Consumer Rights Bill

Around 90% of this value will be enjoyed by consumers, who will be able to increase their usage of their mobile handsets for voice and increasingly data, while enjoying new services and lower prices. Operators will realise a lower surplus over the next ten years, owing to the investments needed to deliver 4G services and expand their networks to meet demand."

2. In view of the huge benefits delivered to date and the operators’ (and Government’s) ambitions for the future, the MBG supports the evolutionary approach to consumer rights in relation to services proposed by the Government, rather than the more revolutionary and costly suggestion of aligning the rights for services with the rights for goods.

3. With respect to goods, the seller is in a position to inspect all inputs during the process of manufacture (which today is usually a highly automated, controlled, mass produced process) and to inspect the assembled product before dispatch, offering a warranty to the customer for a limited period thereafter. Where the goods are sold through independent channels, the retailer is able to carry out additional inspections and offer a warranty underwritten by the manufacturer.

4. This is not the case for services, which are not usually mass produced; the customer experience tends to be very much particular to the individual. Moreover, for continuing services, a ‘fit for purpose’ outcome would effectively introduce an ongoing warranty or perpetual guarantee that was far more onerous than is the case for goods.

5. The MBG would not support an ‘outcome based’ approach for services in the communications sector for the following reasons:

6. The Interdependence of Networks

For any given customer communication, an individual communications provider is usually responsible for only one leg or element of what can be an extended chain of interdependent (as opposed to sub-contracted) Communications Service Providers (CSP) and content providers, underpinned by a network of interconnect, peering and access agreements, where each takes responsibility for their leg of the journey. The ‘originating access provider’ (i.e. the CSP to whom the customer pays his or her bill) cannot be responsible (nor should be held liable) for the overall customer experience across this extended chain.

7. The service that a mobile customer receives is extremely comprehensive and complex: voice communication (making calls, receiving calls) throughout the UK and overseas (through international roaming agreements with other providers), Internet access (within the UK and overseas), other data services (such as e-mail, text messaging and instant messenger), applications (e.g. mapping, information services, location services).

8. In order to provide such services, a mobile operator is dependent on third parties in the interconnected value chain. At its simplest, this can be connecting one UK mobile network to another UK mobile network for voice or SMS communication. When providing access to mobile data, the customer will receive data through many third parties e.g. the network providing the services and a chain of additional operators linking to servers hosting the website which may be located in any jurisdiction.

9. Generally CSPs have little overall control over the quality of the chain. Even if a CSP takes care to interconnect only with those that offer a high network quality, there is no guarantee that others in the chain will (or can – regulation often requires that there is no discrimination).

10. Thus the fault behind poor call quality or websites that are slow to download could originate with any of the CSPs along the chain (which is only as strong as its weakest link). It would cause customer confusion and frustration to hold out the expectation of ‘satisfactory quality’, if the originating CSP was not in a position to deliver it on every occasion.

11. Independence of customers

The actions of customers themselves also have an impact on the level of service that each experiences. For example, large numbers of people making calls or accessing web sites simultaneously can cause network congestion. In mobile, crowds congregating unexpectedly in one place can overload local cellular capacity.

12. Costs of sub-contractors’ warranties

In addition to the independent interconnect partners, CSPs rely on perhaps hundreds of sub-contractors to design, build, maintain and operate their network. In order to mitigate exposures that could arise from sub-contractors in an ‘outcome based’ regime, CSPs would have to renegotiate supply contracts. (For example, a supplier causes some part of the service to go down by severing a cable with a digger, or making a mistake during a software upgrade). There would be significant transition costs in re-negotiating the supplier agreements and the suppliers would of course look to pass on the costs, ultimately to consumers, of their increased risk (with similar knock-on effects and costs building up down the supply chain).

13. Measuring ‘satisfactory quality’

In order to base contracts on ‘satisfactory quality’, and to provide an element of legal certainty, it would be necessary, and extremely difficult and expensive, to establish exactly what ‘satisfactory quality’ entailed, particularly with such a multi-faceted service as mobile. For example, would it cover: level of network coverage (for different mobile services – e.g. 2G, 3, 4G etc.), network availability, number of dropped calls, internet access speeds, the reliability of international roaming, traffic management policies, or a combination of these factors? Mobile services are also affected by local variables outside the operators’ control (tree coverage, weather, and building materials) that will change with time.

14. In our sector, clearly the regulator would have to be involved and, we believe, would have to spend considerable resources in establishing appropriate benchmarks. They would also have to consider whether ‘satisfactory’ was an absolute term across the industry or a term that applied only to the basis on which any given CSP had sold its service; presumably the latter would be the more appropriate. Furthermore, quality is a function of price. Given the scale of what might be involved, it is not surprising that Ofcom has not considered this approach to date. It has found other, more focused, ways of addressing particular consumer issues that have arisen in the communications sector.

15. Not relevant to actual consumer complaints in the communications sector

As can be seen in the table below, an ‘outcome’ based approach would not actually deliver any additional consumer rights that would be relevant to the great majority of issues that can cause customers difficulties.

The Ofcom Consumer Experience Report for 2013 breaks down the 7,000 or so complaints that it receives about telecommunications each month as follows [2] :

This table relates to the whole communications industry, not just the mobile sector.

Of the identified categories of complaints specified above, none is directly related to an ‘outcome’ based regime and so consumers would not benefit from any change of regime.

16. In summary, the MBG believes that there would be considerable transition and compliance costs involved with changing to an outcome based approach for services, where the potential marginal benefits for consumers are uncertain and small. We believe better outcomes will be achieved if services continue to be subject to the standards set by our regulators, particularly with regard to customer protections.

17. For all the reasons given, it would have the opposite effect of simplifying and clarifying consumers’ rights and remedies. As mentioned above, the forecast consumer welfare to be delivered by our industry over the next ten years is considerable. It is absolutely right to clarify the rights at consumers, so that they become more confident at asserting them but there are no compelling reasons to jeopardise the hoped for benefits by risking a potentially disruptive and revolutionary change in the underpinning regime for Services.

Digital content

18. The mobile operators in the UK are active participants in the digital content value chain: providing mere connectivity to digital content, as a mobile Internet Service Provider, providing a portal through which customers can access third party digital content, and providing digital content directly to customers.

19. The MBG supports the Government’s objective of clarifying consumers’ rights in relation to digital content, which we agree have features that make them distinctive from physical goods and require a slightly modified approach if the rights of both consumers and producers are to be properly balanced.

20. For example, once a customer has loaded a piece of software onto his or her computer and backed it up, as is good practice, it is not practical to ‘return’ the digital good to the supplier and it can be difficult and onerous to delete all copies of the software, as would otherwise be the obligation. We agree that it is therefore not really practical to afford a short term right to reject.

21. Moreover, the Government has expended enormous resources trying to minimise the incidence of piracy. It would be unwise to open up another avenue that could be exploited to obtain software without paying for it.

22. We particularly support the provider’s right under clause 43, without restriction, to modify digital content post sale. As the Government acknowledges on page 35 of its impact assessment on digital content ‘Bugs are considered standard in digital content on issue and as such it is proposed that a reasonable person would expect a certain amount of bugs when purchasing digital content. Therefore the existence of bugs will not necessarily amount to a breach of the guarantee as to quality and fitness.’

23. We will also need to be clear that providers will continue to be permitted, through the contractual arrangements, to discontinue customer support, as is often the current practice, in the event that the customer does not consent to receive necessary updates or is using software that has become uneconomic to support.

24. If the consumer experiences significant negative impact from an update, consumers would have the right to revert to the prior version. This is a less costly and burdensome way to reduce the potential consumer harm that could be caused by an update.

Unfair Contract Terms

25. In summary, the MBG generally supports the Government’s proposals to refresh the law on unfair contract terms.

26. Our most significant area of uncertainty, though, is over the term ‘transparent and prominent’.

27. The MBG strongly supports the principle of transparency. All mobile operators publish comprehensive, accessible price lists. However, some businesses – and communications service providers are a good example – face real practical difficulties in making every aspect of their pricing ‘prominent’ purely because of the sheer volume of information.