Delivering for Consumers and Citizens - speech at Which? by Sharon White, Chief Executive of Ofcom, 12 April 2017
It’s a pleasure to be here. I’m very grateful to Alex Neill and her team at Which? for organising today’s event.
Which? does a superb job as a consumer advocate rooted in serious policy analysis.
I joined Ofcom two years ago, and Which? were generous enough to host my first speech as Chief Executive.
My aim then, as now, was to explain how consumers – both people and businesses - lie at the heart of everything Ofcom does.
By law, Ofcom is required “to further the interests of citizens in relation to communications; and to further the interests of consumers in relevant markets, where appropriate by promoting competition”.
I want to consider what we mean by ‘the interests of consumers and citizens’.
I spoke two years ago about the fact that a decent reliable broadband and mobile had become an essential service.
As much a necessity as gas, water or electricity.
The fourth utility.
Indeed our research shows that young people would happily do without hot water than Facebook.
Universally available superfast broadband and 4G mobile are viewed as a right by consumers in a way that was unimaginable even five years ago.
Yet around five per cent of homes and offices – 1.4 million – cannot get decent broadband of 10 megabits per second.
That figure rises to eight per cent in the case of small businesses –or 190,000 offices without an adequate connection.
Mobile broadband is being rolled out across the country. Yet 28 per cent of UK homes and offices cannot get a good indoor 4G signal from every operator.
The Government has set out a clear policy objective to widen broadband and mobile coverage across the UK.
A new ‘universal service obligation’ for broadband is currently being legislated in this Parliament in the Digital Economy Bill.
The USO complements the Government’s pre-existing commitments to make superfast broadband available to 95 per cent of homes and offices by the end of 2017 and to ensure that 90 per cent of the UK has a mobile signal to the same timeframe.
These sit alongside Ofcom rules to ensure that 98 per cent of homes and offices get a good indoor 4G signal from at least one mobile operator also by the end of this year.
The Government has said it will go further, setting out in a transparent fashion its policy objectives for the whole of the telecoms sector in a new Strategy and Policy Statement; which I very much welcome.
As the regulator, we have a supporting role to ensure that people in the UK get the best from their communications services, and that these are available as widely as possible. We do this through the detailed application of regulation.
Some in the industry argue that in furthering the interests of consumers, we should limit our activity to promoting competition and go no further.
Increasing competition is clearly of fundamental importance.
It brings consumers greater choice, innovation and lower bills.
In 2000, 56 per cent of us depended on BT for our broadband. Today that figure is 32 per cent, as players like TalkTalk and Sky have entered the market and taken business from BT.
And over the last five years, we have, on average, been paying the same amount for our landline, mobile, TV and broadband services, while the range and power of those services has often increased. [(Individual bills may, of course, have gone down or up.)]
Careful regulation has played its part.
And we are taking further action to make the market more competitive.
Reforming Openreach, BT’s network arm, so that it works on behalf of the whole of the telecoms industry.
Openreach will become a distinct company with its own staff, management and strategy, giving other operators the confidence to invest.
Forcing Openreach to open up its core network of underground ducts and telegraph poles, so that other companies can route their own fibre networks through them.
Cutting the wholesale price that Openreach can charge for superfast broadband, further to spur competition.
But promoting competition cannot be the sum of our activity if we are fully to serve the interests of consumers and the wider public.
That is because competition has its limits.
For one thing, competition is generally less pronounced in rural areas, simply because fewer customers make it hard for operators to turn a profit.
For another, while people tend to shop around on price, or for a particular product they like, they do not tend to make choices based on customer service; which means operators can get away with poor service.
And millions of consumers, particularly vulnerable and elderly people, don’t shop around at all.
This has created a widening gulf between consumer expectations and what the industry is actually delivering.
Which? has found that telecoms dominate the list of worst-rated companies for customer service – behind even banks.
Which?’s new campaign, Fix Bad Broadband, rightly highlights one particular failure – the mismatch between the speeds people think they are buying, and what they actually end up getting.
Interestingly, Which? finds that one of the most trusted sectors is the food industry.
Customers see the food industry as quick to respond to their concerns and effective at addressing them.
The fact that the telecoms industry is so far behind should be a concern for us all.
In putting consumers at the heart of everything we do, Ofcom has three important roles beyond competition –
First, empowering consumers to make better choices.
People can only make informed choices if they understand what is available to them.
This becomes even more important – and challenging – as communications services become more complex, with different combinations of services and packages on sale.
So today, we have published our first ever report on Comparing Service Quality.
This shines a light on the varying service of different operators, giving consumers the information they need to shop around and hold providers to account.
Today’s report shows that a significant minority of consumers – 13 per cent – experience poor service.
One in eight broadband customers had reason to complain about their service. Of those, three quarters were suffering slow speeds or loss of service.
Some customers faced excessive delays in getting a new phone or broadband installed. One in twenty installations took more than 30 days.
More than one in twelve mobile customers are dissatisfied with their mobile reception – increasing to one in five in rural areas.
And when people turn to their provider for support or to complain, some operators keep their customers waiting on the phone for four, five or even seven minutes before their call is answered.
That’s a lot of Vivaldi’s ‘Four Seasons’ to listen to!
Providers can distinguish themselves from the competition by investing more in customer service.
Some are starting to do so.
Call centres are being returned to the UK. More emphasis is being given to ‘getting it right first time’.
But it is not yet leading to a step change in industry performance.
The Which? trust tracker shows high levels of distrust in the telecoms sector – 24 per cent for broadband services, and 26 per cent for mobile. Figures that are comparable to the banking industry.
We believe our Comparing Service Quality report provides a benchmark for improvement, and a strong incentive for providers to turn round performance.
By presenting information in a way that’s easy to understand, it can empower customers and help them to shop around with confidence.
We will update the Report annually, and include new data that the public want to see.
So informing and empowering customers is vital.
But so too is making it easier for them to shop around. That means making it easier to switch to a provider that offers a better deal.
We have already made the switching process simpler for millions of landline and broadband customers.
We’re looking to do the same for mobile; and will say more later this year.
A second major task for the regulator is to protect customers – particularly the vulnerable – where the market fails to.
We are tightening up our rules on Openreach, requiring the company to provide faster installations and fault repairs.
In the event that things still go wrong, we are proposing to introduce automatic compensation. A cash payment or credit on your account without having to chase your provider.
Automatic compensation will be payable if your landline or broadband isn’t fixed quickly enough; if your new service isn’t up and running when promised; or if an engineer fails to arrive for an appointment.
Around 2.6 million extra landline and broadband customers could get payments totalling £185 million each year.
We also intend to cut bills for two million elderly and vulnerable customers who only take a landline. Their bills have risen by one third, even as operators’ costs have fallen by one quarter.
Almost half are aged over 75. Their landline is a lifeline to friends and family. We are proposing to cut their monthly bill by at least £5.
Third, when operators fail their customers and break our rules, we will take enforcement action.
In the last few months we have fined Vodafone, Plusnet and EE for a range of poor behaviours including mis-selling, overcharging and false billing.
Our primary motivation as a regulator is to deliver for consumers.
That starts with ensuring a competitive market – one that supports innovation, better coverage and fair prices.
But where competition isn't enough, we have a duty to step in.
We will empower consumers with better information, protect those who are failed by the market, and take action against companies who fail their customers.
Ultimately, what we want to see is cultural change in the telecoms industry.
We want all operators consistently to put customers – and customer service – at the heart of their businesses.
And what would success look like?
Openreach, not Ofcom, setting its own stretching service standards.
Automatic compensation rarely being necessary, because there are few failures in the first place.
And fewer fines, because companies routinely put their customers first.
I appreciate that there is a long way to go.
But with commitment from the industry – and appropriate action from the Government and the regulator – things can get better.
And consumers deserve that they do.