
  • This year we are publishing interactive maps on mobile coverage so that people can see in their own locality what coverage they should be getting and feed back if their service falls short.

And we have laid out clear rules for companies about the quality of service they should be delivering for consumers and businesses:

  • For example, we have set new installation and repair targets on Openreach, the arm of BT that manages millions of lines for BT and its competitors.

In all of this work, we have gathered and considered the views of others, and sought to intervene only when it is justified by evidence. 

Everyone who works in Ofcom has a strong consumer and citizen focus. As our approach has evolved and developed over the years, so we have devoted more resource to specific consumer issues and adapted our organisational structures to reflect this focus.

Progress made

Let me now move on to the progress that we’ve made.

If you look at how well the market for communications is delivering for consumers and citizens today compared to ten years ago, on many measures you would count it a success.

Most consumers are getting better value and greater choice than before thanks to competition and innovation in the sector:

  • Nearly a third of homes with fixed broadband had a superfast service at the end of 2014, compared to 1 per cent at the end of 2010.
  • Between 2008 and 2014 average residential fixed broadband download speeds increased six-fold - from 3.6Mbit/s to 22.8 Mbit/s, enough to support multiple High Definition video streams. 
  • The choice of TV channels has increased thanks to digitisation, from just over 200 in 2002 to more than 500 today.
  • Consumers are increasingly watching TV online, with both free and paid for on-demand services enabling access to a library of thousands of films and TV programmes.
  • UK prices are amongst the lowest in Europe and compare well against the US, with the price of a typical mobile package down by over two thirds since 2003.

Ofcom’s annual customer satisfaction survey shows that people are generally happy with their communications. And their satisfaction has steadily improved over time.
Complaints to Ofcom are on the decline.

These are positive indicators.

But there is a more challenging picture behind the headline statistics.

The fact that mobile coverage – that’s 2G - reaches 98 per cent of people’s homes and offices still leaves 2 per cent or half a million premises without coverage.

The situation is particularly challenging in rural areas. In some coastal areas of West Wales, 7 per cent of premises don’t have coverage; in the Shetland Islands in Scotland it’s 8 per cent; while 11 per cent of homes and offices in Newry & Morne on the east coast of Northern Ireland don’t have 2G mobile coverage.

Across the UK, going on for one half of SMEs have yet to be offered access to superfast broadband.

So access and reliability remain a problem for an important minority. My postbag of MPs’ letters shows that people are sometimes frustrated by the service that they are getting.

We also know from our consumer research - and from our engagement with stakeholders such as groups here today - that other problems remain:

  • It can be very hard to cancel contracts. Sometimes because of deliberate obstruction from the current provider. I am worried about this, which is why we have this week announced an investigation into companies who hold on to customers who want to leave at the end of their contracts.
  • Nuisance calls blight the lives of many people – several billion are made into the UK every year.
  • People can be exasperated by their experiences with customer services and of trying to get through to call centres. 

Ofcom’s response

I now want to come on to Ofcom’s response to these remaining challenges and to how we want to work with others to make improvements.

Ensuring that all consumers are able to enjoy the benefits of a dynamic communications market even as expectations rise is one of my biggest priorities as Chief Executive.

At Ofcom we will be focusing on ensuring consumers are able to get access to good quality, reliable services; that they are able to switch easily including bundled services; and that there is proper redress if things go wrong.

We want to work even more closely with those who represent the interests of consumers, with real expertise in this area – like the Communications Consumer Panel, Which? and Citizens’ Advice.

Over the next year there are two big milestones that could affect the functioning of the market for consumers.

First, big mergers in our sector. These are not in Ofcom’s jurisdiction and, as we are supporting the CMA with technical advice, it would not be right to set out our position on individual cases.

But my general observation is that competition has been good for investment and for consumers.

Customers in the UK benefit from one of the world’s most competitive mobile markets, paying as little as £7 for a monthly service – among the cheapest in Europe.

But more than that, we need competition to help incentivise investment - the two go in hand in hand.

At Ofcom, we have usually found it is better to preserve or promote effective competition between providers, and rely on this to spur investment, rather than deter it. That investment, in turn, leads to better choice and quality for consumers.

Second, our Digital Communications Review. This is our first big review in ten years and will be an opportunity to take a broad look at the position of the citizen and consumer and what more needs to be done to serve their interests more strongly as we consider reforms to our regulatory approach. We already have a number of specific priority actions to support consumers underway:

  • Support to vulnerable groups, such as better sub-titling to improve the viewing experience for people who are deaf.
  • Work with the Government to deliver the Universal Service Obligation of 5 meg broadband announced in the March Budget. Our evidence shows a strong case for universal availability of 10 meg broadband – for residential consumers and businesses - to ensure that everyone can benefit from and enjoy their experiences online.
  • Stronger enforcement on nuisance calls working with the Information Commissioner’s Office.  

It is also important that industry plays its part

Improving delivery to consumers doesn’t just fall at the feet of the regulator. The delivery of first class communications services is primarily the responsibility of providers.

I am therefore calling on industry to focus and lead on four crucial areas that will make a real difference for consumers:

Better information: Making available clear and accurate information in advertising and at the point of sale, so that consumers can genuinely compare offers and make effective choices.

Easier switching: Ensuring straightforward processes when consumers want to switch, including arrangements for cancellation of services without entanglement – and coordination between providers for a smooth transfer.

Improved contract terms: Having clear and fair terms with no hidden charges or lock-ins.

Better complaints handling: Setting out simple steps when consumers wish to complain or when things go wrong. It means doing everything possible to avoid a dispute in the first place, including the opportunity for consumers to ‘walk’ when services fall short.

It also means clear signposting of alternative dispute resolution services – which are free to use.

These issues are high on my agenda and my team is busy working on how we can drive up standards against each one.

But industry must lead in delivering better service and consumer experiences, and I am calling on all providers to deliver quick improvements without the need for regulatory intervention.

What’s coming up

Before closing, I want today to announce some news that will help to improve consumers’ experience of communications services.

First, later this morning we will publish a beefed-up Code of Practice on broadband speeds.

The speeds code has been around since 2008 and, like the sector, it has to move on.
The new version of the Code gives consumers the opportunity to walk away from contracts when speeds fall below acceptable levels, giving real power to the elbow of consumers.

Second, on the 20th of this month a new consumer switching regime begins. From this date, changing landline and broadband between providers who use the Openreach network – such as BT, Sky, TalkTalk and EE – will become a lot smoother.

A new ‘one touch’ process will place the responsibility for the switch in the hands of the company the customer is moving to. I am confident that this will make a real difference for consumers and will encourage more people to take full advantage of competition in the sector.

Once this is in place we will next month turn our attention to improving consumer switching between mobile networks, starting with a public consultation on a new set of proposals.

Close

I am determined that Ofcom can continue to deliver good outcomes for consumers, and actually that we can step up further.

We have set the bar high for ourselves but also for industry. If we deliver then everyone benefits: consumers and citizens of the country and the businesses who deliver the services we regulate.

I look forward to working with you to make this happen.

ENDS

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