Introduction

On 15 May 2019 Ofcom announced in a statement the details of upcoming changes to rules affecting broadband, mobile, home phone and pay TV providers. At present, many customers sign up to fixed period contracts for their broadband, phone and TV services, but don’t keep track of when this period comes to an end, or if they could be getting a better deal elsewhere.

Providers will have until February 2020 to prepare for changes which mean they will be obliged to notify both residential and business customers about the upcoming end of their contracts, as well as providing other information to help customers choose a deal going forwards.

What are the new rules?

From 15 February 2020, companies will have to notify both their residential and business customers when their minimum contract period is coming to an end.[1]

For residential and small business customers (i.e. 10 employees or fewer[2]) this means between 10 and 40 days before their contract ends they must be notified either by text, email or letter of:

• the minimum contract end date;
• the services provided and price paid before the end date;
• any changes to the services provided and the price paid after this date;
• information about the notice period needed to terminate the contract;
• details about the ‘best’ tariffs available from the provider.

They information about available tariffs must include at least one SIM-only deal for customers who bundle the cost of a mobile handset with airtime. It must also contain information on prices available to other customers, such as new customers. Customers who remain out-of-contract will receive an annual notification containing best tariff information.

Why the new rules?

The new rules are the latest in Ofcom’s ‘Fairness for customers’ campaign which has aimed to ensure a fair deal for all customers, especially those in more vulnerable circumstances. A central focus for Ofcom has been ensuring that customers are given the information they need to make informed choices and “to shop around with confidence”.

Customers often sign up for fixed contracts for broadband, mobile, pay TV and home phone services, during which time they cannot cancel or switch. However, when this period ends, customers are free to switch, but many do not and as a result pay more than they need to or face automatic changes to their services.

Ofcom is therefore seeking to increase fairness by allowing people to see if they are losing out in their contract and should think about switching. In its news statement it has said:[3]

• Over 20 million customers have gone beyond their initial contract period
• People who bundle landline and broadband services together pay an average of 20% more when they are out of contract, rising to 26% if pay-TV is added.
• 14% of customers don’t know whether they are still in their original contract
• About 12% of customers believe they are still in contract, but don’t know when it ends

Ofcom consulted in July and December 2018 on proposals for the notification requirements, receiving feedback on its plans from various industry players and regulators, many of whom welcomed the increase in transparency and fairness to customers.

On top of this, the European directive, the European Electronic Communications Code (EECC), has now entered into force.[4] Article 105(3) of the EECC contains provisions that overlap with Ofcom’s July 2018 proposals, specifically requiring notifications to end users about their contract expiry and best tariff advice. The government has indicated it would implement appropriate substantive provisions from the EECC even in the event of a no-deal Brexit, and on broadly the same timetable as the EU.[5] As a result, Ofcom has decided to proceed with implementing the changes ahead of the transposition deadline in the form of the new rules.

What about business customers?

The new rules state all other business customers must also receive a notification to inform them of the end of their minimum contract period and how they may terminate the contract.

However, the requirements for business customers are considerably lighter. One of the contentions raised during consultation was that including business customers in the requirements would be an undue burden on providers to notify business who were less likely to befall the same harms as residential customers due to greater resource and incentive to track contracts.

Additionally, the ‘small business’ category is nebulous, as there is no central register for number of employees at a business. This raises the question of what happens to small businesses which find themselves straddling Ofcom’s ten-employee limit with fluctuating hires potentially taking them above and below at any given time.

Ofcom has nonetheless considered it appropriate to include business customers in the new rules as planned, but on a less prescriptive basis. Providers have some flexibility on how to judge appropriate notification, performing it on a case-by-case basis depending on the nature of the relevant business customer. There is no set time to notify, only a requirement to do so in a “timely manner”. What constitutes “best tariff advice” for these customers is also undefined.

The Ofcom statement suggests that providers will have lesser obligations to larger businesses with many employees as opposed to smaller ones which share “significant characteristics, behaviours, and needs with residential customers”[6] and therefore are owed a similar level of information regarding contract end.

What about GDPR and PECR?

Sending notifications to customers and former customers naturally raises concerns around data protection, as notifying is highly likely to involve processing of personal data. Providers will have to consider whether sending the notifications will fall within the initial purposes for which they collected the data, or whether end-of-contract and/or out-of-contract customers will require notification of new processing purposes.

Additionally, the inclusion of any offers or promotions (i.e. as part of new tariff information) is likely to result in the notifications falling within the definition of direct marketing. As a result, providers will need to consider carefully whether they are compliant with GDPR, the Data Protection Act 2018 and also the Privacy and Electronic Communications Regulations (PECR) in sending their notifications, with concerns being raised around sending the notifications to customers who have already opted out of direct marketing.

Ofcom has engaged with the ICO and, while it has confirmed the example end-of-contract and annual best tariff notifications are still appropriate to send to opted-out customers,[7] providers will need to exercise caution in the structure and content of their notifications to ensure they do not inadvertently breach the regulations. The distinction between the required best tariff notification and direct marketing is not clear cut, while the fine for failing to comply with the regulations can be up to £500,000.

In a recent example of the dangers of straying into direct marketing, in June 2019 the mobile network EE was issued a £100,000 fine for sending texts to customers without consent, encouraging them to use the EE app and to upgrade their handsets. EE had believed the texts were service messages and not direct marketing, but the ICO ruled promotional material of any kind engaged PECR. In its ruling the ICO stated “if a message includes any significant promotional material aimed at customers to buy extra products or services or renew contracts that are coming to an end that message is no longer a service message… and will be subject to the same rules as other electronic marketing messages”.[8]

It is therefore conceivable that a ‘best tariff’ notification which involves proposing other contractual options for end-of-contract customers could well fall foul of the same reasoning.

What happens next?

The new requirements will come into effect on 15 February 2020. Ofcom are currently working on new general conditions and will issue guidance on how they expect providers to comply with the new requirements for residential customers.

Ofcom has stated its intention to monitor and evaluate the approach providers take to the new notification rules when they are in force.

 

[1] Ofcom ‘Helping consumers get better deals – Statement on end-of-contract notifications and annual

best tariff information’ (“Ofcom Statement”), Chapter 1, 15 May 2019

[2] Ofcom Statement footnote 7

[3] https://www.ofcom.org.uk/about-ofcom/latest/media/media-releases/2019/firms-must-tell-customers-about-best-deals

[4] Directive (EU) 2018/1972 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L1972&from=EN

[5] https://www.gov.uk/government/publications/what-telecoms-businesses-should-do-if-theres-no-brexit-deal/what-telecoms-businesses-should-do-if-theres-no-brexit-deal

[6] Ofcom Statement paragraph 8.14

[7] Ofcom Statement paragraph 5.109

[8] https://ico.org.uk/media/action-weve-taken/mpns/2615179/ee-limited-mpn-20190620.pdf

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