Ofcom review of mobile industry

Ofcom review of mobile industry

Ninety four percent of mobile users say that they are satisfied with the mobile phone service they receive, according to Ofcom’s recent assessment of the industry. This overall score may be good news, although the assessment has been criticised by some, who feel it is unnecessary in an industry that is generally very healthy.

One analyst says: ‘Compared with other countries, coverage in the UK is good, prices are low, and take-up of services is good, so why do we need a review? It’s just bureaucracy for bureaucracy’s sake.’

Some operators are worried that the report is an excuse to impose more regulation on the industry. Simon Grossman, head of government policy and mobile regulation at Orange, says: ‘We welcome the review but we are concerned about areas that don’t need regulation, like customer service. We are concerned that Ofcom is using this review to impose regulation in areas that don’t need it.’

Grossman adds that Orange plans to send an official response to the assessment ‘in detail and at length’.

Ofcom maintains that the report is not a blueprint for regulation and, according to David Stewart, competition partner at Ofcom, the regulator is ‘thinking about where mobile is heading and our role in it’.

Complaints on the rise
Despite the high satisfaction rate, Ofcom points out that it still leaves 1.4 million unsatisfied customers, and complaints are on the rise.

Although complaints about cashback have fallen drastically, by around 75% since its peak in September 2007, largely due to big cashback dealers going bust, the bad news is that mis-selling and slamming are on the rise, despite the introduction of the voluntary code last summer. In fact, complaints reached their peak in May/June this year.

The number of people getting in touch with consumer organisations about mis-selling have since started to fall, but those complaining about slamming are rising, and are at similar levels to two years ago, when complaints were at their peak. Grossman says: ‘You have to look at this in context. There are about 50-60 complaints of slamming per month, so the overall level is very low. But this doesn’t mean that we are dismissing the problem.’

He adds that there is no need for further regulation as the voluntary code for cashback covers slamming and mis-selling too.

The Ofcom report reveals that customer service is also at the top of the list of complaints, which is not surprising, as this part of the mobile industry has recently come under heavy criticism.

Customer complaints and industry criticism may be the reason why some operators, such as Orange, have recently brought back their overseas customer service centres. Although T-Mobile has recently outsourced a call centre in the Philippines.

The report doesn’t go into as much detail, but the majority of complaints are likely to be from prepay users, who often face inferior service, longer waiting times and overseas call centres.

Ofcom’s Stewart says: ‘If you look across different [consumer] institutions, the number of complaints is increasing. We estimate that about 1.4 million are affected out of a total of 46 million. When we look at complaints rising that’s a real challenge to the industry.’

Consumer rights advocates, such as the Citizen Advice Bureau, say one of the most complained about sections of the industry are independent mobile dealers.

Complexity of pricing
According to the report, another major source of customer complaints is disputed bills. This is no surprise with the increasing complexity in the way that mobile services are charged.

In its study, Ofcom used the number of lines in the small print of Carphone Warehouse’s tariff deals as an indicator of the complexity of pricing. This had risen from zero in 2000 to over 30 lines by 2006, after which, Carphone started referring customers to each specific operators’ website for explanations.
Grossman claims that Ofcom is to blame for the growing small print, as the regulator is requiring operators to insert increasing amounts of information into tariff ads.

He says: ‘Ofcom is responsible for all that small print – they introduced that in regulation. They require details about things like cost of calls to 08 and 09 numbers, direct debit charges and so on.

‘Our marketing team is pulling their hair out because of the fact that they have to put the small print with all the tariffs.’

Operators also argue that tariffs are getting more complex as a side effect of more choice. But it is making price comparisons between different providers difficult.

According to the assessment, the number of people who said it was easy to make comparisons between operator prices fell in 2007 from 21% to 15%.
Ofcom also points out that hidden costs, such as calling customer services, set up fees and other such charges, are increasing.

New services

Consumers are likely to be even more confused about price when it comes to relatively new services like mobile broadband and dongles, as many find megabytes difficult to understand.

The report shows that the take-up of new mobile services is rapidly increasing, with 133,000 new mobile broadband connections opened in June alone.

There have been complaints about broadband speeds advertised by operators being misleading and coverage, especially indoors, not meeting the expectations of customers.

Stewart says: ‘We are asking what, if anything, regulators need to do to make sure the promise of mobile broadband will be realised.’

Exact speeds and coverage may not be so simple, as these can vary yard by yard. Grossman says: ‘Ofcom is comparing it to fixed line where you can give a more accurate idea [of speeds and coverage].’

Coverage
Another issue raised in Ofcom’s assessment is coverage. After O2 recently increased its 3G coverage to cover 80% of the population, all the operators have met Ofcom’s 3G coverage requirements.

2G coverage, on the other hand, has no minimum requirements, because the allocation of the licence took place over a longer period of time. Currently 2G covers 99%, which still leaves 1% of the population (600,000 people) without any mobile coverage.

Ofcom says that the number of people outside mobile coverage and the number of people saying that they are involuntarily without a mobile phone are very similar, indicating that there is demand for network coverage in these areas too.

The problem with covering the whole country is that the areas currently left out are the ones that cost the most to cover, either because of difficult terrain or because of low return on investment in sparsely populated regions. A spokesman for O2 says: ’In our view, coverage on these areas is essentially a public policy matter and should be funded by the public purse.’

Orange recently announced it was planning to increase 2G coverage in areas that currently have no or insufficient coverage.

Stewart says: ‘The [coverage] figures in the report say that operators have focused on highly urbanised areas. This is rational, but raises questions about what happens to people that coverage doesn’t reach. These people are affected in a big way. We are asking in the consultation if something should be done about it.’

With the adoption of services requiring high speeds also on the rise, 3G coverage is likely to increase.

‘We are still increasing 3G. It’s not 3G reaching 80% and then stopping,’ says Grossman.

Whether Ofcom will take further action on any of the issues raised will depend on the response from the industry.

Ninety four percent of mobile users say that they are

Written by Mobile Today
Mobile Today

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