Regulating broadband advertising
The Advertising Standard Authority and Ofcom announced a couple of weeks ago that they were seeking to change the way broadband packages are promoted.
One of the issues raised is whether phone line rental (required by most broadband services delivered over FTTC/VDSL or ADSL2+, and even for some of the cheaper deals on Virgin cable services) should be included in the price when promoting broadband services. The logic for this assertion is sound, as often you will see packages such as PlusNet Unlimited Broadband + Home Phone which have a headline cost of £1/month*
(small print: * plus £16.99 line rental for 18 months)
PlusNet is just one example and this isn't an issue specific to them and broadband providers routinely advertise prices which exclude line rental.
So it sounds like a great idea to force providers to bundle this together? Of course, however it's an overly simplistic approach which is ignorant of the fact there are various scenarios that arise which makes it difficult to advertise a price including line rental, just as you can't advertise a single speed that's accurate for all potential customers. There are three possible scenarios:
- Broadband service requires a phone line from the broadband provider (broadband + home phone)
- Broadband service requires a phone line, but you can buy it from another provider (broadband only)
- Broadband service does not require a phone line (e.g. wi-fi based services)
There are some edge cases (e.g. Virgin Media charges extra for a broadband service if you don't have a phone line) but these can still be worked into the above categories if you split the packages (i.e. add line rental details to option 1, or have a package without line required under option 3).
Of course the vast majority of users will be subscribing to the major providers who will usually bundle in a phone line, but in setting rules on advertising, regulators should be mindful so as not to distort the market especially for smaller providers. If you already have a home phone supplier you're happy with, you want to compare packages which fit into options 2 or 3 above.
In designing a new platform for our ISP listings, we have spent considerable time trying to work out how best to display the information to users (and how to store it in our systems). In particular, how do you reflect one-off costs, termination costs, changes in fees during the course (or after) the contract). The simplest way to do this is probably to look at the 'total cost of ownership' across a year (setup fees and monthly charges for first 12 months; although whether to include line rental or not is tricky), although even this can be challenging as some contracts are in excess of 12 months.
Some years ago, we floated the idea of a 'broadband label' which could provide a standardised way of describing broadband services similar to the way you can compare energy efficiency of appliances. An agreed 'standard cost' similar to the way credit cards have 'APR' percentages is probably the way to go, but as with pay day loans, these can be misleading. Regulators should seek to work with industry to define best practice, rather than restrict outright the way services can be marketed. By doing so, they will be able to help millions of users without over-burdening niche providers who may offer something different that doesn't fit into the model they are trying to define.
Of course, this is just the start—What about deals where you save on line rental when you pay 12 months in advance? Credit card fees or surcharges for not paying by direct debit and paper billing costs? What about routers which are optional (or even free) but which 99% of users take, or the delivery charges associated with them? Will regulation just drive even more complex advertising?