Broadband migrations: enabling consumer choice

Summary

The UK Broadband market

1.1 Broadband has had a profound effect on the way that many people live their lives in the UK today. The ways in which we communicate and the ways we access information and entertainment services have been transformed by ‘always-on’ connections to the internet. The availability of increasingly low-cost, high-speed broadband has been a particular spur to mass market takeup of online services. Latest figures indicate that around 11.5 million UK households subscribe to broadband services, and this number continues to grow at a rapid pace.

1.2 New regulatory and industry initiatives – for example, the unbundling of the local loop – have created a competitive market in broadband, resulting in the availability of cheaper, better and faster services. However, if consumers are to continue to see the benefits of competition, they must be able to shop around – and, once they have found a good deal, to switch broadband providers without undue effort, disruption or anxiety.

1.3 Where consumers don’t have access to processes that let them switch easily, they may suffer inconvenience and distress. If consumers start to think that switching providers carries this kind of risk, the competitive process can be dampened in a way that means all consumers will suffer. Competition is only effective where customers can punish “bad” providers by taking their custom elsewhere, and reward “good” providers by staying where they are. If switching is difficult, competition may, over time, fail to ensure that consumers receive the benefits they should be able to expect.

Broadband migrations

1.4 Ofcom considers that it is vital to support consumers’ ability to migrate between products and providers – so that customers can consider available options and change their broadband service or provider when they want to.

1.5 The majority of broadband service changes go through seamlessly and with relatively little effort from the customer.

1.6 However, evidence suggests that many consumers have found it difficult to switch between broadband suppliers or to move home without experiencing problems. Some have lost their broadband for several weeks, or been given confusing and contradictory information about what they need to do to migrate.

1.7 Customers are continuing to subscribe to broadband services for the first time, and increasing numbers are now likely to be reaching the end of their initial contracts. With the ever-increasing range of new packages and better deals, this means that more and more customers will want to be able to switch provider if they find a better deal. This, in turn, points to a risk that more and more customers may face difficulty when seeking to change broadband suppliers. Broadband customers may even decide not to switch rather than risk disruption to their service.

1.8 During 2005, Ofcom saw 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 (“BMR”) in April 2006 to understand the situation further and consider whether action could be taken.

1.9 On 17 August 2006, Ofcom published the consultation document Broadband migrations: enabling consumer choice (“the consultation”), which set out the findings of the BMR and proposed new regulation, in the form of a new General Condition, to address some of the problems associated with broadband migrations.

1.10 After considering stakeholders’ responses to the consultation and further developments in the market, Ofcom has concluded that it is appropriate for it to take action in two ways:

• the introduction of General Condition 22: Service Migrations, which will come into force in two months ( 14 February 2007); and
• continued co-regulatory work on outstanding process issues, with a further consultation on additional broadband migrations processes – in particular, an alternative mechanism for the release of Migration Authorisation Codes (“MACs”) – likely to follow after General Condition 22 comes into force.

1.11 This statement explains why Ofcom has reached this decision and how it expects General Condition 22 and further co-regulatory work to address consumer harm associated with broadband migrations.

General Condition 22: Service Migrations

1.12 General Condition 22 consists of two elements:

• a requirement on all Communications Providers to comply with the MAC process; and
• where the MAC process does not apply, a requirement on all Communications Providers to comply with a number of high-level obligations designed to address consumer harm associated with broadband migrations.

1.13 Broadband service providers will now be required to follow the MAC process for all migrations to which it applies.

1.14 This means that broadband service providers who are losing a customer will be required to provide MACs on request in most cases. They will not be able to withhold MACs where the customer owes them money (“debt blocking”) or charge for MACs. At the same time, however, customers need to make themselves aware of their responsibilities under the contract that they have with their broadband provider – which may for example require them to pay an early termination charge if they wish to leave their contract before the agreed date.

1.15 Broadband service providers who are gaining a customer must, when presented with a valid MAC, use the MAC process to ensure a seamless transfer. This does not mean that broadband service providers must take on any customer. They are entitled to refuse to provide service, for example, to someone who they consider to be a bad debt risk. However, where they are content to take on a customer they must use the MAC process where it applies.

1.16 General Condition 22 will also impose new obligations on some wholesale broadband providers. Currently, consumers may suffer harm where their broadband service provider is unable to supply MACs because its wholesale provider is refusing to issue it with MACs. When General Condition 22 comes into force, however, wholesale providers will also be required to supply MACs to their customers – broadband service providers and resellers – on request.

1.17 Where the MAC process does not apply (for example, for migrations to and from connections based on MPF, for home moves, or where there is no live broadband connection), the high-level obligations in General Condition 22.2 will require broadband providers to:

1. facilitate the migration (or where applicable, connection) of the Broadband Service in a manner that is fair and reasonable;
2. ensure that the migration (or where applicable, connection) of the Broadband Service is carried out within a reasonable period;
3. ensure that the migration (or where applicable, connection) of the Broadband Service is carried out with minimal loss of the Broadband Service; and
4. assist with, and facilitate requests for, the migration (or where applicable, connection) of a Broadband Service provided by another Communications Provider, in instances where the other Communications Provider has failed to, or refused to, comply with the MAC Broadband Migrations Process, in a manner that is fair and reasonable.

1.18 Because General Condition 22 will be a regulatory requirement, Ofcom will have the power to formally investigate potential breaches and, where appropriate, to take enforcement action against broadband providers who have failed to fulfil their obligations.

1.19 This means that General Condition 22 will enable Ofcom to address the operational problems not related to the MAC process that we discussed in the consultation.

1.20 For example, Ofcom will be able to investigate a possible breach:

• where it is clear that a particular provider could have taken action to address weaknesses in its processes or systems that currently lead to problems for consumers with broadband migrations (e.g. tag on line) but has failed to do so;
• where the industry has agreed a process to support broadband migrations, and a particular service provider is failing to use it;
• where a wholesale broadband provider has not acted reasonably and proportionately to help consumers following the failure of a retail provider or in the event of a dispute – for example where it could have issued MACs without incurring significant costs but did not do so.

1.21 The high-level obligations in General Condition 22.2 require broadband providers to do what is fair and reasonable in a particular case. Ofcom will therefore consider any of the possible breaches listed in the preceding paragraph on a case-by-case basis.

Further work by industry

1.22 While General Condition 22 will address many of the problems associated with broadband migrations, it will not solve all of them.

1.23 Where a problem requires further input from the industry to design, test and implement new processes, it may not be appropriate to rely on regulation alone to deliver results.

1.24 In particular, Ofcom will work with the industry to design an appropriate process for the provision of MACs by an alternative source if the customer’s broadband service provider fails, or refuses, to provide them. Ofcom does not at this stage have a view about what such a process would look like, and considers that there may be a number of possible alternatives. Ofcom plans to discuss plans for appropriate co-regulatory arrangements with the industry in early 2007.

1.25 Following further work by the industry, Ofcom expects to consult again in due course to bring a process for the provision of MACs by an alternative source within the scope of formal regulation. However, Ofcom recognises that the introduction of General Condition 22, combined with further work undertaken by the industry, may, over that six-month period, bring consumer harm associated with broadband migrations down to a level where further regulation is not appropriate. Ofcom will therefore only undertake a further consultation if it remains of the view that further regulation is a necessary and proportionate consumer protection measure.