Contents

Summary

Chapter 1 Background and Introduction

Chapter 2 Review Criteria and information requirements

Chapter 3 Information gathering processes

Chapter 4 Consultation details

Summary

S.1 EC Directives establishing a new regulatory framework for regulation of electronic communications throughout Europe entered into force on 24 July 2002. Member States have 15 months in which to transpose the provisions of the Directives into national legislation and bring regulation into line with the Directives. The Directives are to be implemented in all Member States on the same day, the 25 July 2003.

S.2 The Universal Service and User’s Rights Directive (Directive 2002/22/EC) sets out new requirements for dispute procedures to be in place on 25 July 2003. Member States are required to ensure that there are effective dispute procedures in place for resolving disputes involving consumers and relating to issues covered by the USD.

S.3 In the UK, it is intended to implement the provisions of the four main Directives through the Communications Act. The Communications Bill sets out specific duties on Ofcom in respect of dispute procedures, in particular it requires Ofcom to approve and keep under review the approval of such dispute procedures. The provisions of the Bill that relate to dispute procedures apply to all providers of electronic communications services through the requirements set out in the General Conditions of Entitlement.

S.4 These guidelines are intended to raise awareness within the telecommunications industry regarding the way Oftel, and in due course Ofcom, will review and approve dispute procedures in accordance with the duties set out in the Bill. The guidelines also set out how Oftel will apply its Consumer Protection Policy Review (CPPR) criteria when assessing dispute procedures. In due course the Communications Bill will require Ofcom to review and approve dispute procedures. Given its broader remit for the converging communications industries, Ofcom will need to keep its approach under review and, in particular, consider whether there are lessons for or from other parts of the communications sector which need to be reflected in future. Initially, however, with effect from 25 July, the review and approval of such procedures will be undertaken in accordance with these guidelines.

S.5 Chapter 1 of this document clarifies the regulatory framework as set out in the Universal Service Directive 2002/22/EC and the legal requirements incorporated in the Communications Bill regarding the establishment of effective dispute procedures.

S.6 Chapter 2 looks at the relevant CPPR criteria, and the type of information that is likely to be required to assess dispute procedures against those criteria, as well as other assessment criteria laid down in the Communications Bill.

S.7 Chapter 3 sets out how Oftel considers information for assessment should be collected.

S.8 Chapter 4 requests views from stakeholders on the analysis and proposals set out in this consultation. The Director will then publish a statement setting out his conclusions. As dispute procedures have been debated extensively in the industry in recent years, the Director considers that a 6 week consultation period is appropriate in this instance and representations must arrive at Oftel no later than close of business on 16 May 2003.

Chapter 1

Introduction

Purpose

1.1 The purpose of these draft guidelines is to inform the industry about the way Oftel intends to apply the Consumer Protection Policy Review (CPPR) criteria when assessing dispute procedures for the purposes of Clauses 49, 51 and 52 of the Bill and the Universal Service Directive (USD).

1.2 Clause 51 of the Bill requires Ofcom to approve dispute procedures. These guidelines set out what Oftel intends to consider when approving such procedures. The industry should take this into consideration when establishing new or joining existing dispute procedures.

Background

1.3 In September 1999 the Director General of Telecommunications (the ‘Director’) published a consultation document Proposed New Dispute Resolution Procedures for Fixed Telecommunications, , in which he set out proposals to meet the requirements under the Regulations implementing the Revised Voice Telephony Directive (RVTD Directive 98/10/EC, implemented by the Telecommunications (Open Network Provision) Regulations 1998 (SI 1998 No. 1580). The document covered disputes between operators and/or service providers on the one hand, and between consumers and their operator/service provider, on the other.

1.4 Following the consultation, the Director made a clear distinction between these types of disputes, that is disputes between operators and/or service providers and those between consumers and their operator or service provider. In respect of the former, the Director issued a Statement, entitled Resolving Disputes between Fixed Telecommunications Service Operators. In respect of the latter, the Director decided to explore the feasibility of a Telecommunications Ombudsman scheme.

1.5 As a result, a further consultation, on alternative proposals for resolving disputes between consumers and their operators/service providers was published in March 2001 entitled "Developing a Telecommunications Ombudsman,

1.6 Following the consultation, a statement setting out the framework for the Ombudsman Scheme was published in July 2001 entitled Implementation of a Telecommunications Ombudsman Scheme,. The statement set out the timetable for the introduction and the operational launch of the Ombudsman. The Director decided to make membership of the scheme a voluntary matter for industry and not to exercise his powers under the RVTD. By making membership voluntary the scheme could extend beyond the core requirements of the RVTD and meet the wider principles of the USD and the implementing provisions of the Communications Bill.

1.7 Under the USD there is a regulatory duty upon all Member States to ensure that effective dispute procedures are in place within the new regulatory framework which comes into effect on 25^th July 2003. This requirement is reflected in Clauses 49. 51 and 52 of the Communications Bill.

1.8 The legal requirements upon Member States do not specify the type of dispute procedures to put in place, and Oftel is yet to approve any specific scheme. However, Oftel believes that an Ombudsman offers considerable benefits and, subject to formal review, anticipates that such a scheme is likely to meet the criteria for approval (see Chapter 2). Conversely, subject to formal review, Oftel believes that mediation and arbitration schemes may not offer the same benefits.

1.9 Arbitration schemes tend to be more legalistic in nature and a tendency to be less transparent, which may undermine both accessibility, especially for vulnerable groups and general consumer confidence in such schemes. Mediation schemes, which by definition involve an independent body helping parties to reach a voluntary and mutually agreed resolution, may also disadvantage consumers because of the disparity in the size, expertise and resource between individuals or small businesses and their communications provider.

1.10 By contrast because of the way in which Ombudsman schemes function, they avoid the legal proceedings that form an integral and necessary part of arbitration and to some extent provide a better balance between the individual or small business consumer and the communications provider. Furthermore, where legal proceedings form part of a dispute procedure, consumers may be disadvantaged as it is to be expected that a company will have resource capabilities far in excess of an individual consumer.

1.11 In addition the accessibility of arbitration schemes may be more limited and difficult as they tend to rely on written evidence, which might disadvantage some users, those with learning difficulties for example. Furthermore, as the procedures are private and therefore the outcomes at both individual and aggregate level not published, it is difficult to assess whether the dispute has been effectively investigated.

1.12 In comparison Ombudsman schemes are required to publish clear terms of reference, procedural information and in some instances information on previous cases, which facilitate improving both awareness and confidence in the ability of the scheme to effectively deal with disputes. In addition a higher degree of transparency for the scheme can help in creating improved conditions and procedures preventing future problems from arising.

1.13 Given these benefits and the arguments set out in the various Oftel documents mentioned above, Oftel considers that there are considerable advantages if communications providers join an Ombudsman scheme, or develop a scheme that provides similar benefits to an Ombudsman scheme, while avoiding the potential problems that can be associated with formal arbitration and mediation.

Legal framework and legislative requirements

Universal Service Directive

1.14 Article 34(1) of the USD obliges Member States to ensure that:

• "transparent, simple and inexpensive out-of-court procedures are available for dealing with unresolved disputes, involving consumers, relating to issues covered by [the Universal Service] Directive; and,
• "such procedures enable disputes to be settled fairly and promptly and may, where warranted, adopt a system of reimbursement and/or compensation."

1.15 It also states that:

• "Member States may extend these obligations to cover disputes involving other end-users."

1.16 This Directive should be read in light of the Commission's Recommendations (98/257/EC the ‘98 Recommendation’ & 2001/310/EC the ‘2001 Recommendation’) on the principles applicable to the bodies responsible for out-of-court settlement of consumer disputes. The 98 Recommendation states that, amongst other things, the:

• decision-making body is independent;
• procedures are transparent;
• parties are allowed to present their views; and
• procedures are effective.

1.17 The 98 Recommendation is relevant to dispute procedures where an independent third party proposes or imposes a decision to resolve a dispute. The 2001 Recommendation builds on the 98 Recommendation, but is primarily concerned with schemes, where an independent third party brings parties together and assists them in finding an agreement by common consent.

1.18 While Oftel considers that a dispute procedure based on an Ombudsman has several advantages over other schemes, particularly arbitration type schemes (for the reasons set out above) the 2001 Recommendation highlights the importance of impartiality in an effective scheme. Oftel believes that criteria to assess the impartiality of a scheme are necessary to ensure that it is effective.

Communications Bill

1.19 The provisions of the USD have been incorporated into the Communications Bill (Clauses 49, 51 and 52). Clause 49 places a duty on Ofcom to set general conditions to ensure that a public communications provider establishes and maintains procedures to, amongst other things, handle and resolve disputes between them and their domestic and small business customers.

1.20 Furthermore, in carrying out this duty, Ofcom must secure, so far as it considers it appropriate, that the procedures established for handling and resolving complaints are:

• easy to use;
• transparent and effective; and
• free of charge to domestic and small business customers.

1.21 Clause 51 of the Bill requires Ofcom to approve and keep under review the approval of dispute procedures. Clause 51(2) specifically prevents Ofcom from approving dispute procedures unless they are satisfied that the arrangements under which the procedures have effect:

• are administered by (a) person who is for practical purposes independent (so far as decisions in relation to disputes are concerned) of Oftel or Ofcom and the communications providers to whom the arrangements apply;
• give effect to procedures that are easy to use, transparent and effective;
• ensure that domestic and small business customers of the communications provider can use the procedures free of charge;
• ensure that all information necessary for giving effect to the procedures is obtained;
• ensure that disputes are effectively investigated;
• include provisions conferring power to make awards of appropriate compensation; and
• are such as to enable such awards of compensation to be properly enforced.

1.22 When considering whether to approve dispute procedures, Clause 51(6) of the Bill requires that Ofcom have due regard for the matters set out in Clause 51(7) of the Bill. Those matters include the need to secure that the number of different sets of procedures approved is kept to a minimum.

1.23 The meaning of domestic and small business customer is given in Clause 49(6) and covers customers of communications providers who (a) are not themselves communications providers nor (b) are not undertakings for which more than 10 people work (whether as employees, volunteers or otherwise).

1.24 The Explanatory Notes to the Bill note that appropriate measures by Ofcom when approving dispute procedures, may include establishing an independent body corporate to administer and enforce the necessary arrangements. While also obliging public communications providers to pay for the establishment and maintenance of such a body (see paragraph 141 of the Explanatory Notes).

General Conditions of Entitlement

1.25 Oftel is intending to implement its (and Ofcom’s) duty to ensure access to dispute procedures as required by the Communications Bill through the General Conditions of Entitlement. Oftel consulted on draft General Conditions initially in May 2002.

1.26 Following this consultation, a second consultation on draft General Conditions is currently underway as part of a joint Oftel/DTI consultation on the implementation of European Community directives on electronic communications networks and services and the general conditions to be made once the Communications Bill is passed (available at

1.27 This joint consultation sets out the proposed Statutory Instruments that will be required to be in place on 25 July 2003 to implement the Directives in the event that the Communications Bill has not entered into force by that date. The relevant General Condition to apply under such Statutory Instruments will differ slightly from the relevant General Condition to apply under the Communications Bill. This is explained in more detail at Annex B to the consultation document referred to above.

1.28 The main difference for present purposes will be that, under the Statutory Instruments, communications providers subject to the relevant condition (General Condition 15) will not be required to adhere to an approved dispute resolution scheme. Rather, they will have to make available a dispute resolution scheme which complies with the requirements set out in that condition, which mirror those in Article 34 of the USD (described at paragraphs [1.14 to 1.18 above). However, as soon as the Communications Act enters into force, the requirements set out below in respect of the proposed General Condition 15(3) will apply as described, including the requirement that dispute resolution procedures be approved by the Director (or Ofcom). All communications providers should note that, in either case, and where they are providing public electronic communications services to domestic and small business customers, they will be required to have adequate dispute procedures in place by 25 July 2003.

1.29 Subject to the above, the proposed Condition 15 (3) of the general conditions to apply under the Communications Bill obliges all providers of public electronic communication services to provide or comply with an approved dispute procedure scheme for the benefit of their domestic and small business customers.

1.30 In accordance with these requirements Oftel, and in due course Ofcom, will review the processes of dispute procedure schemes to ensure that communications providers are meeting the obligations set out in Condition 15(3) of the General Conditions and therefore the requirements set out in the Communications Bill.

Scope and status of the guidelines

1.31 These guidelines apply only to the assessment and approval of dispute procedure schemes set up to meet the requirements of Condition 15(3) of the General Conditions of Entitlement, in accordance with the duties and responsibilities set out in Clauses 49, 51 and 52 of the Communications Bill. As such they are only concerned with disputes between consumers and small businesses (as defined by Clause 49(6) of the Communications Bill) and their operator or service provider.

1.32 The Director and later Ofcom will take the guidelines into account in assessing and approving any dispute procedure schemes. However, the matters set out in these guidelines cannot fetter the Director’s or Ofcom’s discretion and the ability to depart from the guidelines where warranted is maintained.

1.33 It can be anticipated that Ofcom will develop and update these Guidelines in the light of experience of the operation of dispute procedure schemes, lessons from other parts of the communications sector and other industries and in the event of any changes to UK or European Community law.

1.34 Chapter 2 sets out in more detail the issues Oftel considers it would be appropriate for it to consider when undertaking a review of dispute procedures.

Chapter 2

Review Criteria and information requirements

2.1 This Chapter sets out the criteria and likely information requirements needed to assess and give approval to dispute procedures.

The Director believes that there are two stages to the approval process:

• a compliance check to ensure that all applicable communications providers have established appropriate dispute resolution procedures by 25 July 2003; and
• a process of regular monitoring of the dispute resolution procedures to ensure that they are providing the intended benefits to domestic and small business customers.

2.2 In December 2002, the Director published a consultation document on Consumer Protection Policy Review guidelines. These guidelines set out how the Director intends to review regulation that primarily relates to consumer protection issues and therefore falls outside the scope of the reviews that concentrate upon the development of effective competition in a particular market.

2.3 The Director believes that the CPPR guidelines are an appropriate structure on which to base the approval and monitoring process for dispute resolution procedures.

The two sections below set out:

• the criteria and principles that the Director believes need to be met by any dispute resolution procedure; and
• the proposed methodology for carrying out assessments.

Criteria set by the Communications Bill

2.4 The requirements under the Communications Bill regarding dispute procedures within the new legal framework are clearly defined in Clause 49(3). This requires that they should be easy to use, transparent, effective and free of charge. The procedures should be set-up so that disputes can be fairly and promptly settled and a system of reimbursement and/or compensation should be adopted.

2.5 Therefore, in addition to the relevant consumer interest criteria set out below, it is also relevant for Oftel to consider the following criteria when assessing and approving dispute procedures:

• ease of use;
• transparency;
• effectiveness; and
• cost.

2.6 In interpreting these criteria, the Director has taken into account the guidance provided by the Commission’s 98 and 2001 Recommendations on alternative dispute resolution.

Ease of use

2.7 Easy and direct access to the scheme should be available to all consumers (including disabled and elderly people). In addition, consumers should have access to the services without being obliged to use a legal representative. Even though legal representation may not be obligatory when submitting a matter to a dispute procedure, cumbersome and complicated procedures may ultimately lead to this result.

2.8 Therefore, Oftel will need to assess whether:

• the procedures are user-friendly and easily accessible;
• the procedures take specific measures and offer the right facilities in order to meet the requirements of disabled or elderly people, those with language difficulties or other special needs, and that those people are made aware of the availability of such measures/facilities;
• all necessary information regarding the procedures are easily obtainable and understood throughout the dispute resolution process (i.e. the parties should be kept informed at stages of the resolution process); and
• all necessary information regarding the procedures can be made available-upon the consumer's request in alternative formats, such as large print, Braille etc, free of charge.

Transparency

2.9 Consumers should have a clear understanding of how to access and use the scheme, and have confidence in the scheme’s ability to resolve issues that have previously resulted in deadlock. Consumers should also have confidence in the decision-making processes of the scheme.

2.10 These objectives are best achieved by having clear and transparent processes in place to handle and feedback to consumers about their individual cases and any key decisions. Publication of regular reports regarding the dispute procedure, its procedures and decisions, which may include publishing decisions at an anonymised individual level and/or in aggregate, would also be helpful in achieving this goal.

Effectiveness

2.11 In order for a dispute procedure to be effective, it has to be fair, prompt, impartial and allow both parties to present their views. All representations, whether general inquiries or cases, should be dealt with on a fair and equitable basis. The dispute procedures processes should facilitate the achievement of this objective.

2.12 For dispute procedures to be effective they should have processes that facilitate fast decision-making processes. Oftel is likely to require information to assess the speed of the scheme’s decision making processes, although it is recognised that complex cases will take longer than simpler cases. Provided that the amount of time spent on any case is reasonable and proportionate to its complexity, then promptness is likely to be met. On the other hand, any delay in the decision making process should be justified.

2.13 Impartiality is a necessary prerequisite for a dispute procedure scheme to be effective. Prior to granting approval for any dispute procedure scheme Oftel would need to be satisfied that the scheme had safeguards in place to ensure its impartiality in resolving disputes between the parties. To ensure this Oftel would expect those responsible for the scheme to adhere to the following principles:

• appointments should be for a fixed term and appointees shall not be liable to be relieved of their duties without just cause;
• those administering the procedures should not have any perceived or actual conflict of interest with either party in a dispute; and
• those administering the procedures should provide information about their impartiality and competence to both parties upon request.

Cost

2.14 The Communications Bill requires that dispute procedures are offered to consumers free of charge. Therefore, Oftel will need to be satisfied that:

• any scheme is cost effective and therefore meets its costs without charging consumers that make use of the scheme; and

• the funding mechanism works efficiently and provides sufficient funds for the operation of the scheme, while remaining operationally independent of the communications provider(s) to whom the arrangements apply.

Compensation Awards

2.15 In addition to the requirements set out above, Clause 51(2) Bill also requires that before approving dispute procedures Ofcom is satisfied that adequate provisions are in place to confer the power to make awards of appropriate compensation and to enable that such awards of compensation are properly enforced. In assessing any dispute procedures, Oftel will need to be satisfied that this is the case.

Assessment methodology

2.16 As referred to at the beginning of this Chapter, the Director published CPPR guidelines on how he intends to review regulation that primarily relates to consumer protection issues in December 2002 (see paragraph 2.2 above). Dispute procedures clearly fall into this category of reviews and the CPPR guidelines are therefore relevant when considering dispute procedures.

2.17 The CPPR guidelines set out a number of criteria (access, choice, safety and effectiveness of services, information availability, equity, representation, privacy, and redress) that are relevant when reviewing consumer protection policies. The two most relevant and necessary to assess dispute procedures are:

• redress; and
• representation.

Redress

2.18 In this context, redress means that where a dispute arises between a consumer and a provider of electronic communications services, there is an effective process to resolve the dispute. The effectiveness of such a process can be assessed in two ways:

• through analysis of statistical data; and
• a review of the procedures adopted by the scheme.

2.19 In respect of the statistical data, Oftel is likely to require information on:

• the number of complaints/cases opened/resolved;
• the number of outstanding complaints (those that remain unresolved or that go to Court);
• satisfaction of the services by complainants (eg through consumer surveys);
• the number of decisions in favour of the operator/consumer.

2.20 The procedures must also be effective. To assess the effectiveness of such procedures, Oftel is likely to require information on the following aspects of the procedures:

• do they provide easy access for the consumer?;
• do they support the need for clear and transparent decision making?;
• is each step of the decision making process clearly defined?;
• do they ensure consumers are kept informed of each key stage of their case?;
• do they ensure that all cases are treated on an equal basis?;
• do they ensure that all inquiries and cases are dealt with in a timely manner?; and
• do they allow each party to have their say?.

Representation

2.21 Representation is the second of the high-level CPPR criteria that is relevant to a dispute procedure. In this respect, representation means that where consumers are unable to adequately address issues themselves, alternative means of getting their views represented are available. In addition to meeting the criteria for redress, outlined above, an effective dispute procedure would also need to meet the requirement for representation.

2.22 The requirement for representation can be assessed by examining whether a dispute procedure is an effective way of representing consumers’ views. This can be achieved by looking at:

• the definition and functions of the scheme (eg its Terms of Reference etc); and
• the way in which consumers’ views are represented by the scheme.

2.23 In considering the effectiveness of a dispute procedure scheme in meeting the first of these elements of representation, Oftel is likely to require information on:

• how the procedure will function;
• its Terms of Reference;
• its organisational structure;
• its relationship with the industry (or its member operator(s));
• its independence; and
• its complaint handling processes.

2.24 In respect of the representation of consumers’ views, Oftel is likely to require information on:

• the proportion of the market/services/consumers covered by the scheme;
• the satisfaction of consumers with the scheme; and
• the proportion of the market/services/consumers not covered by the procedure.

2.25 In addition, when undertaking a review of any dispute procedure, Oftel will consider the various options available in accordance with its Regulatory Option Appraisal (ROA) guidelines, which form the next stage of the CPPR process.

Chapter 3

3.1 This Chapter outlines the way in which Oftel, and later Ofcom expects to collect information when assessing and approving dispute procedure schemes.

Information gathering processes

3.2 In order to carry out the duties outlined in Chapter 1, and to undertake the assessment described in Chapter 2, Oftel, and later Ofcom will need to collect various types of information from those operating dispute procedure schemes. Oftel would hope to collect the necessary information and data on a voluntary basis, following a mutually agreed and clear reporting procedure, such as a Memorandum of Understanding with those providing a dispute procedure scheme.

3.3 However, Clause 132 of the Communications Bill in conjunction with clause 51 allows the Director and later Ofcom to "require a person […] to provide them with all such information as they consider necessary […]" in order "to keep under review the dispute procedures for the time being approved by them". The Director, therefore has the power to require the necessary information.

3.4 Furthermore, Oftel would be unable to approve a dispute procedure, as required under the provisions of the Communications Bill, in the event that the provider of the scheme or the provider of electronic communications services refused to provide the necessary information.

Chapter 4

Consultation Details

4.1 The Director seeks the views of interested parties on the analysis and proposals contained in this consultation document. The Director will then publish a statement setting out his conclusions.

4.2 Representations must arrive at Oftel no later than close of business on 16 May 2003. Representations received after this time will not be taken into account, and no extensions of the deadline will be permitted.

4.3 Where possible, comments should be made in writing and sent by e-mail to chandley@oftel.gov.uk. However, copies may also be posted or faxed to the address below. If any stakeholders are unable to supply their comments in one of these ways, please use the contact details below to discuss alternatives.

Chris Handley
Oftel
50 Ludgate Hill
London
EC4M 7JJ

Tel: 020 7634 8863
Fax: 020 7634 8847

4.4 Confidential responses should not be sent via the Internet. Responses will be published on Oftel's website in the Publications section under Responses to Oftel consultations except where respondents indicate that the response, or part of it, is confidential. Appointments to view written comments in Oftel's Research and Information Unit must be made in advance (see contact details below). Respondents are therefore asked to separate out any confidential material into a clearly marked annex. In the interests of transparency, respondents are requested to avoid confidential markings wherever possible.

4.5 On this occasion, the Director is not inviting stakeholders to comment on the representations made by others.

Further copies of this document

4.6 This document can be viewed on Oftel’s website, www.oftel.gov.uk. Paper copies and more accessible 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 telephoning 020 7634 8761 or by sending an e-mail to infocent@oftel.gov.uk.

E-mail notifications

4.7 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.