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Everything we do at Ofcom is designed to benefit the citizens and consumers of the UK. Indeed, Ofcom’s legal foundation, the Communications Act, requires us to do so.

One of the ways we further citizens’ and consumers’ interests is by promoting competition, whether this is in radio and television services, mobile and land-line telecoms services or internet, fixed and wireless.

Competition brings many benefits for us all. Lower prices, greater choice, and technology and service innovations; these are just some of the plusses.

But Ofcom also wants to ensure that all consumers can take full advantage of these benefits and that the players in the market do not abuse the trust of their customers.

The section below sets out some of the work we have done in 2007/8 to protect and empower customers.

Clamping down on mobile mis-selling

In summer 2007 Ofcom issued the mobile phone industry an ultimatum. We warned that it must clean up its act in the area of misleading sales and marketing practices, or face significantly tougher regulation to ensure compliance.

We were particularly concerned about two trends: where customers are given false or inaccurate information when buying a mobile contract, and the offer of certain ‘cash-back’ inducements by sales agents where the cash never actually materialises.

In July 2007, the five mobile phone operators signed up to a voluntary industry code. This defined a best-practice approach to marketing and selling mobile services, either directly or through third-party sales agents.

The voluntary code did not lead to a reduction in the number of customer complaints. By January 2008 we were receiving an average of 700 complaints a month compared with 460 in July 2007.

Having issued the warning, in March 2008 we proposed new mandatory rules to stamp out misleading sales and marketing practices. This was a new General Condition, a legally enforceable rule that communications providers must adhere to. The maximum penalty for a breach of the rule is a fine of up to 10 per cent of relevant turnover.

We expect to have the new rules in place by summer 2008.

Faster number porting

The UK has one of the most competitive mobile phone markets in the world, with five network operators and a large number of retail-only ‘virtual’ operators.

For consumers to take full advantage of this competition they need to be able to switch operators simply and easily. Customers also want to keep their mobile number when they change suppliers – this is a process known as number porting.

Following a public consultation Ofcom announced in November 2007 that from 1 April 2008 consumers would be able to receive calls using their existing number within two days of moving to a new mobile network, down from five days. In addition we announced plans to move to two-hour transfers by 1 September 2009.

New rules to tackle slamming

The disconcerting discovery that you have been ‘slammed’ (that your telephone account has been moved to another provider without your apparent consent or knowledge) is just one of the mis-selling techniques employed by certain fixed-line operators.

This, and scams like it, were addressed by Ofcom in May 2005 when providers were required to comply with a new General Condition of Entitlement (GC 14.5), which prescribed a code of practice for sales and marketing activities.

The rules were originally introduced for a two-year period, but were extended in May 2007 in the light of numerous consumer complaints. In addition, Ofcom extended the GC 14.5 rule to include the sales and marketing of Local Loop Unbundling (LLU) technology – phone lines running between homes or offices to the exchanges, which are not operated by BT.

Probes into fixed-line mis-selling and compliance

In March 2008 Ofcom announced a wide-scale investigation into mis-selling in the fixed-line market. The investigation covers all types of mis-selling including:

• slamming;
• when communications providers pass themselves off as other companies;
• when communications providers fail to provide important information to consumers, for example, the minimum contract duration or details of early termination fees; and
• when communications providers refuse or make it difficult for consumers to transfer to a different supplier.

Ofcom opened an investigation programme when it introduced new rules to protect consumers from mis-selling and slamming in 2005 and took enforcement action against eight communications providers during this period.

This helped to reduce fixed-line mis-selling complaints to Ofcom from a peak of 1,200 per month in 2005 to around 350 per month in January 2008.

But the rise of new products is now fuelling an increase in consumer complaints, which is why Ofcom is extending its investigation.

For details of Ofcom’s investigations and enforcement cases on behalf of consumers, see the table, below.

Compliance investigation

We also announced in March 2008 an industry-wide investigation into the requirement that communications providers must be a member of one of the dispute resolution schemes, which are designed to deal with consumer complaints.

Under Ofcom rules, all communications providers must join an independent dispute resolution scheme (such as Otelo or Cisas). The investigation will target all communications providers that are not a member of such schemes. We asked companies to confirm either that they will join such a scheme or to provide evidence for not being classified as a communications provider. We will take action against providers who fail to join a scheme with the maximum penalty being a fine of up to 10 per cent of relevant turnover.

Consumer investigation and enforcement cases

Consumer protection enforcement was a high priority for Ofcom in 2007/8. During the year Ofcom:

• Issued notifications of contravention of mis-selling rules to:
• The Post Office
• Universal Utilities (trading as Unicom)
• Economy Calls Limited
• Issued notifications of persistent misuse and imposed financial penalties totalling £35,000 as part of its silent and abandoned calls enforcement programme to:
• Abbey National
• Complete Credit Management Limited

• Imposed a penalty of £50,000 on Telecoms Billing Services (TBS) Limited for persistent misuse (it was sending misleading and unsolicited text messages to consumers);
• Issued a notification of contravention to Virgin Media for failure to make Caller Location information available to the emergency organisations. In issuing this notification Ofcom used its power to deal with urgent cases requiring remedial action to be completed within a little over three weeks rather than the normal deadline of one month after a notification is issued;
• Issued a notification of contravention to Telecom Plus plc (trading as The Utility Warehouse Discount Club) for preventing customer transfers without the customer’s express consent;
• Issued a further notification of contravention to Spacetel UK Limited requiring it to implement a compliant technical solution that enabled it to meet its General Condition 18 obligations in relation to providing number portability to BT;
• Issued a notification of contravention and imposed a penalty of £30,000 on Prodigy Internet Limited for failure to comply with requirements to provide information to Ofcom;
• Issued a notification to Primus Telecommunications Limited in relation to a contravention of its duty to pay an administrative charge to Ofcom; and
• Successfully prosecuted TBS for not providing information to Ofcom during a persistent misuse investigation into the company. TBS failed to provide information in response to two formal information requests. The City of London Magistrates’ Court awarded the statutory maximum fine of £5,000 for each offence and fined TBS a total of £10,000. The Magistrates’ Court also required TBS to pay Ofcom’s internal and external costs in full.

Curbing unfair additional charges on customers’ bills

On the surface, it looks good: competition has visibly driven down the headline prices we all see advertised for fixed-line, broadband, mobile and pay-TV services. In some cases, however, extra charges can lie in wait which are either unfair, or not clear when you sign on the line, or both.

In February 2008, Ofcom proposed to introduce new guidance for communications providers, spelling out our view of the law and what providers must do to comply with the Unfair Terms in Contract Regulations 1999. The draft guidance was framed around the need for providers to be upfront about their charges, and that those charges should be demonstrably fair.

The guidance addressed a number of specific areas.

Extra charges for not paying by Direct Debit

• Providers must make clear in advertised prices what any extra charges for paying by cash or cheque would be;
• if extra costs are not clearly seen as being part of the main price under the contract, charges should only reflect the provider’s direct costs; although
• where extra charges are prominent, normal competition – and not regulation – will provide price discipline on behalf of consumers.

Protection for low-income households

A new service for people on low incomes – BT Basic – was due to be introduced in mid-2008. It will not levy an extra charge for customers who choose not to pay by Direct Debit and, unlike previous social telephony products, will be open to consumers who have pre-pay mobile phones and/or broadband services.

Charges for late and failed payments

• Providers should make consumers more aware of these charges;
• a charge should only be made after consumers have had a fair chance to settle their bill; and
• any charge should only reflect the direct cost providers incur by a late or failed payment.

Minimum contract periods and early cancellation charges

• Providers must be clear about the length of a contract, and any penalty for breaking the deal early;
• There should not be a subsequent contract period without a clear benefit to the consumer and cost to the provider; and
• If a customer ends a contract early, he or she should never have to pay more than the payments left on that contract period.

Following consultation, we are due to publish final guidance in autumn 2008.

Access to emergency services

As new voice services evolve, regulation must evolve with it.

In July 2007, Ofcom launched a consultation requiring the providers of certain types of Voice over Internet Protocol (VoIP) services to offer access to emergency calls. This followed research, which showed that 78 per cent of VoIP users without this facility assumed that they could access the emergency services, or were not sure.

In December 2007, we announced that from September 2008 all VoIP services that allow users to make national calls must also provide access to 999 and 112.

Helping the consumer

The Ofcom Central Operations function deals with questions and complaints from viewers, listeners, customers of telecoms companies and users and licensees of wireless communications services.

During the period under review, Central Operations logged more than 166,600 cases as a result of telephone enquiries and received more than 70,000 completed internet forms, emails, letters and faxes. Of those, around:

• 152,000 related to telecommunications;
• 57,600 related to spectrum issues and licensing;
• 5,000 were general enquiries; and
• 22,000 related to broadcasts.

Telecoms

Some 10 per cent of all customer complaints in telecoms were where customers had experienced problems with changing broadband service or the provision of service in a new property. Issues include ‘tag on line’ and problems with Migration Authorisation Codes – a reference that enables customers to switch broadband provider smoothly and with minimal disruption.

Also, 10 per cent of customer complaints were about mis-selling. This includes where a customer was switched to a new service without their knowledge or consent; a customer signed up to a service based on information they later find untrue; or a customer was promised ‘cash back’ sums of money which do not materialise.

Consumer complaints included:

• broadband migrations;
• mis-selling;
• delayed installation of service;
• the charge raised when bills are not paid by direct debit;
• silent calls;
• inadequate customer service by service providers;
• problems with loss of service; and
• issues relating to contract terms.

Where appropriate, Central Operations meet with companies to discuss ways in which their service to customers can be improved. Details of companies, which demonstrate persistent problems, are passed to Ofcom’s Competition Group for potential formal investigation.

Spectrum

The Ofcom Licensing Centre (OLC) is part of Central Operations and dealt with more than 57,600 enquiries from users and providers of radiocommunications services, as well as other members of the public. These related to:

• guidance for radiocommunications users on licensing issues relating to the Wireless Telegraphy Act;
• Wireless Telegraphy Act licence fee queries; and
• Ofcom’s online Sitefinder service, which enables the public to identify the location of mobile phone base stations by postcode.

Broadcasting

The Central Operations broadcasting team logged 22,000 complaints from the public. Any complaints not resolved by the team were passed to the Content and Standards Group for further investigation.

The greatest cause for complaint about television and radio programmes was material which viewers or listeners found harmful or offensive, including racist comments, strong language, sexual portrayal and religious offence. Concerns about competitions and voting were also raised.

Around 12 per cent of complaints were received about The X Factor Final results and around nine per cent of complaints were received about Big Brother 8.

Other programmes generating significant complaints* were:

• Bringing Up Baby ;
• Eastenders ;
• Hell’s Kitchen ;
• Coronation Street ;
• News Knight with Sir Trevor MacDonald ;
• Diana: The Witnesses in the Tunnel ;
• coverage of various news items throughout the year; and
• the operation of various quiz shows and channels.

* Celebrity Big Brother, which generated over 44,500 complaints, is not covered here as it was transmitted in January 2007.

• Ofcom Annual Report 2007/08 - Section B [pdf]
• Adroddiad Blynyddol 2007-08 Ofcom - Adran B [pdf]

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