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Ofcom’s Consumer Policy

Foreword

We believe that over the last year, our approach to competition and regulation has begun to deliver significant benefits to consumers in terms of falling prices, increased reported levels of satisfaction and an increase in the availability of a range of services. However, consumers have also faced harm in a number of areas.

We have increased our efforts to protect consumers from scams and unfair practices, and to help enable them to benefit from competitive markets through access to information and processes that allow them to switch providers. Nevertheless, it is clear that more needs to be done. In this statement we set out our approach to protecting and empowering consumers and the actions we believe will ensure we are more effective in these areas.

The communications sector is at the forefront of technological change. Consumers are benefiting from innovative services, faster connection speeds and the ability to buy bundles of communications services more cost-effectively than ever before from a single provider. However, with technological change comes complexity; and with complexity comes the increased potential for scams and other forms of abuse which can develop rapidly and cause a great deal of consumer harm. This complexity can also make comparing services and switching provider more challenging.

We will always seek to prevent scams and unfair practices from occurring. However, the potential for harm will always remain. Where such practices do arise, we will seek to respond promptly and effectively. We have continued to build on and strengthen our enforcement activity over the last year. We have introduced new rules to tackle mis-selling and slamming in our sector and have taken action against the worst offenders. We have also reduced the potential for silent calls through the introduction of new rules and increased penalties, and improved the effectiveness of the regulation of premium-rate services by enhancing the ability of the regulator, ICSTIS, to take effective action against those involved in premium-rate scams.

However, we believe we still need to increase our efforts to make sure we take swift and effective enforcement action against those who defy regulation . We also want to make sure that consumers can complain to the right organisations at the right time and to seek redress when things do go wrong.

In addition to our work on protection we try to ensure that customers are able to understand and explore the market , make informed choices regarding provider and service and benefit from processes that enable them to switch supplier easily when they choose to do so.

To help this, we are revising and relaunching Ofcom’s accreditation scheme for providers of price comparison services. Another important factor for consumers in deciding which service to buy from which supplier is the quality of that service. We are exploring the feasibility of providing data for broadband and 3G quality of service, and considering alternative ways of providing quality of service information to consumers without internet access.

While the majority of consumers who have switched communications provider tell us their experience was on balance a good one, substantial problems are emerging in some areas. This is particularly true for a significant number of consumers wanting to switch broadband provider. In response, we are currently consulting on proposals to make it easier for customers to move from one broadband company to another.

We are also aiming to establish consistent principles on customer migrations and switching across a range of communications services. We want to make sure that consumers can switch providers easily and with confidence as bundles of services sold together, such as mobile, landlines and broadband, become increasingly popular.

Ofcom’s primary statutory duty is to further the interests of citizens and consumers. All our work is ultimately geared towards this one aim. To understand whether we are doing so effectively, it is important to measure and analyse the consequences of our decisions. On 16 November 2006 we published The Consumer Experience, the first in a series of annual publications which will report on how well consumers are served in communications markets. We will continue to work with consumer representatives, industry and other stakeholders to ensure we remain focused on the task at hand: the development and implementation of policies which will secure the best possible outcomes for citizens and consumers of communications services.

Consumer policy action plan

The tables below give a high level overview of actions in respect of Ofcom’s Consumer Policy for the next two years and set out what we try to achieve for consumers by those actions. The action plan relates to the three main elements of Consumer Policy:

Integration with competition policy: ensuring that competition policy takes sufficient account of consumer interests and behaviour;
Consumer protection: protecting consumers against harm, unreasonable annoyance and anxiety; and
Consumer empowerment: equipping consumers to obtain the best deal they can.

The background and the details of these initiatives are discussed in more detail in the remainder of the document.

Initiatives related to integration with competition policy
We will continue to strive to ensure that the conditions that allow sustainable competition take hold and flourish. In this way, we hope to encourage further investment and innovation so that communications markets carry on delivering an increasing range of high quality services at lower prices, ever more tailored towards consumers’ particular needs. To ensure that our competition policy is designed to secure maximum benefits to consumers, we will pursue the following actions:
Action	Purpose
Deepen our market research to gain insight into consumer interests.	To ensure that we understand the impact of competition policy on different consumer segments, and to make sure our policy is designed to deliver positive outcomes.
Further build on relationships with consumer advocacy organisations.	To make sure we fully understand the interests of consumers and reflect these interests effectively in our competition policy and actions.
Further implement the consumer interest toolkit in order to identify, evaluate and communicate consumer interests throughout the development of policy.	To ensure that all our policy is targeted at improving consumer experiences, to make sure that we take account of potential trade-offs between different consumer groups and can articulate this fully in our publications and communications.
Monitor consumer interests by publishing the ‘Consumer Experience’ report on an annual basis.	To make sure we are able to gauge the success of our actions, re-direct policy accordingly, and focus resources at the highest priority consumer issues.

Initiatives related to consumer protection:
While competition has delivered substantial benefits to consumers, the presence of scams and unfair practices continue to cause consumer detriment. Ofcom finds this unacceptable. We have increased our enforcement activity over the last 12 months and this has had a positive effect. Nevertheless there are more problems to be addressed and we will step up its efforts in this area further. We will also continue to work to ensure that consumers have effective mechanisms in place to complain and seek redress when things go wrong. We therefore will carry out the following actions:
Action	Purpose
Carry out reviews of the consumer related General Conditions and the use of self- and co regulation.	To ensure that consumer protection regulation is fit-for-purpose. Rules need to protect consumers effectively and be readily enforceable, while not imposing excessive or unnecessary burdens on providers.
Continue to develop the consumer advice section of Ofcom’s website.	To ensure that consumers are provided, either directly or through intermediaries, with the information they need to understand how they can protect themselves from scams and unfair practices, and how they can complain and seek redress when things go wrong.
Gather information on complaints handling processes in order to assess their effectiveness – and take appropriate action where inadequacies are identified.	To ensure that consumers can pursue complaints in a fair manner, and that they are advised of their right to seek alternative dispute resolution without undue delay where the provider cannot provide satisfaction.
Further develop our early warning systems, in order to identify problems at an early stage.	To ensure that we can act to address consumer harm effectively.
Streamline and improve our referral and investigation processes.	To ensure that we address effectively practices that are causing consumer harm.
Identify further opportunities to deploy industry wide programmes of compliance and enforcement activity.	To further secure industry compliance with the rules that are designed to protect consumers from harm.

Initiatives related to consumer empowerment:
By comparing the price and quality of different services, switching between providers or negotiating a better deal with an existing provider, consumers can influence the market positively in many ways. Over the last 12 months, we have pursued initiatives to deliver information on price and quality of service, and have started to look at consumers’ experiences of switching provider. However, more needs to be done to ensure consumers are aware of the choices available and have access to the right kinds of information so they can shop around. We also need to make important improvements to existing switching and migrations processes so that consumers can change provider easily and with confidence. To ensure consumers are empowered to participate in communications markets we will carry out the following actions:
Action	Purpose
Continue to create partnerships with consumer groups and other organisations to promote media literacy, especially focussing on older people.	To ensure consumers are aware of services and alternative providers, especially so they can search for information and shop around.
Consider other channels (in addition to Ofcom’s website) to disseminate advice and information to consumers - for example, by creating consumer advice fact sheets.	To enable all consumers, particularly those without internet access, to participate in communications markets by providing advice about opportunities for searching and switching.
Introduce requirements on VoIP providers to produce information about VoIP services to consumers.	To ensure consumers are able to make well-informed decisions about what VoIP services to subscribe to and how to use them.
Launch the new price comparison scheme, and increase consumers’ awareness of the scheme.	To provide consumers with accurate information that enables them to compare the cost of different services, and shop around with confidence.
Explore ways to improve the current fixed and mobile quality of service initiatives and to ensure consumers get the information they desire in relation to broadband services.	To provide consumers with accurate information which enables them to compare the quality of service offered by different providers and shop around with confidence.
Introduce new rules on broadband switching (subject to consultation).	To ensure that consumers can switch broadband supplier or service with minimum effort or service disruption.
Work to establish consistent principles on customer migrations and switching across a range of communications services.	To enable consumers to switch easily and confidently across a range of communications services, particularly as services increasingly get sold as bundles, including landlines, broadband and mobile.
Improve current number portability processes.	To reduce the time it takes for consumers to transfer from one network to another and to ensure that they can do this when their existing provider has gone out of business.

Executive summary

Introduction and overview

1.1 The purpose of this Statement is to:

Set out Ofcom’s approach to the promotion of the consumer interest, having taken into account stakeholders’ responses to our consultation, additional market research and further analysis; and
Give an overview of actions we have already taken and will start over the next two years focusing on consumer protection and consumer empowerment.

1.2 We delayed publication of this Statement to complete a number of new research initiatives which have informed our policy direction. This research was carried out in close cooperation with the Ofcom Consumer Panel, who encouraged us to do so in their response to the consultation document.

Consumer and citizen interests

1.3 The Communications Act 2003 requires Ofcom:

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

1.4 In our February consultation document, we proposed a distinction between consumer and citizen interests. This recognised that consumer and citizen interests are closely related and that for many people, the distinction is not very important. Stakeholders’ responses to the consultation confirmed this view.

1.5 However, for clarity, we propose to maintain a distinction between consumer and citizen policy as follows:

The purpose of consumer policy is to facilitate the operation of markets, to remove barriers and correct market failures which might otherwise prevent them delivering what consumers want.
Citizen-related policy is concerned with changing market outcomes in order to meet broader social, cultural or economic objectives.

Vulnerable consumers

1.6 We recognise that vulnerable consumers are not one homogeneous group but that different people can be vulnerable in different situations. Where there is evidence that particular consumers are more likely to be vulnerable to harm than others, we will take this into account when formulating and implementing consumer policy and may give greater weight to the interests of those groups.

1.7 We are undertaking a number of initiatives which consider the interests of vulnerable consumers. We also commission and publish a substantial amount of market research related to potentially vulnerable groups and continue to build our relationships with a variety of advocacy groups in order to learn from their experiences.

Consumer policy objectives

1.8 We believe the overall objective of our consumer policy should be, within the confines of our statutory duties, functions and requirements:

To take reasonable and proportionate steps to ensure that consumers benefit from well-functioning markets, are effectively protected from financial and physical harm, unreasonable annoyance and anxiety and are enabled to make informed choices.

1.9 The remainder of this Statement addresses developments and initiatives with regard to consumer protection, consumer empowerment and the integration with competition policy.

Consumer protection

1.10 We will always seek to prevent scams and unfair practices from occurring. However, the potential for harm will always remain. Where such practices do arise, we will seek to respond promptly and effectively.

1.11 In our consultation, we identified four key elements of an effective consumer protection regime:

Well-designed regulations governing supplier behaviour;
Consumer access to information about rights and risks;
Effective complaints handling processes, including provisions for awarding redress; and
Active monitoring and enforcement.

1.12 Below we will describe the priorities and initiatives we have taken and intend to take in the future in each of these four areas.

Priorities and initiatives in respect of regulations and rights

1.13 We have carried out research into the nature of consumer harm in order to help us examine the characteristics of scams and unfair practices and to recognise and address the circumstances that make them possible. This should help us determine the possible impact on potentially vulnerable groups and to prioritise our activity.

1.14 We are further developing our early warning systems, in order to identify problems at an early stage.

1.15 We are committed to carrying out a review of the consumer related General Conditions and the use of self- and co-regulation. This work will be included in our plan for 2007/8.

Priorities and initiatives in respect of raising consumers’ awareness regarding scams and rights

1.16 The Consumer Advice section of Ofcom’s website has been updated with improved signposting and sources of information. We are also in the process of updating our Competition Bulletin in order to make it more effective as a source of information.

Priorities and initiatives in respect of complaints handling and redress

1.17 Last year we reviewed the effectiveness of the Alternative Dispute Resolution (ADR) schemes, established to mediate between consumers and providers and to ensure appropriate redress where required.

1.18 One of the recommendations of that review was for both ADR schemes – Otelo and CISAS – to publish key performance indicators (KPIs) on their performance. Otelo has been publishing performance data for some time, and CISAS has now also started to publish.

1.19 We have commissioned research to gain a greater insight into consumers’ satisfaction with their communication providers’ complaints handling processes. The findings of this research will inform our policy and/or enforcement action in this area.

1.20 We are also reviewing the proportion of cases in which a consumer has been forced to wait for the regulated maximum of twelve weeks (in the absence of a ‘deadlock letter’) before being able to use the ADR scheme.

Priorities and initiatives in respect of monitoring and enforcement

1.21 We have continued to build on, and strengthen, our enforcement activity over the last year. We have also improved our cooperation with other external enforcement partners. It is vital that we continue to reinforce our efforts in this area, so that we can act quickly and effectively wherever consumers are experiencing harm as a result of poor practices by providers.

Consumer empowerment

1.22 For a market to be effectively competitive, consumers must be effectively informed and actively engaged. In the consultation, we sought feedback on our overall approach to ensuring consumers benefit from the information they need.

1.23 Below we summarise our conclusions and plans for consumer empowerment in the following key areas:

Our approach to consumer information;
The research which informs our decisions;
Awareness of alternatives and services;
Access to comparative information; and
Access to switching processes.

Ofcom’s approach to consumer information

1.24 We believe there is a role for Ofcom in enabling consumers to make effective choices where we identify gaps in the information available. We do not believe that we are well placed to provide complex comparative information in our own right, but we may have a role in facilitating the provision of this information where the market is not already doing so. However, we do believe that Ofcom is best placed to provide other types of generic, impartial information - such as general advice about communications markets as a whole and opportunities for switching.

1.25 This is reflected in our revised approach to consumer information:

Consumers must play an active and informed role in markets if competition is to be effective. For this to happen, they need information on the products they wish to purchase. If consumers cannot switch easily or buy new services because they do not have the right information, competition does not deliver the intended benefits. In addition, where vulnerable groups of consumers cannot engage in the market, they may fail to benefit from competition or new services that others take for granted.

We recognise that in some cases the market may not deliver to consumers the information they want or need, or may fail to deliver information to certain groups of consumers. Where the market does not deliver the information consumers want or need, Ofcom will consider appropriate intervention where this is deemed to be effective in improving the situation. In such cases, Ofcom will choose the most effective and proportionate option. This could be a self/co-regulatory initiative, an initiative that would involve the provision of information by an independent third party or Ofcom providing the information itself.

Overview of Ofcom’s decision-making research

1.26 In previous research we had identified that around half of consumers were ‘uninvolved’ in communications markets. We based this on whether or not consumers had switched provider. We expressed concern over this and carried out additional research to explore further the barriers consumers face, and the factors which motivate their decisions.

1.27 Our new research has identified that although some consumers are not actively switching provider, they are participating in the market in other ways, for example by negotiating better deals with current suppliers and surveying the market for alternative offers.

1.28 The research also found that significant numbers of consumers say they would participate more actively if they had access to comparable information on price and customer service, and if the regulator approved reliable and trusted comparison websites. Ofcom’s current initiatives fit well with this. However more needs to be done to raise levels of awareness and ensure the information provided fulfils consumers’ needs.

Awareness of alternative providers, new services and consumer rights

1.29 Our research shows that the majority of consumers are sufficiently aware of alternative providers of communications services. In particular, awareness of fixed line suppliers has risen significantly in the last 18 months, prompted by the launch of Wholesale Line Rental (WLR) services.

Access to comparative information on services

1.30 In the consultation we distinguished between comparative information on price and quality of service.

Price

1.31 We recognised that communications markets have changed significantly since the accreditation scheme for price comparison websites (‘PASS’) was established by Ofcom’s predecessor, Oftel. We also acknowledged that consumer awareness of the scheme was low and more needed to be done to promote the scheme and add value to accreditation. We concluded that it was appropriate to conduct a full review of the scheme and asked for stakeholders’ views on a number of options.

1.32 We have concluded that to retain, review and relaunch the PASS scheme is the best way forward. This option was favoured by the majority of respondents. It is also supported by our research which confirms that significant numbers of consumers would be more inclined to participate in communications markets if they had access to price comparison information accredited by Ofcom and would in turn share this knowledge with other people in their social network.

1.33 This option would also enable Ofcom to bring the scheme up to date and take account of new services and delivery methods – such as bundled services or international roaming charges that have the potential to make comparisons more complex. We are therefore publishing the details of a new accreditation scheme for price comparison providers alongside this Statement.

Quality of service

1.34 In the consultation, Ofcom outlined the details of two separate initiatives to publish comparable information of quality of voice services, one for fixed and one for mobile. The fixed providers launched their website - www.topcomm.org.uk - in July 2006. The mobile network operators launched their website - www.topnetuk.org - in September 2006, with results of independent mobile network voice quality surveys across the UK.

1.35 Working with Topcomm and Topnetuk, we are examining ways to improve the current initiatives, for example by exploring the feasibility of providing data for broadband and 3G quality of service, and considering alternative ways of providing quality of service information to consumers without internet access. We are undertaking a full review of both schemes and will publish our proposals next year.

Awareness of, and access to, switching processes

1.36 Whilst overall participation in communications markets is high, there is potential to encourage more people to shop around more actively.

1.37 However, problems in switching suppliers are emerging for some services, particularly as more consumers take up bundles of services which can make changing providers more complex. Through Ofcom’s work on Migrations, Switching and Mis-selling, we are aiming to establish consistent principles on customer migrations and switching across a range of telecoms services.

1.38 In addition, Ofcom is aware that significant numbers of consumers who have tried to switch provider suffered from poor customer service. This is particularly true for a number of broadband consumers. In response, Ofcom is currently consulting on proposals to make it easier for customers to change broadband suppliers.

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