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ShareUPDATE: Where there’s blame there’s a claim – really?

Last week further details emerged regarding Ofcom’s plans for a broadband compensation scheme. In our previous article (Where there’s blame there’s a claim – really?) we clearly stated a number of concerns we have about this and with the release of the additional information from Ofcom, unfortunately many of those concerns remain.

What are the compensation plans?

When a consumer (specifically a residential consumer or SME) with a domestic fixed line broadband service experiences a fault they would be entitled to claim automatic compensation at set rates eliminating the need for any lengthy or difficult claims processes.

Ofcom states the situations allowable for compensation and set rates are:

  • Delayed repair following loss of service – the service has stopped working and is not fully fixed after two full working days = £10 per calendar day that service is not repaired
  • Delays with start of new service – Promised start date for new service is missed = £6 per calendar day of delay including missed start date.
  • Missed engineer appointment – engineer doesn’t turn up for appointment or the appointment is cancelled with less than 24 hours notice = £30 per missed appointment

They also state that SMEs purchasing business products should be provided with greater clarity on the quality of service they should expect and any compensation claim policies in place. All compensation claims should be paid in cash or as a bill credit within 30 days.

To support their proposals Ofcom argues that there are 5.7 million cases of consumers experiencing a loss of landline or broadband service every year and engineers also failed to turn up for around 250,000 appointments. Additionally, around 1 in 8 landline and broadband installations were delayed (12%), affecting more than 1.3 million people. So with its new plans in place up to 2.6 million additional customers could receive up to £185m in new compensation payments each year.

However, their own research also shows that “over 80% of fixed line, broadband and mobile consumers are satisfied with their services”. So, is this all even necessary and will it just satisfy a small minority of consumers?

Proportionate compensation amounts?

Firstly, we have concerns over the set rates Ofcom have published. £10 per day of a service being down when the broadband service could cost as little as £20 a month in total seems disproportionate to us! Margins are already squeezed on broadband – will this just result in smaller providers having to put up their prices to cater for these potential costs and make them less competitive against the major market players?

Identifying who’s at fault

A further problem is the issue of who’s to blame. Often, broadband is provided via a ‘channel’ of suppliers and this may not be obvious to the end user. For example, in our own situation an end user customer would purchase their broadband service from reseller A, who purchases the service from us, who delivers the service from the BT network via our own network. But, like every supplier in the UK using the BT backbone, we rely on Openreach to fix any faults on the BT network. and conduct any installs. So when something breaks on the BT network or an Openreach engineer doesn’t turn up – why should reseller A (the ‘retail provider’) have to bare the brunt of the compensation claim? Yes, they should be able to claim it back up the channel but how long will that take? Absorbing those sorts of delays and bureaucracy is all well and good for the major market players with ‘compensation funds’ set aside, but for small resellers that could cause significant cash flow issues especially if one outage affects several hundred customers at once. Despite their best intentions, if the fix is reliant on Openreach or any other network operator, they are unable to do anything to speed up the fix (apart from complain – but that won’t necessarily help either).

What about MBORCs?

That brings us nicely on to MBORCs (Matters Beyond Our Reasonable Control) that cause major outages such as flooding and storm damage. When it comes to these contentious matters the regulator appears to step back stating “we do not have a view on whether the cost of force majeure-type events should be borne by the wholesale provider or retailers, especially as the issue may be no more under the wholesale network provider’s control than the retail provider’s. Our provisional view is that the aggregate cost to industry of providing automatic compensation for service problems caused by force majeure-type events is not disproportionate.”

Proving where fault lies

A further concern of ours is around proving where the fault lies. It’s far from uncommon to have issues where Openreach have difficulty finding the root cause of the issue and where it lies (e.g. on which network – BT’s or the suppliers?) or won’t admit that the issue is on their network. Similarly, what if an engineer states they tried knocking etc and there was no answer – then it becomes a case of your word against theirs. Then what? How is this resolved?

All in all, we agree with the principle of compensating customers for significant outages and other issues such as missed appointments and install dates but in reality, it’s much more complex to implement, especially with regards to the wholesale channel. At the end of the day, broadband is usually a low cost, contended, connectivity solution, that like everything, breaks from time to time. It’s important customers understand that.

If it’s critical to your business or your daily consumer life then the better idea would be to choose a connectivity solution that provides its own form of ‘guarantee’ e.g. through SLAs. At least, we hope the proposals will force the likes of Openreach to up their game further and improve their fix times, install dates and missed appointment targets.

The current proposals will now go into industry consultation period until 5th June with plans for a final statement by the end of the year. It’s likely an implementation period of up to 12 months will then follow.

Have your say!

Do you think the new broadband compensation claim proposals are a good or bad idea? How do you expect they will affect your business? Share your opinions with us by leaving us a comment below.

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