Consumer protection policy review guidelines

Consumer protection policy review guidelines

A consultation document issued by the Director General of Telecommunications

28 June 2002

Contents

Chapter 1 Role of consumer protection policy reviews

Chapter 2 The guidelines: methodology for consumer protection policy reviews

Chapter 3 Consultation process and questions

Annex A Oftel strategy principles applicable to consumer protection policy reviews

Annex B Consumer protection policy review: indicative forward timetable

Chapter 1

Role of consumer protection policy reviews

Introduction

1.1 The purpose of this consultation is to outline how Oftel intends to review regulation that primarily relates to consumer protection outside of formal market reviews, which are aimed at identifying whether regulation promoting competition is needed in that market. In essence these proposed guidelines are to ensure that such consumer protection focused regulation remains appropriate, proportionate and is achieving its objectives.

1.2 Oftel's goal is to achieve the best deal for the consumer. In seeking this goal Oftel has at its core four high level objectives, consistent with EU objectives, as follows:

effective competition benefiting consumers
well informed consumers
adequately protected consumers
prevention of anti-competitive practice.

1.3 Oftel's goal and objectives form the core of Oftel's strategy. In implementing its strategy, it has set out ten regulatory principles it will follow (for principles that apply to consumer protection policy reviews see annex A). For the other strategy principles, guidelines currently exist or are being prepared for applying the strategy in relation to Oftel's objectives of;

effective competition (market analysis guidelines and Access obligations under the EU directives guidelines – regime coming into force July 2003)
prevention of anti-competitive practice (competition case manual and Competition Act strategy – current regime).

1.4 There has not, however, until this document, been an equivalent set of guidelines in relation to implementing strategy under the other two objectives ie 'well informed consumers' and 'adequately protected consumers'.

1.5 The range of areas included under these objectives – which can be broadly termed consumer protection policy – is more diverse than those related to effective competition/prevention of anti competitive practices. There is sufficient commonality however for these guidelines to provide consistency of approach between the different reviews.

Defining 'consumer protection policy'

1.6 Consumer protection policy is defined to include actions taken to protect consumers irrespective of the level of competition in the market place. Consumer protection policies include:

consumer complaint handling, dispute resolution, customer rights including rights to information

generic consumer information initiatives (that are not originated from individual market reviews) eg quality of service information published on a comparable basis

actions required of all telecoms operators rather than just those with market power and that are not specific to an individual telecoms market eg itemised billing, metering and billing system approvals

polices dealing with specific social objectives (eg universal service, low user scheme) to protect groups whose needs would not otherwise be met by the market, or

privacy of customer information across electronic communications networks eg data protection and Calling Line Identification

1.7 There are also areas where the reasons for intervention are in relation to wider social objectives, a mix of consumer or citizen protection eg ensuring continuity of telecoms supply in a national emergency or in some cases promoting competition eg network interoperability, numbering. While these areas have other policy drivers, they would not fit easily within a market review. It is envisaged that the proposed consumer protection policy review (CPPR) guidelines are flexible enough to accommodate these areas.

1.8 Policy areas that are specifically not covered by CPPR guidelines are those that are covered by obligations to promote competition flowing from market reviews. However while the starting point for analysis may differ between these two types of reviews – consumer protection and market competitiveness – in some cases the remedies pursued may be similar especially in relation to the provision and dissemination of information for consumers. This link is discussed further later in this chapter.

External drivers for review

1.9 CPPRs will ensure that Oftel has the processes in place through which it can test and, where relevant, justify to external stakeholders the continuing appropriateness of any regulation it undertakes in areas, which are not primarily competition related. They will also allow Oftel to assess the effectiveness of its regulatory actions.

1.10 The Communications Bill emphasises a 'light touch' approach to regulation in order to achieve public policy objectives. The regular review of existing regulation and its withdrawal where appropriate, is part of the review process. In the future Ofcom will be expected to review existing regulatory mechanisms and assess whether an alternative approach would be more effective.

1.11 Bodies such as the Better Regulation Taskforce (BRTF) and Regulatory Impact Unit (RIU) have been set up by the Government to ensure that the regulations made by government departments, agencies and regulators, are fair and effective.

1.12 The UK is required to implement and comply with EU Directives, thus regulation must be in accordance with those Directives. Whilst EU Directives provide a clear framework for regulation, going forward they allow a degree of flexibility in applying regulatory rules. The guidelines show how Oftel (and in the future OFCOM) is implementing the scope for flexibility within the context of CPPR.

1.13 In formulating these proposed guidelines it is necessary take account of the existing regulatory regime and the new regime that will come into force in July 2003.The new EC Communications package entered into force when the Directives were published in April 2002 (the Communications Data Protection Directive is still to be finalised). The new Directives will be implemented in the UK through the Communications Bill. These directives establish the rules and parameters under which Oftel (and later, OFCOM) must operate in the future. It is intended that these guidelines when finalised in autumn 2002 would operate under the existing regulatory regime and then carry over when the new regime commences in July 2003. It is Oftel's view that the proposals for these reviews are consistent with both legal regimes.

1.14 The implementation of the Directives will see the replacement of the current licensing regime for telecommunications companies with a new approach based on a general authorisation to offer electronic communications networks and services. The existing licence conditions will be replaced by 'general conditions' and 'specific conditions'. The 'general conditions' that will replace licence conditions are currently the subject of consultation www.oftel.gov.uk/publications/licensing/2002/enti0502.htm. The consultation will determine at a high level what licence conditions will become general conditions under the new regime to apply in July 2003.

1.15 This consultation on consumer protection policy review guidelines, is not intended to review whether these areas become part of the general conditions, but is to produce a generic set of review guidelines to determine how policy objectives relating to consumer protection can best be met.

Purpose of consumer protection policy reviews

1.16 Changing market conditions and patterns of consumer behaviour require assessment of the continued appropriateness of regulation. The aim of these reviews is therefore on justifying the continuing of regulation, or seeking a more flexible regulatory approach using self or co-regulatory approaches as necessary, and assessing, whether regulatory withdrawal may be appropriate now or at some stage in the near future. However the outcome of such a review process may also find that regulation is still needed, or indeed may need to be strengthened. The emphasis then is ensuring:

regulation remains appropriate, proportionate and effective,

the policy justifications for existing regulation still exist, and if they do still exist, can objectives be met with greater regulatory flexibility or general consumer protection or other laws, and

the policy objectives regulation needs to achieve are being met.

Links between market reviews and consumer protection policy reviews

1.17 A Market review (rather than CPPR) is aimed at identifying whether regulations promoting competition are needed in that market. The purpose of the review is to identify if any of the players in the market have significant market power (SMP).

1.18 Separate from the obligations that may flow from a market review, the new European regulatory regime which will come into force in July 2003, will require the imposition of other regulation such as general conditions. Such regulation is not dependent on the level of competition in the market segment. These areas of regulation either apply across markets or are not scoped or defined in terms of a particular market. As with market segments, proportionate regulation requires that these areas should be reviewed on a regular basis.

1.19 Many areas where Oftel has taken action or enacted a certain policy will obviously contain issues that relate both to competition and consumer protection. In such circumstances the primary reason for regulatory action should be considered (ie to promote competition or ensure consumer protection in its widely defined sense set out above) and which determine whether to use market review guidelines or CPPR guidelines.

1.20 However the two guidelines should not be seen as mutually exclusive. If in the course of conducting either a market review or CPPR, issues arise that are clearly of a competition nature, or would be more properly addressed by the CPPR guidelines, Oftel project/programme managers should use the relevant guidelines to address these issues. The guidelines can be used in conjunction with each other to address issues outside the main body of the review.

Chapter 2

The guidelines: methodology for consumer protection policy reviews

Introduction

2.1 This chapter sets out the basic procedures, principles and framework for carrying out individual reviews. The relevant regulatory principles involved from Oftel's strategy can be identified and a framework for analysis provided. The policy specific details relating to the wide range of consumer protection areas would be addressed during the course of individual reviews. What is provided here is coherent overall framework. The process of applying guidelines in specific cases should enable the guidelines to be revisited and refined in due course but will follow general principles based on the strategy.

2.2 Oftel has developed a strategy as described in Chapter 1 and, underpinning its strategy objectives, ten regulatory principles to be applied in pursuing these objectives. Excluding those regulatory principles, which relate primarily to issues of effective competition or preventing anti-competitive behaviour, the relevant principles in terms of consumer protection policy reviews are set out in Annex A.

Link to Oftel's regulatory option appraisal guidelines

2.3 In conjunction with the development of CPPRs Oftel will also be publishing its guidelines for regulatory option appraisals. Oftel's Regulatory Option Appraisals make up part of the CPPR review process and like the CPPR guidelines encapsulate existing reviews processes like Consumer Impact Assessments (CIA), Regulatory Impact Assessments (RIA). They also take into account the Office of Fair Trading's guidelines for Competition Assessment (February 2002) and other good practices. Regulatory Option Appraisals are a way to inform decision-making that can be applied to both market reviews and CPPRs, with criteria differing to the type of review and the issue under consideration.

2.4 Regulatory option appraisals build upon Oftel's Guidelines for assessing the costs and benefits of regulatory action published in May 2000. The guidelines provide for a more transparent way to assess the advantages and disadvantages of different policy options.

Framework for review

2.5 The framework for review includes the following elements:

criteria which define the 'consumer interest' on a widely recognised basis, which consumers can reasonably expect to obtain and the absence of which can justify some form of regulatory intervention

regular review of the current consumer protection policy to see if it meets relevant Oftel regulatory principles

recognition of changes which are likely to impact on any existing justification for a policy

the need to assess the advantages and disadvantages of proposed regulatory options in these circumstances; and

the need to indicate the period for which any revised policy is intended to apply.

The proposed review approach to be adopted is summarised below (see Fig 1). The Regulatory Option Appraisal guidelines fit within the CPPR process at step 6 (see below) of the proposed review framework ie identifying and evaluating the costs and benefits of any policy changes needed and pursuing the appropriate policy option.

Figure 1: Consumer protection policy reviews – outline of review approach

2.6 The above approach can be applied for new consumer protection specific policy areas, as well as existing policy areas, although in the case of the latter it should be possible to combine several steps in such cases.

2.7 In either instance, for an adequate review to take place steps 2, 5 and 6 require a sufficient evidence base to be established. This will involve use of market research and market information and other data sources as appropriate.

2.8 The key step is the assessment, at step 5, of whether the current policy is still needed. Based on the steps described above, the checklist below sets out a framework for a CPPR.

2.9 The checklist below represents a wide range of issues and criteria that will be applicable to different degrees when carrying out a CPPR. The checklist is intentionally broad so as to capture a range of issues. Whilst each question would need to be addressed, it would normally only be necessary to identify and address in depth the appropriate issues relating to a particular field.

Table 1: Consumer protection policy review – checklist

Policy area: __________________________

A. Establish starting point for review

1. Define current policy area to be reviewed

2. What is the justification for intervention

is there a legal requirement to intervene?
in terms of consumer interest criteria (based on an expansion of NCC 'standard' list: see below). NB the justification for regulatory intervention may typically be primarily based on only one of the consumer interest criteria listed, although there may be may relevant secondary criteria

Access: Can consumers actually get the goods or services they need or want?

Choice: Is there any? And can consumers affect the way goods or services are provided through their own behaviour?

Safety: Are the goods or services a danger to health or welfare?

Information: Is it available in the right way to help consumers make the best choice for themselves?

Equity/Fairness: Are some or all consumers subject to arbitrary or unfair discrimination, does regulation (or its withdrawal) differentially impact on individuals or groups of consumers (including disadvantaged consumers)?

Redress: If something goes wrong, is there an effective system for putting it right?

Representation: If consumers cannot affect the supply of goods or services through their own decisions, are there ways for their views to be represented?

Privacy: Are consumers' rights to privacy of personal data adequately protected?

Value for money: Will it effect the cost to the consumer and the quality of goods and services.

3. What policy has been adopted?

4. Does policy adopted meet relevant Oftel regulatory principles listed in Annex A: (NB while the policy adopted should be consistent with all the regulatory principles listed, in terms of the analysis undertaken, some principles may require greater attention than others).

Oftel strategy principles – summary (for full text of strategy principles see Annex A)

All objectives

1. Regulate only where it is likely to bring a net benefit to consumers. Keep regulation to the minimum necessary to obtain appropriate outcomes.

Well informed consumers

4. Encourage greater awareness of choice of services and supplies on the part of consumers so they are able to make competition effective and to rely less on regulation.

5. Encourage industry to meet the needs of consumers rather than relying on regulation to meet these needs and encourage third party providers to produce information to help consumers choose.

Adequately protected consumers

6. Where competition cannot provide agreed services to all at affordable prices, regulate to ensure there is such provision in a way that minimises distorting effects.

8. Where competition is not in prospect or the market, of itself, will not meet consumer needs, regulate to replicate efficient outcomes subject to not undermining incentives to innovate as set out in the Access and Interconnection Directive guidelines.

9. Encourage industry, wherever feasible to work with consumers, to regulate itself in those areas where a common approach is necessary to meet consumer needs ie either to provide service or for the development of competition.

B. Carrying out the review

5. Are there any changes since policy determined, any forthcoming changes likely or concerns with the original grounds for the policy which mean policy justification needs to be re-assessed? For example:

what is long term prospect – will consumers need the regulator to intervene even in foreseeable future?
changes in general consumer protection law or other non-sector specific law?
changes in EU telecoms law?
consumer complaints ( see data from Oftel's consumer representation section )
technology changes?
market developments?
consumer behaviour changes?
concerns over existing policy basis identified (eg if inconsistent with regulatory principles or does not meet any of the consumer interest criteria)
consumer detriment assessment

6. As a result of factors identified in (5) above, does the original policy justification in terms of consumer interest criteria listed in (2) above need to be reassessed?

If so, what are the policy options and the advantages and disadvantages of each main option? For example:

policy no longer needed (in full or in part) as sufficient intervention provided by

general law (timing issue – ie with or without industry code of practice to enable effective enforcement) and/or

more competitive market, and/or

effective industry code of practice to implement telecoms specific regulation

is there a need to strengthen regulation?

policy needs amendment due to

new EU requirements
change in consumer needs
need to target protection on specific groups

7. Where a new policy is determined, and involves some further regulatory role, determine and publish forward review timescale when intending to revisit policy and extent of review envisaged. (monitoring and evaluation process included in this process)

Review outputs and timescales

2.10 Three main outputs are envisaged for each review

kick off document setting out scope and timing of review

consultation document including assessment of advantages and disadvantages of policy options

statement setting out policy decisions.

2.11 Timescales should ensure that the review process takes no longer than nine months including a three-month consultation period. This is the same time period as for a market review. Where regulatory intervention in a consumer protection policy area is a specific legal requirement then it should be possible to condense the length and form of the review process for those aspects and focus on areas where greater discretion over regulatory action is involved.

Frequency of reviews

2.12 The frequency with which reviews should be carried out should be determined for each individual policy area. No policy should remain unreviewed for more than five years. While market segments are to be reviewed more frequently than this – possibly annually – an equivalent standard timescale for consumer protection policy review areas does not seem justified. Factors to be considered in setting a timescale for subsequent review should include:

anticipated changes in technological or markets terms, of services impacting on the extent and adequacy of the consumer protection or other existing policy under review

the existence of external timetables for review (eg of EU Directives)

anticipated and planned developments at UK and EU level, of general consumer protection law or other statutory or self/co regulatory initiatives that may impact on the policy area in question.

2.13 The extent of any subsequent reviews should depend on an assessment of the degree of change in circumstances since the last review. Experience of reviews on the basis set out in these guidelines (and the extent to which it is possible to condense the review process where regulatory intervention is a legal requirement as discussed under 'review outputs and timescales' above) should reveal whether there is an abbreviated version of the review process which it is appropriate to carry out. Based on existing work areas Annex B gives an indicative timetable for further consumer protection policy reviews for the next few years.

Chapter 3

Consultation process and questions

3.1 This chapter sets out:

input from stakeholders already consulted
consultation questions; and
how to respond to the consultation

Informal consultations to date

3.2 As part of its consultation process for developing these draft guidelines, Oftel met with the representatives of consumer and industry groups at the beginning of the drafting process to gain stakeholders views as to what the appropriate principles and issues that any CPPR guidelines would need to address. Oftel held these discussions between October and December 2001. Oftel met representatives of the Public Utility Access Forum (PUAF), National Consumer Council (NCC), Consumer Association (CA) and Barbara Bardzki from Glasgow Caledonian University. From the Industry Oftel met with NTL, Cable and Wireless and BT. In these discussions Oftel outlined the broad principles and rationale behind the guidelines and all representatives were sent a short background paper. Overall there was broad support for the CPPR process and the use of RIA's, CIA's and Oftel regulatory principles as a basis for the framework. Stakeholders raised a number of issues during these discussions, these are summarised below:

Consumer representatives

3.3 Overall consumer representatives accepted the rationale behind the development of CPPR guidelines, that is ensuring that regulation remains appropriate, up to date and is achieving its objectives. Consumer representatives felt however that it was important that the guidelines should make it clear that there is not a presumption against formal regulation. Whilst they accepted that co/self-regulation and regulatory withdrawal could be possible outcomes, there would need to be a strong evidence base before withdrawing regulation, and self and co-regulatory schemes would need to prove that they could provide at least equivalent protection. Other issues raised included:

that any guidelines would need to be transparent, flexible and able to draw in consumer issues. Any guidelines must be easily able to be followed, that is external stakeholders must be able to see how Oftel arrives its decisions;
any regulatory withdrawal or lessening of regulation should be evidence based;
how issues of consumer detriment are handled needs to be resolved;
not only was transparency seen as important in how any guidelines might work but also transparency in why Oftel has decided, or would decide to review a particular policy area;
that the benefits of regulation need to be recognised, backstop powers even if rarely used can play a role in protecting consumers;
part of the review process should include detailing a 'worst case' scenario of the policy option adopted, ie if regulation was withdrawn or self/co-regulatory regime introduced the consequences of the failure of the policy should be outlined; and
the issue of adequate resourcing for consumer representatives was also raised, this was seen as important if a potential policy outcome could lead to a self or co-regulatory policy option.

Industry representatives

3.4 As with consumer representatives, there was general agreement as to the rationale behind the guidelines and an agreement that a process to review consumer protection (non-competition) related regulation was desirable. The industry representatives raised a number of issues, these included:

the need to determine at the outset of any review, what is the minimum regulation that may be required ie EU Directives and what (if any) Oftel's flexibility is in this area;
need for the guidelines to clarify what (the guidelines) objectives are, what type of issues and areas will be looked at;
as part of the review process any existing horizontal legislation needs to be identified, and the need for telecoms specific legislation to be assessed in light of this;
what would happen if regulation were not there needs to be evaluated as part of the review process;
how each criteria would be weighted ie aspects of CIA and RIA needs to be assessed;
the resource costs to industry and consumers needs to be borne in mind when a self or co-regulatory policy option is being contemplated;
there needs to be transparency in the review process, when a decision is arrived at Oftel needs to be identify which criteria it has deemed the most important; and
once a policy has been arrived at, it is important that the monitoring and review process not be neglected.

Consultation questions

3.5 Consultees are asked to respond to the following questions:

1. Do you agree with the need for a more clearly defined framework for assessing what is appropriate for regulation in relation to consumer protection policies which are not primarily based on promoting competition (as discussed in chapter 1).

2. Do you consider the criteria to be assessed and information to be evaluated when reviewing consumer protection regulation set out in chapter 2 are sufficiently comprehensive and relevant? If not, what other factors should be considered?

3. Do you consider the process set out in chapter 2 is sufficiently transparent, open, easily understood and accessible to stakeholders? If not how would you suggest it could be improved?

How to make comments on the questions raised

3.6 Oftel is publishing this consultation document so that interested parties may comment on the issues, which it addresses. The closing date for submitting comments is 28 August 2002. This is a two-month consultation period given that there has already been some consultation with stakeholders.

3.7 Where possible, comments, and comments on comments, should be made in writing and sent by e-mail to john.wimmer@oftel.gov.uk. However, copies may also be posted or faxed to the address below. If any interested parties are unable to respond in one of these ways, they should discuss alternatives with the Oftel manager named below:

John Wimmer
Policy Advisor
Oftel
50 Ludgate Hill
London EC4M 7JJ

tel: 020 7634 8742
fax: 020 7634 8757
e-mail: john.wimmer@oftel.gov.uk

3.8 Paper copies of this document and alternative formats such as large print, Braille, disc and audio cassette can be made available on request. Please contact Oftel's Research and Information Unit by phoning 020 7634 8761 or by sending an e-mail to infocent@oftel.gov.uk.

Publication of comments made by stakeholders

3.9 On this occasion, Oftel is not programming a formal period during which interested parties may comment on the responses made by others. Nevertheless, in the interests of transparency, all non-confidential comments and comments-on-comments, will be published. Respondents should separate out any confidential material into a confidential annex which is clearly identified as containing confidential material. Oftel will take steps to protect the confidentiality of all such material from the moment that it is received at Oftel's offices. However, in the interests of transparency, respondents should avoid applying confidential markings wherever possible.

3.10 Non-confidential responses can be viewed on Oftel's website in the publications section under Responses to Oftel consultations. They can also be viewed at Oftel's Research and Information Unit. Appointments must be made in advance by phoning 020 7634 8761 or sending an e-mail to infocent@oftel.gov.uk.

e-mail notifications

3.11 Oftel has a free e-mail based mailing list to help people stay informed about the work that Oftel is doing. Each time an Oftel document is published and placed on Oftel's website at www.oftel.gov.uk, subscribers to the list receive an e-mail alert. To register, please go to the What's New? section of the website and access the electronic form.

Annex A

Oftel strategy principles updated April 2002

A.1 Listed below are those strategy principles that relate to consumer protection

All objectives

I. Regulate only where it is likely to bring a net benefit to consumers. Keep regulation to the minimum necessary to obtain appropriate outcomes. Assess, in a transparent, accountable and proportionate manner, the advantages and disadvantages of targeted and feasible regulatory options, for consumers and suppliers and other relevant parties, when considering adding to, reducing or retaining regulation. Measure and assess impact of regulatory actions.

Well informed consumers

IV. Encourage greater awareness of choice of services and supplies on the part of consumers so they are able to make competition effective and to rely less on regulation. Rely on standard consumer legislation wherever this is sufficient and encourage the use of codes of practice by industry to make this effective for electronic communications consumers.

V. Encourage industry to meet the needs of consumers rather than to rely on regulation and encourage third party providers to produce information to help consumers choose.

Adequately protected consumers

VI. Where competition cannot provide agreed services to all at affordable prices, regulate (using published 'Consumer Protection Policy Review' guidelines to ensure consistency and relevance of approach) to ensure there is such provision in a way that minimises distorting effects. Geographically averaged prices should be used only for supply of basic service to ensure network access by all.

VIII. Where competition is not in prospect or the market, of itself, will not meet consumer needs, regulate to replicate efficient outcomes subject to not undermining incentives to innovate as set out in the Access and Interconnection Directive guidelines. Ensure resources are managed efficiently but seek market solutions wherever feasible.

Monitor extent of consumer detriment, a consistent basis, to help assess need for and impact of regulatory intervention. Attempt to minimise disruption arising from suppliers rapidly exiting from the market.

IX. Encourage industry, wherever feasible, to regulate itself in those areas where a common approach is necessary to meet consumer needs ie either to provide service or for the development of competition. Encourage focus on areas where sufficient common interest (typically consumer information and protection) and look at different ways of pursuing co-regulation appropriate to circumstances, sometimes in conjunction with formal regulation as necessary.

Encourage initiatives that are focused on producing tangible outputs, are time limited in terms of development effort and make efficient and proportionate use of resources of participants. Any Oftel role to focus on facilitating involvement of consumer groups and suppliers and to act as a fallback option in exceptional circumstances.

Annex B

Consumer protection policy reviews: indicative forward timetable

The table below indicates when existing consumer protection policy areas will be subject to review. This is an indicative timetable only.

* Universal Service Obligations cover a range of issues, as such any reviews undertaken would cover specific and appropriate areas of policy within the context of fulfilling USO obligations

** The Welsh Language Act and Northern Ireland Act require regular monitoring and review of both schemes which is detailed in the management plan. Whilst the existence of the scheme's is not subject to review, their effectiveness will be subject to annual review.

Note to table

The above list is based on projects and programmes appearing in Oftel's 2002/3-management plan. It does not include areas of work, which are: primarily

market review based; or relate to the overall framework of regulation; or, comprise a one-off action which is not suited to a cyclical review process.