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Ofcom introduction

Background

Ofcom has a duty to further the interests of citizens and consumers through a regulatory regime which, where appropriate, encourages competition. Effective competition delivers choice and lower prices to consumers as well as opportunities for new services. However, consumers may need protection from inappropriate and unacceptable behaviour by certain Communications Providers (‘CPs’) that may undermine confidence in the market as well as causing individual harm.

For competition to be effective in delivering benefits to consumers, it is vital that consumers are able to engage effectively in the competitive process and can switch simply between CPs but at the same time be protected from the risks of mis-selling and slamming¹. Effective migrations processes for consumers’ communications services are, therefore, a priority for Ofcom. While the majority of migrations of such services go through seamlessly and with relatively little effort from consumers, there is, however, some evidence that Ofcom’s efforts to drive consumer benefits through competition have been hampered by difficulties switching.

These switching difficulties are likely to increase as CPs continue to develop and expand their offerings to consumers by bundling different services together. While this mean that consumers will be able to benefit from an increasing range of services from a variety of CPs, Ofcom is concerned that the lack of consistent migration processes across communications services may contribute to the complexity and inconvenience experienced by some consumers in trying to switch providers. This could be a source of consumer harm in itself, and could also inhibit switching, thereby making the competitive process less effective.

For these reasons Ofcom is currently reviewing existing approaches to migrations, switching and mis-selling across transferable communications services in order to assess whether these approaches are consistent with Ofcom's principal duty, as set out in section (3)(1) of the Communications Act 2003 (‘the Act’); namely:

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

Ofcom consultation document

Ofcom published a consultation document, Migrations, Switching and Mis-selling, on 16 February 2006, which considered the current industry processes for switching, and set out an initial view that there were valid reasons for moving away from product-specific migrations towards more uniform processes. The reasons for this were as follows:

• multiple and inconsistent approaches means that the customer experience depends on the product(s) and service(s) being migrated;
• increasing volume and complexity of migrations which will increase the demand placed on the migrations processes initially developed for more simple migrations production processes; and
• difficulty and inefficiency of managing multiple and separate migrations processes for existing Communications Providers and new entrants.

Ofcom’s initial proposal was for a ‘Single Code’ process whereby the code necessary to switch appears on the customer’s bill. However, this received a mixed response from respondents. In particular, there was a strong view that although the concept seemed relatively simple, in practice it may be problematic. The main areas of concern were:

• code security due to there being no expiry date for codes;
• potential difficulty for consumers to access codes in the case of lost bills;
• that a ‘Single Code’ process would not map across all sales channels; and
• the potential that publication of codes on bills along with other personal details might increase instances of slamming.

Industry Migrations Working Group (IWG)

Following the consultation and, in light of responses received, Ofcom encouraged the industry to establish a Migrations Industry Working Group (IWG) with the principal aim of making recommendations to Ofcom on preferred options for single migrations processes. The IWG was set up in June 2006 and chaired by Openreach, and comprised representatives from across the breadth of industry.

The IWG agreed the following ‘customer experience’ principles

• a single process for all products and sales channels was needed;
• the migrations process should support complex migrations i.e. those involving product bundles;
• the customer should be well informed;
• there should be no undue barriers to switching CPs;
• opportunities for mis-selling and slamming should be minimised; and
• end-user touch points should be minimised.

The IWG submitted its report to Ofcom in October 2006, in which it agreed that a single process was desirable, and recommended three options to Ofcom for further consultation.

The IWG’s work, however, was focussed solely on the best consumer protection mechanism for the migration of customers between CPs, based on the ‘customer experience’ principles listed above. It did not consider issues relating to the practical implementation of the various options considered (including costs and timescales). Consequently, the IWG also recommended that Ofcom undertake a detailed feasibility study into issues relating to the practical implementation of the various options considered (such as costs and timescales).

While the IWG considered longer term options for migrations processes, during 2006 there was a steady increase in the number of customers complaining about problems related to broadband migrations. Ofcom considered that this trend warranted urgent investigation and action and launched the Broadband Migrations Review in April 2006. Following consultation, and in light of stakeholder responses received to the consultation, Ofcom concluded that existing broadband migrations processes required strengthening. Accordingly, new regulatory obligations in relation to broadband migrations (General Condition 22) were introduced, and came into effect, from early 2007. These obligations formalised many of the existing migrations processes developed by industry.

The Deloitte study

In March 2007, Ofcom asked Deloitte to develop a broad picture of the costs and benefits of the changes required to deliver a single migrations process for transferable communications services. In particular, Deloitte was asked to consider a variety of migrations options (including, but not limited to, the options recommended by the IWG) with a view to developing an opinion on the implementation and ongoing operational and maintenance costs and transitional issues. Deloitte was asked to evaluate these costs against the resultant ‘customer experience’, to include the six principles adopted by the IWG, but to also take account of other factors, including customer convenience, time taken, ease of understanding and reliability.

Deloitte was also asked to review and evaluate proposal against experiences and practice abroad and in other sectors and to consider how lessons could be drawn from them.

Next steps

Ofcom is publishing Deloitte’s report today, and is keen to hear the views of stakeholders on the issues raised. Ofcom believes that this report is one element of a wider debate on improving the migrations processes and consumer experience. Ofcom is nevertheless keen to engage with the industry on the findings in advance of consulting more formally in order to develop our thinking further. Written comments on any aspect of the report’s data, analysis and conclusions would be particularly helpful. Please send your responses to Gavin Daykin at gavin.daykin@ofcom.org.uk to reach us no later than 5pm on Friday 15 February 2008.

In addition, Ofcom will be undertaking a number of activities over the next month designed to facilitate this debate and is proposing to hold a stakeholder workshop on the Deloitte study at Ofcom’s Offices at Riverside House, starting at 3pm on Monday 11 February 2008, to discuss the findings in more detail. If you are interested in attending please use the e-mail contact details above to register your interest by no later than 5pm on Friday 1 February 2008.

Ofcom plans to publish a consultation document later in the year reflecting on all stakeholder feedback received during the informal consultation period and explaining how we intend to take this work forward.

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Footnote

The term ‘mis-selling’ covers a range of sales and marketing activities that can work against the interests of both consumers and competition and undermines confidence in the industry as a whole. ‘Slamming’ is an extreme form of mis-selling, where customers are simply switched from one company to another without their knowledge or consent.

• Costs and timelines for moving to a single migrations process for transferable broadband and voice products [pdf]
  Deloitte Report - Full Print Version
• Responses to the Deloitte study

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