ACCAN conference
The Telecommunications Consumer Protections Code—delivering for consumers
Speech by Chris Chapman
Chairman and Chief Executive
Australian Communications and Media Authority
Wednesday 5 September 2012, Sydney
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Introduction
I’m very pleased to be here today to discuss the work of the ACMA in the consumer space, primarily through the lens of the new Telecommunications Consumer Protections Code; what it can deliver and our mutual way forward.
Of course that discussion sits in the context of the many other activities that the ACMA is tasked with.With that in mind, I’d like to share with you a video distillationthat our staff recently put together—what we are, what we stand for and what we do in the heavily textured environment of media and communications in Australia.
It is essentially about how the ACMA interacts with the diverse and complex Australian landscape today, but you should discern that it has a future focus, a future in which we see an enhanced and strengthened ACMA playing an important, indeed pivotal role in the evolving networked society world.
I think it is a fantastic piece of work (the emerging Gov 2.0)and I’ll be interested to hear any feedback.So, before going any further, let me introduce the ACMA story.
[PLAY VIDEO—3 minutes]
As you all know, the ACMA recently decided to register the Telecommunications Consumer Protections (TCP) Code, in fact, only last Saturday.It provides a comprehensive set of enforceable safeguards for Australia’s telecommunications consumers.All of the primary protections are contained in a single document and the protections are aimed at addressing key points in the customer/provider lifecycle. It represents the delivery of what I consider to be a world leading reform package for Australian telecommunications consumers.
At this point I would like to commend ACCAN’s Michael (Fraser) and Teresa (Corbin) for their work on Communication Alliance’s TCP Code Steering Committee and also Sue (Salthouse), Elissa (Freeman) and Jonathon (Gadir) for their considerable input to the Code’s working committees.I must also acknowledge the intensive work of John Stanton (the Comms Alliance CEO) and the input of industry representatives in the process.Finally, I again acknowledge the ‘behind the scenes’ but nonetheless unwavering interest and encouragement of Minister Conroy. And thank you Michael for also hosting me at your recent ACCAN Board lunch—a very engaged lunch it was.
These strong new consumer safeguards have come about due to the ACMA’s extensive public inquiry Reconnecting the Customer its subsequent ground-breaking report and its unwavering insistence that the proposals of the inquiry be implemented, accepting, in the first instance, thatthe opportunity for implementation be first provided to industry though the industry codedevelopment process.We now have that industry code, it has been registered and it’s now up to industry to prove its mettle through action.Frankly, they simply can’t afford to snatch defeat from the jaws of victory.
The ACMA, for its part, will be stepping up the compliance and enforcement work necessary to make the TCP Code work (that is, really work) in the interests of consumers.I am hopeful that most players have bought into the necessity to lift their game both individually and collectively—we are, and will be, watching and responding to non-compliance with the code.
TCP Code
The key consumer advances in the new TCP Code are in direct response to each of the five areas highlighted by the Reconnecting the Customer report: advertising; facilitated customer care comparisons between providers; improving information about plans; spend management tools; and complaintsmanagement. For the long tail of the industry that may not have quite digested the comprehensiveness of the enhanced consumer protection, it is worth dwelling in a little more detail on how the new code deals with each of these.
Advertising
The inquiry proposed that all providers should clearly disclose pricing information in their advertisements so that consumers can compare plans. Advertisements should no longer use words that could be confusing.
In the inquiry, the ACMA estimated that the consumer costs associated with the industry’s poor advertising practices and the lack of critical informationfor consumers that ensues are $1.4 to $1.5 billion a year.
A key problem has been the way the mobile telecommunications industry has progressively structured its plans. And I’m referring here specifically to ‘included value plans’ which may offer, for example, a supposed $500 worth of value for $49 a month.
To be honest, advertising was the main issue in contention since CA submitted its original ‘register me’version of the code in February.
Though these offers sound attractive, they are not currently comparable. $500 worth of value for $49 where the calls are charged at 10 cents per minute with no flag fall may be much better value than $700 worth of value for $69 where the calls are charged at $1 per minute plus 30 cents flag fall…or any other reasonable variation thereof. This information is not readily visible to consumers or capable of manageable computation,and once the included value limits are passed, charges accrue at a more expensive rate.
The ACMA would like to see these confusing offers disappear. However, the ACMA has no direct power to control pricing or to make providers structure their offers in particular ways; nor, quite obviously, is that appropriate.So the ACMA ‘asked’ Communications Alliance to require standard pricing information in the text advertising of included value plans.
From the end of next month (27 October), suppliers must disclose unit pricing for the key elements of internet and mobile included value plans—the charge for a two-minute national call, the charge for a standard SMS and the charge for downloading one megabyte of data in printed and online advertisements where price is quoted. This will give consumers a better idea of what is being offered and facilitate some manageable computation and, therefore,greater comparability.
Making it easier to compare providers for consumers
The inquiry found that consumers could not compare the quality of customer care offered by different telecommunications suppliers before they chose a plan. This situation created a ‘race to the bottom’ leaving many customers disappointed by the quality of customer care they receive after they have purchased their plan, which they’ve usually only cottoned on to when they have a problem.
The response from the inquiry was that industry shouldindeed provide more information about how good their customer care is, particularly how quickly they resolve their customers’ enquiries.
The code establishes a new body, Communications Compliance(‘CC’), which will undertake regular compliance monitoring as well as developing customer service metrics and benchmarking standards. The metrics will be in place by 1 March 2013.I’ll return to CC but, good heavens, aren’t there some expectations visited upon it!
Improving information
The inquiry found that customers receive contradictory and inconsistent advice. The large number of plans and products available, and the confusing way in which they are promoted, makes it hard for consumers to understand and compare services.
The inquiry proposed that all providers should give customers a simple explanation of what is included in a plan, how bills are calculated and what other essential information they need to know about the plan (similar to a ‘product disclosure statement’).
The code introduces a requirement for suppliers to include a range of essential information about the service in a two-page document so logically called the ‘Critical Information Summary’. This must be made available to customers prior to sale and on the supplier’s website. The Critical Information Summary, a world leading telecommunications initiative, will be available from next March (1 March 2013).
This Critical Information Summary is very important, especially so for consumers who are vulnerable including those with a disability, who are aged, digitally challenged or for whom English is a second language.The ACMA welcomes the Department’s recently released report Review of Access to Telecommunication Services by People with Disability, Older Australians and People Experiencing Illness.The recommendations of the report are about improving the information available to vulnerable Australians and helping them make use of everyday telecommunications products, and I note that Minister Conroy announced that the government will accept all of them.That’s terrific progress.
This focus on ensuring that Critical Information Summaries are accessible, simple and accurate is alsoconsistent with the National Disability Strategy, a 10-year reform plan to help ensure that mainstream services and programs (including communications) address the needs of people with disability.How sobering a reminder of the challenges of those with disabilities as we continue to be inspired daily by the personal feats of all Paralympians.
Spend management tools
The ACMA’s public inquiry estimated that industry writes off bad debts of between $113 and $117 million per year due to the inability of customers to pay their bills.The inquiry found that customers frequently experience ‘bill shock’, which occurs when a consumer receives a higher than expected bill or sees their prepaid credit run down faster than expected.
We recently commissioned Roy Morgan Research to survey 2,400 telco bill-payers about financial hardship matters. The results were revealing, and today I am releasing the report of that study.
14 per cent of Australian bill-payers (yes, one in seven) have experienced some difficulty paying their phone and internet bills over the past 12 months.
Nearly half (47 per cent) indicated bill shock—an unexpectedly high bill—as one of the main triggers for difficultyin paying a bill. Financial difficulties such as poor budgeting and low incomes also contribute to difficulties paying bills (16 per cent). Sometimes(in fact, in 14 per cent of the survey) an unexpected event can cause a bill-payer to have problems paying.
The research showed that 69 per cent of consumers who contacted their service provider due to payment difficulty or bill shock were not offered advice about avoiding such situations in future.The telco’s mindset has to change from being reactive to preventative.
So these results corroborate and support one of our compliance priorities for the coming year, which is to focus on the causes of financial hardship and how telcos deal with customers who have difficulty paying their bills.
We feel this research also reinforces the elements in the code that require suppliers to progressively rollout the provision of notification alerts for data, voice calls and SMS usage no later than 48 hours after the customer has reached data usage and expenditure thresholds of50, 85 and 100 per cent. In addition, suppliers must include additional notification information about charges that apply once the customer has exceeded 100 per cent of data or expenditure usage.
These new spend alerts match (and possibly exceed) world’s best practice … although I must acknowledge that in the US the voluntary but widely subscribed Wireless Association Consumer Code requires spend alerts to be provided to wireless consumers. Our counterparts in New Zealand have no regulation; our colleagues in the UKhave legislation confined to bill shock action plans.
Another important improvement in the TCP Code requires suppliers to give 10 days notice before direct debits occur.
Let me pause from my summary of the details of the new code to address one concern that ACCAN has voiced. This relates to the 48-hour delay in notification for alerts of data, voice and SMS usage.
In considering this, the ACMA decided that the benefit of this provision could be introduced more quickly by use of the delay component,as some smaller suppliers would struggle to meet a tighter deadline.Specifically, the ACMA considered the limitations of existing billing systems and the particular difficulty that resellers face in receiving usage information from wholesalers. After this consideration, it was decided that it would not be appropriate to put obligations on a selected class of suppliers that they are unable to meet as this would limit competition in the industry. On many many occasions through this exacting process and ACMA consideration, balancing considerations were in play.
Where situations of financial hardship arise, telcos must provide relevant information to customers experiencing financial hardship. Where customer requests assistance on the grounds of financial hardship, suppliers must complete an assessment of a financial hardship within seven (7) days of receiving the information that they need.
On this point, I must take the opportunity to commend the work of Simon Cohen and the staff of the TIO, in facilitating a series of workshops with industry and consumers on the issue of hardship.I won’t talk too much about the expected outcomes of the work, as I know Simon will expand tomorrow. Suffice it to say, it is anticipated that it will build on and complement the provisions of the code.
Also on the subject of preventing bill shock, I welcome the Minister’s recent intervention to direct the ACMA to develop a standard on information to be delivered to overseas travellers about international mobile roaming. The new TCP Code contains a number of measures that require information provision about roaming to customers. But there is a gap in ensuring that Australian customers get information about roaming charges at the time when these charges are about to kick in.
Complaint management
The inquiry found customers have difficulty contacting their supplier, ironically, especially by phone. Callers are commonly left on hold, experience long waiting times, can’t speak to a person, have trouble communicating with customer service representativesand (my personal bugbear) must repeat their complaint to the next operator or find it difficult to find someone to actually resolve their problem. As punters, we want more than someone just telling us ‘your business is important to us’—we want action and resolution.
The ACMA has estimated that the cost to all parties of the industry’s poor dealings with customer telephone complaints was between $54 million and $108 million per annum.
The inquiry concluded that all providers should have a standard complaints-handling process that meets benchmark standards and includes timeframes for dealing with a complaint.
The TCP Code has responded with a raft of significant improvements:
Tighter timeframes for standard complaint acknowledgement and resolution—two (2) days for acknowledgement and three (3) weeks for resolution, and urgent complaints must be resolved within two (2) days.
A new definition of ‘complaint’, requiring providers to ask if the customer wishes to make a complaint, where uncertain.
It requires suppliers to more clearly promote the TIO’s services.
Obligations for suppliers to implement their complaints-handling processes, and improve record-keeping so people can actually track their complaint.
These improvements compare very favourably with overseas jurisdictions. Australians are now very well off compared to the United Kingdom, for example, where suppliers have eight (8) weeks to solve a customer complaint before the customer can enter alternative dispute resolution processes.
New approach to compliance
Our approach in regulating under the new code will have responsive and proactive elements.
We will continue to respond to referrals from the TIO and will be working with them to increase code-related referrals.
The ACMA also responds to individual customer complaints where the complaint represents a systemic issue. In addition, the ACMA will continue to respond to compliance issues generated through our recently revitalised Consumer Consultative Forum.
The ACMA will also focus on proactive compliance.
We will continue to educate industry about the new rules in the first three (3) months after the code comes into effect. However, enforcement action will occur where there is flagrant or substantial non-compliance by a supplier.
We will focus our interventions on key aspects of the consumer life cycle, where compliance will generate the greatest consumer benefit.
We have budgeted to undertakenot less than100 audits of providers’ compliance with key code rules during the remainder of this financial year.
The first issue we will focus on is complaints-handling. We intend to ensure that providers deliver on the undertakings they make to customers when resolving complaints.
The ACMA will then move on to advertising which, as I’ve telegraphed, is going to be a big area of initial focus. Our priority will be advertisements that use misleading or confusing language.After that, we will target those that do not contain standard charge information for included value plans. This will be an important and very visible early test of the industry’s transformation.