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Ofcom have now announced the final details of their automatic broadband compensation scheme. Not much has changed since the initial proposals, with some back and forth between industry and Ofcom over the final agreed compensation amounts. But, the biggest surprise is the fact that this will now be a voluntary agreement between Ofcom and several of the UK’s consumer focused providers, namely BT, Virgin Media, Sky Broadband, TalkTalk and Zen Internet with EE and Plusnet also indicating an intention to join the scheme.

A compensation compromise IS possible after all!

So, it looks like a compensation compromise is possible after all. Ofcom and the industry giants have negotiated some minor changes to the actual charges as below:

 Original Ofcom ChargeIndustry suggestion in June 2017Final Agreed Charge
Loss of service£10 per calendar day beyond two working days after the provider becomes aware of the loss£7 per calendar day for loss of service beyond two working days£8 for each calendar day that the service is not repaired
Delayed Installation£6 per calendar day beyond the date that the provider has committed to in a written form£4 per calendar day (only payable automatically if customer subsequently activates)£5 for each calendar day of delay, inc the missed start date
Missed Engineer Appointment£30 for a missed appointment slot or cancellation with less than 24 hours notice£20 for a missed appointment slot or cancellation with less than 24 hours notice£25 per missed appointment

However, the most significant change is the fact that the scheme is now voluntary, Ofcom have decided not to enforce this through regulation. Although they do state a review will be conducted 1 year after implementation, which is expected to take approx 15 months in itself, taking us up to early 2019.

What does this mean for ISPs?

Essentially, you don’t have to provide automatic compensation unless you decide to do so voluntarily and sign up to the scheme, which is great news for smaller ISPs that may have struggled to cover these costs. The regulator estimates that up to 2.6 million customers could be affected receiving up to £142 million per year in automatic compensation.

However, in reality not being signed up to the voluntary system may become a service differentiator if several of your competitors decide to join. Therefore, some smaller ISPs may still decide to participate, but at least this way it will be their choice.

Whilst this currently only affects ‘residential’ packages it’s estimated to affect up to 1/3rd of SMEs who have purchased residential broadband services for their businesses. Ofcom reportedly has plans to ensure all SMEs receive clearer and more detailed information about service expectations and how and when they can claim compensation.

But, who’s at fault?

The key concerns we have, are over who pays and when. Identifying where a fault lies and therefore who’s responsible for that fault can be complex.

Firstly, the customer will not be compensated where they are responsible for the fault (e.g. through damaging their own internal wiring etc) but that can be difficult to prove in itself.

Secondly, it can be very difficult to identify exactly where the fault lies within a network e.g. the ISP or the infrastructure owner (e.g. Openreach) and therefore identify who is responsible and liable for the costs. Not to mention the potentially lengthy process to claim those costs back through the supply chain. Details of how that will work are yet to be announced although Ofcom has already stated this will be a matter for industry negotiations.

Thirdly, what about MBORCs (Matters Beyond Our Reasonable Control) such as flooding. In response to ‘force-majeure’ type events Ofcom again referred this to industry negotiations and stated “our judgment is that a fair and effective automatic compensation scheme should provide for retail providers to pay compensation to consumers where the service quality failure occurs as a result of a force majeure event.”

They continued to add that they “do not have a view currently on whether the cost of force majeure-type events should ultimately be borne by the wholesale provider or retailers, especially as the issue may be no more under the former’s control than the latter’s.”

We foresee many issues arising over ‘responsibility’ in the future where Ofcom may need to step in to find a resolution when ‘industry negotiation’ fails.

However, in the main, the voluntary nature of the scheme should come as a relief to many smaller ISPs that would have been otherwise financially burdened by a potentially cost heavy automatic compensation policy. It will be interesting to see how many ISPs sign up to the voluntary scheme and how the industry ‘negotiations’ pan out over time.

Have your say!

Are you planning to sign up to the voluntary scheme or are you relieved that it will not apply to you? Do you have concerns over the identifying ‘responsibility’ for faults and reclaiming the initial costs? Share your thoughts by leaving us a comment below.

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