Complacent UK telcos to be hit with compensation costs

From today, all UK broadband and landline customers will be entitled to compensation for connectivity delays and faults.

It could turn out to be quite a headache for the telcos, as while it will only cost £5 a day to compensate customers for any delays in providing services, the sum of the costs would have been £142 million for the industry across 2018. Today, April 1, is the first day of Ofcom’s new Automatic Compensation scheme.

“We think it’s unacceptable that people should be kept waiting for a new line, or a fault to be fixed,” said Ofcom CEO Sharon White.

“These new protections mean phone and broadband firms will want to avoid problems occurring in the first place. But if they fall short, customers must be treated fairly and given money back, without having to ask for it.”

For customers who have signed up to a new provider, for each day connectivity is not delivered past the agreed upon date £5 will be paid in compensation. The customer will also be given £25 as a one-off payment for the missed appointment. Those who have reported a fault, two working days will be given to the telco to perform any work, but from then on compensation will be set at £8 a day.

In comparison, Ofcom figures suggest there are 7.2 million cases each year where broadband or landline customers suffer delayed repairs, installations or missed appointments. Financial compensation, totalling around £16 million, is generally paid out in 1.1 million of these cases, with customers receiving an average of £3.69 per day for loss of service, and £2.39 per day for delayed installations.

BT, Sky, TalkTalk, Virgin Media and Zen Internet had already signed up to the scheme, which is currently voluntary, though these providers account for 95% of customer relationships across the UK today. EE has theoretically agreed to the scheme, planning to pay automatic compensation next year, as has Plusnet. The compensation outlined in this scheme will be 9X the amount which was received by customer in 2018.

“The voluntary auto compensation scheme is a great step for consumers in the UK, but hopefully, in time, it will become part of the process for all internet service providers as treating customers fairly should be at the core of any organisation,” said Richard Tang, Chairman and founder of Zen Internet.

Although this is one step on the journey to a customer service-orientated business model which should be already expected from the telcos, there is plenty of room for error. In theory, customers should not have to do anything to receive the compensation, aside from report the fault, but it is highly likely something will go wrong with the mechanisms over the next couple of weeks.

What is worth noting is there is a risk of creating a two-tier broadband industry. As it stands, the cheapest broadband providers will not pay out for any of the delays, and considering any penalties might wipe out an entire months bill, they might not bother committing. This is a voluntary scheme from Ofcom after all and some of the cheaper broadband providers might decide the PR points from being part of the scheme might not be worth it from a commercial perspective.

Another interesting question is whether this will apply to any Fixed Wireless Access (FWA) solutions. Mobile tariffs have not been considered in this scheme, therefore it might be down to the legal experts to argue what the definition of FWA actually is.

It will be interesting to see what Ofcom has to report over the short- to medium-term. Hopefully this scheme will force the telcos to perform better, reducing the number of delays, though the amount of paid compensation will also be an interesting comparison to 2018.