Ofcom consults on revision of (half of) UK’s general authorisation conditions

As anticipated, Ofcom yesterday started a consultation on its plans to update the UK’s Conditions of General Entitlement i.e. the obligations placed on all telecoms operators in the UK that rely on the UK’s general authorisation. Continue reading

Ofcom to review and update General Conditions of Entitlement affecting all communications providers operating in the UK

If you read past the Openreach headlines in Ofcom’s Digital Communications Market review, you can find four paragraphs in chapter eight announcing a review of the UK’s General Conditions of Entitlement, which will affect anyone operating a telecoms network or providing telecoms services in the UK  Since individual licences were (largely) abolished in the UK in 2003, providers of electronic communications networks or services have operated subject to the General Conditions of Entitlement (aka General Conditions or GCs). Continue reading

Ofcom proposes prohibition of evergreen customer contracts

Earlier this week I discussed the changes Ofcom are proposing to the General Conditions of Entitlement to implement the revised European Regulatory Framework. It now seems that Ofcom are also taking the opportunity to look at other changes to the General Conditions, yesterday publishing proposals to amend General Condition 9 to prohibit providers of fixed voice and broadband services to the consumer and SME (for these purposes, businesses with less than ten employees) markets having contracts which automatically renew at the end of their initial contract term for subsequent fixed contract term(s). Early termination charges would be payable if contracts are terminated before the end of any particular contract term.

Readers will recall that Ofcom’s earlier consultation already included proposals restricting Communications Providers’ freedom to contract with their customers including a maximum contract period of two years and the requirement to offer a twelve month contract option where a longer contract period is offered, as a well as a general requirement to ensure that conditions or procedures for contract termination do not act as disincentives for end-users against switching.

The additional proposed restriction would prohibit relevant Communications Providers from having opt-out processes for minimum contract term renewals.

Ofcom is clearly anticipating significant industry resistance, as they have commissioned an array of research to justify their proposals, including:

  • Empirical Analysis of BT’s Automatically Renewable Contracts, August 2010 – an econometric study analysing the impact of BT’s automatically renewing contract on its customers decisions to switch to another CP.
  • Mystery shopping survey summary by E-Digital, September 2009 – to see whether BT promotes ARCs ahead of other options, and whether consumers are given all facts about ARCs in order to facilitate effective purchasing decisions.
  • BT Renewable Contracts – a Report by Spring Research, August 2009 – to assess the knowledge and understanding of ARCs terms and conditions among BT customers.
  • Analysis of Call Recordings by Mott MacDonald, October 2009 – to understand the accuracy of information that BT call centre advisors provide to consumers in relation to ARCs at point of sale, and whether advisors verify that customers understand the ARC prior to agreement.

Ofcom identify two types of potential harm:

  1. direct effects  from the exposure to switching costs in the form of early termination charges; and
  2. indirect effects  from the lessening of competitive intensity in the market.

Responses are due by 12 May with implementation proposed to be at the same time as the other changes to general conditions.

The watcher has mixed views on the proposals. Whilst on their face they appear positive for consumers and competition, from a policy perspective it is not clear that Ofcom have identified a market failure that requires regulatory intervention and interference with the freedom to contract.  Some communications providers already compete in the market by making a virtue of their lack of contract term (e.g. see Post Office Home Phone) and there is not a convincing cost-benefit analysis of the proposals. I await responses with interest.

Rules applicable to all UK telecoms operators to change

Last week Ofcom started a consultation on revising the UK’s General Conditions of Entitlement and Universal Service Conditions. The consultation closes on 7 April, and will be followed by a statement, with implementation on or before 25 May 2011.

The changes are part of the UK’s implementation of the revised European Framework for electronic communications. In addition, (although not expressly part of this consultation) the UK will need to take account of the recent European judgment on the UK’s Court of Appeal’s reference as to what obligations may lawfully be imposed on designated universal service providers. This Ofcom consultation follows the broader, now closed (with responsibility transferred to DCMS), BIS consultation which covers wider changes to the Communications Act 2003, the Wireless Telegraphy Act 2006 and the Privacy and Electronic Communications Regulations 2003.

Within Europe and the UK, the scope of telecoms (or as it is more accurately now described, electronic communications) regulation is very broad, and as (some of) the General Conditions do, and will continue to, apply to any Communications Provider, the consultation will be of broad interest.

The main changes proposed are:

  • a requirement that number portability takes place within one working day of an activation request being received by a donor Communications Provider. This will apply to fixed, mobile and bulk mobile porting requests and is to be backed up by accessible compensation schemes where this deadline is not met (GC18);
  • access to emergency services (112/999) is to be provided via  SMS (GC15) as well as clarifying the scope of the access and the provision of location information obligation on network providers, resellers, VoIP providers (GC4);
  • changes to mandatory contract terms (GC9):
  1. ‘the maximum duration of initial consumer contracts will be 2 years; and users generally must be offered an option to contract for the provision of public electronic communication services and also make this information available to other end-users on request;
  2. subscribers must be able to withdraw from contracts penalty-free following a notice of contract modifications; and for a maximum duration of 12 months; and
  3. contract termination conditions and procedures for termination must not act as a disincentive to end-users from switching their providers.’;
  • an extension of the requirement to maintain proper and effective functioning of the network to mobile and nomadic networks (GC3);
  • the introduction of a process for transferring number allocations and permitting time-limited number allocations (GC17); and
  • the introduction of an obligation on Communications Providers to provide end-users with access and the ability to use services behind any numbers in the European numbering plan, including non-geographic numbers. Although the wording change appears small, this could have significant impact on access to VoIP and other services (GC20).

Whenever changes are made to rules with general application it is inevitable that in addition to the intended consequences there will be unexpected or unintended consequences. Whilst contemporary press coverage focused on the changes to contract terms affecting retail contracts for smart phone contracts (views were mixed), and access to emergency services via SMSs (positively received) my suspicion is that the more ‘technical’ changes to the definitions, requirements to maintain network functionality, provision of location data, ‘number trading’ and most importantly the end-user right to access and use services will have much more significant long-term impact, even though not highlighted in Ofcom’s executive summary.