Sunday, March 31st, 2019 (12:01 am) - Score 8,656

Ofcom’s new system of automatic compensation will tomorrow be introduced, which requires major UK ISPs to compensate consumers (cash or bill credits) for a total loss of broadband connectivity (i.e. if the outage lasts longer than 2 working days), missed appointments or delayed installs.

The new scheme was technically finalised at the end of 2017 (full summary), although the regulator recognised that it was a significant change for the industry and thus allowed for a 15 month implementation period in order for ISPs to adapt.

On top of that Ofcom’s system largely overlooked the responsibility of suppliers, which became a contentious issue when considering Openreach’s national infrastructure (many of the faults experienced by related ISPs occur on the supplier side). Happily this was last year settled through a protracted period of sometimes contentious negotiation (here).

Otherwise the new system, which is voluntary but expected to be adopted by most of the markets main broadband ISPs, will compensate consumers by £8 per day for delayed repairs following a loss of broadband (assuming it isn’t fixed within 2 working days). Missed appointments would also attract compensation of £25 and a delay to the start of a new service would be £5 per day.

The new rule, which is supported by a small piece of legislation in the 2017 Digital Economy Act, aims to benefit both residential consumers and around a third of small and medium sized businesses (SMEs) who buy domestic grade fixed line broadband services.

However the system will only be applied to service outages that lend themselves to being “objectively defined and measured” and which have not been caused by consumers themselves (e.g. you will not be compensated if you damage your own home wiring or aren’t at home when the engineer arrives), although some of these situations could conceivably be difficult to judge.

Back in 2017 Ofcom estimated that up to 2.6 million customers could receive up to £142 million per year in automated compensation payments, which is bound to have an impact on service cost. As a result the regulator believes that the changes will offer “incentives for providers to improve service quality” (e.g. they’re already requiring Openreach to meet tougher Quality of Service standards, which should help).

Conclusions

Most broadband faults are usually fixed within 2 working days, with many being corrected within the space of a few hours or minutes (very few of those ever require an engineer visit to your property). As a result we’d expect that most people won’t run into this system, at least not very often.

However anything that increases the costs for ISPs is likely to be passed on to consumers as price rises, which may explain why some ISPs have already been pushing several price hikes into a single 12 month period. In addition, it’s feared that providers may be discouraged from taking on customers if they come from areas where the local infrastructure is known to be problematic.

Similarly there are concerns about the ability of ISPs to accurately gauge whether or not an outage is legitimate and subject to compensation. Not to mention the increased support costs from dealing with consumers who may demand compensation for issues that are not within the provider’s realm or which are difficult to identify (sometimes even Openreach can have trouble identifying faults in their own network).

Ofcom will also expect ISPs to pay out compensation for losses of service caused by “force majeure-type events” (e.g. extreme weather, strikes, and third party acts), although Openreach has refused to pay out for such incidents on the supplier side (i.e. the burden will fall solely upon ISPs who have no control over such things).

On the bright side Openreach will pay out to cover delays caused by third-party incidents (e.g. vehicles parked in front of a cabinet or a pole on private land that engineers can’t get access to).

Naturally the vast majority of smaller ISPs have chosen not to join the system as the significant financial burden would be too big for them, although by doing so they may risk looking less attractive to consumers. Similarly many smaller ISPs have also opted out of Ofcom’s latest Broadband Speed Code (here), at least for now.

Sharon White, Ofcom CEO, said: “We think it’s unacceptable that people should be kept waiting for a new line, or a fault to be fixed. 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. We welcome the companies’ commitment to this scheme, which acts as a strong incentive to improve service for customers.”

In the end we’ll have to wait and see how the new system progresses this year and will keep our readers updated accordingly. Ofcom similarly said they will “carefully monitor companies’ compliance” with the compensation scheme, and report on how it is working in 2020. If customers are not being treated fairly, the regulator said they “will step in and take action.”

The above system doesn’t extend to mobile network operators because related customers very rarely lose service for more than 24 hours (coverage allowing) and “mobile customers generally receive more compensation than broadband and landline customers.”

UPDATE 1:06pm

Updated the member ISP list as Ofcom’s official press release contained a few extra details.

UPDATE 1st April 2019

Added a comment from Zen Internet and the CBI business group.

Richard Tang, Founder and Chairman at Zen, said: “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. At Zen, delivering great customer service is in our DNA and we’ve always believed in compensating our customers if we haven’t been able to meet their expectations. We’re delighted to be one of the founder members of the new scheme formalising this approach for residential customers, but have decided to go one step further by extending the scheme to our small businesses, channel partners and wholesale customers.”