The Consumer Experience 2009 - Evaluation Report 09

09|12|09

Executive Summary

1.1 Underlying Ofcom's work is the aim of improving, where necessary, the experience of consumers in the communications market and specifically the products and services within it. This aim reflects our principal duty, as set out in the Communications Act, to further the interests of citizens in relation to communications matters and to further the interests of consumers in relevant markets, where appropriate by promoting competition.

1.2 To help assess the experience of consumers in communications markets, each year we publish this evaluation of our work. The evaluation report considers the key findings and trends emerging from the accompanying detailed research report and uses these to assess the impact of our work. This enables us to assess whether our work is effective and focused on the right issues, to identify any new issues which need to be addressed and to prioritize our work for the future.

1.3 As in previous years, we are examining four central aspects of consumers' experience of the communications market: choice and value; availability and take-up; empowerment; and concerns and protection.

1.4 In a separate and complementary document published in parallel, The Business Consumer Experience, we examine the experience of business consumers and set out our work programme in that area.

1.5 This year, we are publishing this evaluation report alongside Ofcom's draft Annual Plan. In developing the Plan and our proposed priorities for 2010/11, we have examined the evidence to assess where the communications sector is delivering positive outcomes for citizens and consumers, and where new issues have arisen or further progress needs to be made to achieve our statutory duties and objectives. In doing this, the draft Plan draws from the Consumer Experience research findings and work evaluation.

Consumer choice and value

1.6 The consumer experience of communications services has continued to be affected by the increasing convergence between platforms and services and the growing take-up of new digital technologies.

1.7 The explosion in the number of UK communications providers which started in 2005 has continued, driven by the increasing availability of local loop unbundling and wholesale line rental products. Sustained competition between suppliers is increasing consumer awareness, in particular of bundled services.

1.8 The overall level of satisfaction with communications services has generally remained stable and at levels of at least 86% or above, while the mobile market has the lowest dissatisfaction levels, at 3%.

1.9 Household spending on telecoms and internet/broadband services has continued to fall: with a 6% reduction in spending on mobile and broadband services and a 5% fall for fixed lines. Mobile call charges have continued to fall, in particular because of the increasing popularity of low-cost SIM-only contracts. Broadband prices have been falling, driven by bundled services where broadband is included with fixed-line voice services, mobile services or TV services.

1.10 The UK continues to perform well compared to other countries with the cheapest prices for fixed, mobile, broadband and bundled services.

1.11 These are generally positive indicators about the level of choice and value for consumers. Ofcom's programme of market reviews and investigations will monitor the development of competition in the markets and aim to ensure that these outcomes continue or improve. This programme will complement our work described below to ensure consumers can engage effectively and with confidence in the market.

Availability and take-up

1.12 The availability of most communications services has remained largely unchanged over the past year as many services approach near universal coverage. Most households in the UK now have access to the key broadcasting and telephony services, with at least 9 out of 10 consumers covered by fixed lines, basic broadband, mobile 2G, digital TV and radio. In addition, 3G mobile services, non-BT broadband infrastructure and superfast broadband are becoming increasingly available. However, 'not-spots' remain a concern for mobile and broadband, principally in some rural areas and particularly in Scotland and Wales.

1.13 Take-up of all communications services, except fixed line, has increased since 2008, with homes now more likely to have a mobile than a fixed line. There has been an encouraging rise in computer ownership and Internet access, in particular among low income consumer groups. However, consumers aged 75+ as well as those on low incomes remain the least likely to own mobile phones or multichannel TV services, to use broadband services or purchase bundles.

1.14 The rise in broadband ownership has been driven by the higher socio-economic groups and an increase in mobile broadband connections amongst the under 35s.

1.15 The mobile market continues to see a significant shift from prepay to contracts, in particular SIM-only contracts especially among the younger consumer groups.

1.16 Ofcom is looking closely into mobile network coverage, in particular persistent 2G 'not-spots' problems, and is working with industry to facilitate better coverage. During 2009 providers, working with Ofcom and the emergency authorities, introduced emergency mobile roaming. Mobiles now automatically switch to an alternative network for an emergency call if the user is outside their own provider's coverage area. Also during the year a trial began which enables consumers with hearing or speech impairments to access the 999 service using SMS text messaging, which, if successful, will become a permanent feature of access to the emergency services.

1.17 Broadband 'not-spots' remain an important issue which Ofcom is examining alongside Government. In addition to those who cannot get any form of basic broadband, around one in ten households cannot get a 2Mbit/s or faster service. The Government's Digital Britain Report includes a new broadband 'universal service commitment' to make 2Mbit/s broadband connections available to all UK residents who request the service by 2012, using a mixture of fixed and wireless technologies to plug gaps in current availability.

1.18 In our draft Annual Plan, we are proposing that making progress on 'not spots' should be a priority for us in 2010/11.

1.19 Also identified as a priority is our work with Government on supporting the Digital Participation Consortium, which aims to assist broadband take-up further, particularly amongst older consumers and those on lower incomes.

1.20 We set out our overall strategy on access and inclusion in our October 2009 Statement.

Consumer empowerment

1.21 For competition to be able fully to deliver effective outcomes in terms of choice and value, consumers need the information to be able to compare services and providers and to be able to switch easily.

1.22 Our research shows that 2009 has seen a decline in switching levels and consumer engagement in bundled services. Although the majority of consumers are finding it easy to switch their communications supplier, a quarter find it difficult to switch broadband and bundled services, despite an increase in the perceived ease of comparing the cost of bundles. The hassle of the switching process and, increasingly, the threat of additional charges were some of the reasons put forward for not switching.

1.23 We have started a major review of regulation in this area with the aim of making sure that a lack of information and difficult processes do not create undue barriers for consumers switching providers. Our draft Annual Plan is proposing that ensuring the effectiveness of switching processes should be a priority for 2010/11.

1.24 This year we have published a detailed research report on the performance of the UK's largest internet service providers (ISPs), for cable and DSL broadband services, and in particular the actual download speeds that consumers receive. We also achieved widespread adoption by ISPs of a voluntary Code of Practice on Broadband Speeds so consumers are informed what maximum speeds they can expect and why actual speeds differ from headline speeds when they buy a broadband service.

1.25 However, awareness of broadband speeds amongst consumers has continued to decrease this year, and there has been little change in satisfaction with speed performance (81% satisfied compared to 79% in 2008). We intend to commission further research in 2010 and will also continue our programme of work to ensure that consumers are given relevant information to promote understanding of speeds.

1.26 Our series of consumer guides are intended to give practical advice on a number of key issues in the communications sector. We are considering options to improve distribution of the guides.

Consumer concerns and protection

1.27 Protecting consumers from scams and unfair practices is a continuing area of focus for us. This year we have seen improved outcomes in broadband migrations, mobile mis-selling and silent calls.

1.28 As part of our work on improving switching processes for consumers, we set new rules for ISPs to support consumers in the switching process for broadband, and we worked with industry to resolve technical problems. Since the introduction of these rules, significant progress has been made on broadband migrations, where the number of complaints has continued to fall from over 5,000 a month at their peak to under 400 a month currently.

1.29 The same downward trend has been experienced in mobile mis-selling, particularly around cash-back schemes. We introduced new regulations which aim to prohibit mobile mis-selling and came into effect in September 2009. Complaints about cash-backs and mobile mis-selling are down from a peak of over 700 a month in 2007 to below 170 currently. Over the next year, we will continue to monitor the application of the new rules to ensure they are properly adhered to.

1.30 Complaints about abandoned and silent calls have fallen significantly since their peak in late 2008. We have been able to tackle this issue, investigating and fining several companies. Despite the decline, silent calls remain a particular concern to consumers and our enforcement programme continues. The Government is currently consulting on proposals to raise the statutory maximum financial penalty for persistent misuse.

1.31 In January 2009, new rules governing mobile phone paid services were introduced by PhonepayPlus - the agency which carries out the day-to-day regulation of the premium-rate services market on Ofcom's behalf. The rules were aimed at tackling the major harm incurred by consumers through premium rate services, particularly reverse-billed SMS. Since the introduction of these rules, complaints to PhonepayPlus have declined significantly, from a high of around 2,400 in April 2008 to about 800 in October 2009.

1.32 Despite these positive findings, other consumer protection issues remain of concern. These include fixed line mis-selling, early termination charges and complaints handling. Our draft Annual Plan identifies these as important areas of focus for us during 2010/11.

1.33 Since the introduction of new fixed line mis-selling rules in 2005, Ofcom has pursued an industry-wide investigation with the aim of securing compliance with the rules. We have recently confirmed our intention to introduce a new general condition for providers and a move away from codes of practice towards general prohibitions on mis-selling activity. Although complaints about fixed line mis-selling are down from their peak of 1,200 a month in 2005, they remain high and stood at 900 in October 2009. We believe these figures increasingly reflect industry process problems rather than deliberate mis-selling and we have started a programme of work with industry to seek improvements to these processes.

1.34 Allegations of unfair contracts and concerns over unduly high early termination charges have remained the third most common source of complaints by consumers in telecoms. We have been monitoring and enforcing compliance of the regulatory guidance that we published for providers in December 2008.

1.35 Poor customer service tops the list of complaints received by Ofcom and we are currently considering ways in which to improve consumers' awareness of Alternative Dispute Resolution (ADR) and ensure effective complaints handling by providers. In September 2009 we reduced the time consumers have to wait to go to ADR from 12 to 8 weeks after they make a complaint. We plan to publish further proposals shortly.

Next steps

1.36 Ofcom's draft Annual Plan published alongside this report reflects the findings of this evaluation of our work and the accompanying research in developing our proposed priorities for 2010/11.

1.37 We encourage anyone with an interest in Ofcom's work to contribute and respond to the draft Plan. Our finalised Annual Plan for 2010/11 will then be published before Easter 2010.