opinion


It’s all change again for CSPs thanks to Ofcom

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece James Sarjantson, commercial, digital and telecoms partner at LCF Law, explains what Ofcom’s second wave of rule changes mean for providers of communications services.

Providers of communications services including business telecoms, broadband, mobile, pay TV and landline services, must prepare for a second wave of key rule changes from Ofcom. These rules will require further significant changes to the way telecoms providers offer their services and will mean changing their contracts with customers.

Background

The 2018 European Electronic Communications Code (EECC) updated the EU regulatory framework for communications services. Although the UK has now left the EU, under the terms of the EU Withdrawal Agreement, the UK still had an obligation to implement this EU directive into domestic law.

The EECC contained a package of measures designed to protect customers of communications services, and to ensure that customers can shop around with confidence and make informed choices. Ofcom, the UK communications regulator, has been implementing the new EECC protections through changes to the General Conditions of Entitlement, which are the regulatory rules that communications providers must comply with when providing services in the UK.

Most of the changes to the General Conditions came into effect on 17 December 2021, after the original deadline of December 2020 was put back due to the Covid-19 pandemic. Communications providers that haven’t yet updated their practices and contract terms to reflect those changes must do so urgently to avoid enforcement action by Ofcom.

Further new rules will come into effect on 17 June 2022, relating to various points including the provision of contract information, and extended customer rights to exit.

Changes to the rules relating to switching and porting will then come into effect on 3 April 2023.

New Rules from 17 December 2021

New definitions were introduced into the General Conditions for micro enterprise and small enterprise customers and not-for-profit customers. Essentially these are small businesses or not-for-profit entities with 10 employees or less and they now have many of the same protections under the General Conditions as consumers do. As such, the distinction between business communications providers and residential or consumer communications providers is now much more complicated and requires business providers to look closely at their contract terms and in most cases update them.

Other changes to the General Conditions that came into effect in December 2021 include:

  • A two-year maximum commitment period, or contractual lock-in period, applies to microenterprise, small enterprise and not-for-profit customers, as well as consumers, and also applies to cover bundles including terminal equipment. The aim here is to prevent customer switching being unduly hindered by long lock-in periods.
  • Internet and phone providers are not allowed to extend the duration of a customer’s existing contract when they buy additional services, unless the customer gives their express consent.
  • End-of-contract notifications and annual best tariff notifications sent to customers must include details of other contracts taken as part of a bundle.

New Rules from 17 June 2022

Upcoming changes to the General Conditions from June 2022 include specific contract information and contract summary requirements.

Before they are bound by a contract, customers must be given a detailed contract information document by hard copy or email, rather than just via a general website page. Customers must also receive a short one-page contract summary in writing, or this extends to three pages for bundles.

This summary must follow a specific format, with the aim being to give customers clear information about the relevant service, in advance, so they can make an informed decision about what’s best for them. This applies to consumers, micro enterprises, small enterprises and not-for-profit customers, unless they have expressly agreed otherwise.

Crucially, contracts with providers are not binding unless the customer has received the contract information and contract summary documents in advance of entering into the contract. Providers may therefore find that customers who they thought were bound into contracts for several years, could in fact desert them overnight.

The right to exit

Providers must notify customers at least one month in advance of changes to their contractual conditions and, at the same time, inform them of their right to exit.

Any proposed changes to a customer’s contract, where those changes are not exclusively to the customer’s benefit, are purely administrative with no negative effect on the customer, or are directly imposed by law, will give the customer the right to exit their contract, without paying extra charges. These rules apply to all customers, including both large and small business customers.

If a right to exit is triggered it will also apply to any contracts with that customer forming part of a bundle.

Where a customer decides to exit, their contract must be terminated from the day before the contractual change comes into effect, unless the customer agrees otherwise.

Importantly for providers, the right to exit rules will apply to existing contracts as well as new contracts.

Communications providers can still potentially include price increase clauses in their contract, provided they are sufficiently transparent and prominent to the customer when entering into the contract. In particular, price increase clauses must be reasonable, and where the clause permits a price increase at a certain time by an amount linked to an inflation index, providers must include examples of the customer’s future monthly price following the increase.

As always, the detail of the changes is considerable and extensive, and this is only a brief summary of some of them. Providers will need legal advice to make sure they are not breaching any of the conditions as this could lead to an OFCOM investigation and may subsequently lead to a fine of up to ten per cent of turnover of the relevant communications business.

 

James Sarjantson, commercial, digital and telecoms partner at LCF Law, has more than 20 years’ experience in providing legal solutions for clients in relation to their selling, trading and commercial arrangements, with particular expertise in advising telecoms providers and technology-led businesses.


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