Supplementary Memorandum submitted by
Ofcom
ADDITIONAL CHARGES
LEVIED BY
COMMUNICATIONS PROVIDERS
When we appeared before your Committee in the
joint session last month, several members expressed keen interest
in additional charges levied on consumers for paying bills by
means other than Direct Debit and for late payment of bills. We
promised to update you on this issue.
We have reviewed the differentials for payment
by non-Direct Debit. It is clear that this is, at a minimum, a
sector-wide issue. Although much of the public interest was sparked
by BT's announcement that it would widen the differential for
its customers from £3 a quarter to £4.50 a quarter,
it would be wrong to look at BT in isolation. More than 40% of
homes now get their telephony from providers other than BT; and
there is a wide range of differentials, from zero in the case
of one or two smaller operators up to £15 a quarter levied
by Virgin Media. Indeed there are some providers who provide no
payment options other than direct debit.
It is also clear that, in addition to the non-Direct
Debit differential there is also a range of other `additional
charges' of greater or lesser transparency, levied by the different
providers. BT's recent retail charges originally proposed charges
to six of these additional charges (though, following discussions
we had with them, BT withdrew their proposals on administrative
charges for terminating BT services, on removal of outgoing call
barring and have placed a financial ceiling on charges for terminating
contracts within the 12 month contract period). This is not an
a-typical level of complexity of additional charges within the
sector.
Against that background, we will shortly announce
that we are conducting a full Review of communications providers'
additional charges. It will cover all key types of additional
charges, including non-direct debit, late payment, restoration
of service and early termination fees. It will cover fixed and
mobile operators and (since services are increasingly sold in
bundles) pay TV.
It will look at the nature and level of charges
levied by communications providers and how transparent and well
signposted such charges are. In parallel we will undertake consumer
research into both attitudes and behaviour. This will build on
the research we have already commissioned for non-direct debit
charges. It will test how far consumers are aware of additional
charges, how far they are able and willing to shop around on the
basis of core price and additional charges rather than just core
price; and whether there are specific groups of consumers who
are unable to do so, are unfairly disadvantaged as a result and
not within the scope of the existing social telephony schemes
provided under the Universal Service Obligation.
In the light of that evidence we will consider
afresh what needs to be done and what can be done within the existing
regulatory framework. We expect to announce the conclusions of
our Review in the Autumn.
I will ensure that you are kept informed as
the Review progresses.
I am copying this letter to the other members
of the Trade and Industry Select Committee and, for information,
to John Whittingdale.
5 June 2007
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