Ofcom to intervene on unfair additional charges
Ofcom plans to introduce new regulation that will require communications providers to be more transparent on hidden and extra charges. The proposals are aimed at the various services under its remit, including fixed voice, mobile, broadband and pay TV. Ofcom believes that these additional charges can be unfair and are often overlooked by consumers when purchasing services, leaving them to actually be higher than they otherwise could be as they are not determined by competition. The number of complaints received by the regulator in relation to these, particularly in the areas of additional costs for a payment method other than direct debit and early termination costs have been high. One particular concern of Ofcom is that the higher charges are often paid by those on lower incomes, particularly non-direct debit charges.
One initial proposal is the introduction of a new telephony service by BT of a product called 'BT Basic' which will be available to people who receive certain Government benefits. It will feature a low cost fixed voice service, including some talk time, and no penalties for not paying by direct debit. It will also be available to consumers who have prepay mobile phones and/or broadband services. Ofcom is also in discussion with Kingston Communications about a reduced price social package. In terms of broadband access, Ofcom does not feel that the non-direct debit charges are a significant influence in the prevention of take up of broadband services by low income consumers, however there could be a need in the long term to look at the affordability and availability of broadband services. Currently, the Universal Service Obligation (USO) does not extend to broadband services, although this is due to be discussed by the European Commission this year.
The consultation has looked at various factors where it believes service providers are not being transparent or fair over costs and has various recommendations of what it expects. A summary of these from the consultation can be seen here:
Charges for paying by a non-direct debit method
- any headline advertised prices are to include non-direct debit charges, and this is to be made obvious in marketing material
- where not advertised as such, charges should be directly related to costs
- where obvious, competition (and not regulation) should ensure they are fair
Late payment, payment failure & restoration of service charges
- pricing information is to be easily available, and clear to the consumer
- charges should be directly related to costs
Minimum contract periods & Early termination charges
- suppliers are to provide more information to help consumers understand their contractual commitment and early termination charges
- charges are to never be more than remaining payments due under contract
- charges should be reduced where supplier can mitigate their costs
New minimum contract following service change
- suppliers are to provide more information to help consumers understand what changes may incur a new contract and new minimum period to be imposed
- can only be enforced where there is a benefit to consumer and costs to supplier
Minimum notice period
- minimum notice period is to be clear to consumer at point of sale
- where a migration process exists, the minimum notice required should be in line with the migration period
Itemised & paper billing
- headline advertised prices are to include these charges within marketing material
- what you actually get with itemised/paper billing should be clear to the consumer
- where not advertised as such, charges directly relate to costs
- where charges are advertised, competition will drive costs rather than regulation
Ceasing service charges
- information regarding charges is to be made more clear and available at purchase time
- charges should be directly related to costs incurred
In terms of broadband, the changes should aid consumers in many ways, and help make sure people are aware of hidden costs that may be sprung upon them. One example is when users migrate to a fully unbundled provider such as TalkTalk, reconnecting to a BT service could cost £125. Adjustments to contract terms should also avoid consumers being tied to a provider for another 12 months when they change between their products (and there is no wholesale product change).
If you want to respond to the consultation, responses should be received by 8 May 2008. More details about how to respond and the full document can be found here.