Ofcom is consulting on new rules to require providers of mobile, fixed line phone, broadband and/or pay TV services (standalone or as a bundle) to pro-actively notify their consumer and small business customers (10 individuals or less) when they are nearing the end of their minimum contract period and provide certain information about their contract and the impact of going ‘out-of-contract’.
Pre-pay (such as pay as you go) services or customers on contracts without a minimum contract period or with a minimum contract period of less than six months will not be affected by these proposals.
The proposals would require service providers to make changes to their current operating practices and ensure that internal processes and systems enable them to comply with the proposed requirements.
Communications service providers have until 9 October 2018 to submit a response to the consultation.
Why is Ofcom proposing these changes?
Ofcom research found that 20 million consumers in the UK are outside their minimum contract period and more than 10 million are on deals with automatic price rises once their minimum contract period ends. Research conducted by the Citizens Advice Bureau estimates that four million people in the UK have been charged for phones they already own, paying a total of £490 million extra on their last contracts. Ofcom believes that changes are required to ensure that customers are treated fairly and do not pay higher prices than they need to. It has set out its proposals to address this issue in this consultation.
The current regulatory framework, provided for by the General Conditions of Entitlement (GCs), does not require service providers to notify customers that they are nearing the end of their minimum contract period, although it does impose certain obligations around the provision of information, minimum contract periods and contract renewal, as follows:
- customer contracts must include certain information, such as price, minimum contract period and any early termination charges;
- minimum contract periods must not exceed 24 months;
- a 12-month minimum contract period must be available;
- contracts cannot renew for another fixed commitment period without the express consent of the customer (at the end of the minimum contract period the contract will continue to roll on a monthly basis); and
- early termination charges must not act as a disincentive for the customer from leaving the contract.
What does the consultation propose?
In addition to the existing obligations, the consultation proposes that:
- providers must send end-of-contract notifications to customers between 40-70 days before the end of their minimum contract period;
- one-off notifications must be sent to all customers who are out-of-contract notifying them of this and informing them of the implications on their existing deal;
- the notification must be easily understandable and must contain specific information, including:
- the date the minimum contract period will end, or has ended, and that early termination charges will no longer be payable;
- applicable notice periods to end the contract;
- the services currently being provided to the customer, including details of additional benefits (for example, free subscriptions to services such as Netflix or Spotify);
- any services being provided under a different contract with the same provider;
- the current monthly subscription price paid for the service, including any historical discounts;
- changes to the service and price at the end of the minimum contract period, where relevant; and
- that the customer has options available to them and may be able to make savings – which must include the availability of a SIM-only option;
- marketing of new offers will be permitted within the notification provided that they are at the end of that notification;
- notifications should be sent using the customer’s preferred communication route (SMS, email or post). Where SMS is used, minimum core information must be provided with links to another durable medium where more detail can be found;
- notifications must be provided in an accessible format for vulnerable customers (where they have already been identified as requiring communications in accessible formats); and
- the new rules are subject to an implementation period from the date of Ofcom’s final statement (expected in early 2019) of:
- six months for end-of-contract notifications; and
- nine months for out-of-contract notifications.
The new rules would be implemented through an update to Part C1 of the revised GCs, which comes into force on 1 October 2018.
What impact would this have on service providers?
If the proposals are implemented without change, service providers will need to review existing processes and customer management systems and consider whether they are fit for purpose to enable compliance with the proposed new rules.
Questions that businesses may need to consider in understanding the impact that the proposal would have on them:
- Do we already send end-of-contract notifications which would meet the proposed requirements?
- Does our customer management system record all the information required to be included in a notification: for example, historical discounts and services provided under different contracts?
- What development work would be required to send automated notifications to each customer by their preferred communication method? Is the cost proportionate to protect customer harm?
- Is it possible to undertake this development work and implement new processes within six months, taking into consideration other development plans in 2019?
- Is 40-70 days an appropriate time to notify customers that their minimum commitment period is coming to an end?
- Are the information requirements too extensive? Or do we think it would be helpful to provide any other information to the customer in an end-of contract notification?
- Would the impact on our business in terms of compliance be different for small business and consumer customers (for example, where there are multiple services on one contract with different end-of-contract dates which could result in multiple notifications)?
Ofcom’s proposals suggest that end-of-contract notifications are necessary to prevent harm to customers. The scope of information requirements and the types of customer to whom the notifications must be sent could still be changed following Ofcom’s review of the consultation responses.