Ofcom Automatic Compensation Update | Summary Of Proposals

26th March 2018  by Union Street

On 24 March 2017, a consultation on requirements for automatic compensation (compensation to be paid to end user customers in the event of loss of landline and/or broadband services) was published by Ofcom. Union Street reported on the document at the time and its potential effect on the industry.

The original proposals for automatic payment of compensation related specifically to “landline and broadband services intended primarily for use by consumers”. At the time Ofcom expected that this would also include some small businesses that used these products.

Compensation applies strictly to loss of service and not, for example, to slow broadband speeds. Loss of service can further be characterised as “where the customer is unable to either make outgoing calls or to receive incoming calls; or unable to access the internet and the loss of service requires repair.”

In addition, Ofcom proposed to protect SMEs who would not be entitled to automatic compensation on the above basis, by ensuring that they have access to extra information regarding their CP’s policy on payment of compensation for the same service breakdowns. In this case, an SME customer is determined as an undertaking of no more than 250 employees and not the normal “up to 10 employees” definition.

Following the consultation, a statement summarising Ofcom’s decisions was released on 10 November 2017. Although Ofcom had originally proposed actual regulation incorporated into a new General Condition (GC), it has relented and accepted a voluntary scheme, proposed by the industry, for payment of compensation to consumers.

The requirements on transparency for SMEs will, however, be incorporated into a new General Condition 24 coming into force on 1 June 2018. Subsequently, following the implementation of the revised GCs on 1 October 2018, these commitments will be transposed into the new GC C2 – “Information, Publication and Transparency”.

The Voluntary Industry Scheme

Essentially the voluntary scheme for consumer customers will provide compensation at levels close to those proposed by Ofcom in its original consultation, as follows:

  • Delayed repair following loss of service – where the service has stopped working and is not fully repaired after two full working days, £8 for each calendar day.
  • Missed Appointments – where the engineer does not turn up for a scheduled appointment or it is cancelled with less than 24 hours’ notice, a single payment of £25.
  • Delays with the start of a new service – where the provider promises to start a new device on a scheduled date but, fails to do so, £5 for each calendar day of delay, including the missed start date.

CPs must also proactively notify customers of their entitlement to redress immediately whenever any of the above scenarios occurs.

There is also a general requirement to publish details of the available compensation on the CP’s website and provide it in a durable format when the customer signs a contract.

Payment will generally be made by means of a credit on the customer’s bill and must be made within 30 days of either service restoration or the missed appointment.

As part of the voluntary scheme, CPs will be allowed to cap the level of compensation to be paid in individual cases if the problem persists. After 30 days following the initial failure, the CP can issue a 30 day notice of its intention to terminate payments, effectively creating a 60 day cap.

Compensation is not necessary if the event giving rise to the loss of service was caused by an act or omission on the part of the end user.

Compensation will be paid, however, even in the event of Force Majeure incidents such as when Openreach declares MBORC.

The scheme will also give Ofcom the authority to require the provision of information on compensation payments made by CPs.

The scheme is voluntary and will only apply to those CPs that are signatories to the agreement. Those currently committed to join include BT, Virgin Media, Sky, TalkTalk and Zen Internet which will, in effect, cover 90% of broadband and landline consumer customers.

Transparency Requirements in Relation To SMEs

The new General Condition 24 states that CPs must publish the following information in respect of any standard form contract for fixed-voice or other fixed-line services or broadband services for SME customers:

SLAs which apply in respect of;

  1. Activation of the services the date confirmed to the customer
  2. Loss of service (i.e. restoration)
  3. Failure to keep a pre-agreed appointment at the customer’s premises
  4. The SLG (i.e. compensation payment) (if any) that applies where the SLA is missed.
    Any exceptions to the above
  5. The GC explicitly requires that a CP must publish, in the same way, the fact that no SLA or SLG applies in the above cases, if this is the case.

The requirement is to publish the information in an “easily accessible position and reasonably prominent manner” on the CP’s website.

CPs must also provide this information when an SME enters into a contract. The requirement here is explicitly to provide the information in “durable medium” that is separate and distinct from the contract.

These transparency obligations are regulatory requirements and will come into force on 1 June 2018.

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