Feedback to regulators from consumers

Consumer protection issues in telecommunication services are not generally given full attention, according to a recent report from a case study commissioned by the ITU Telecommunication Development Bureau (BDT). The report entitled Regulatory Challenges: Feedback to Regulators from Consumers (www.itu.int/ITU-D/treg)  is the result of a case study carried out at the request of the ITU Global Symposium for Regulators. This study is intended to give consumer issues greater priority and launch a global dialogue between consumers and regulators. The report, in its opening paragraphs, states that consumer protection issues are rarely included in the agendas of international telecommunication meetings. “Few seminars have been held to enable operators and consumer organizations to share views and experiences. Far more common are meetings between operators and regulators,” the report affirms, adding that a review of Internet websites and policy papers also shows that little attention is given to consumer protection policies and that textbooks on regulation primarily focus on market structure, incentive regulation, tariff regimes, deregulation and competition.

Although the study mainly focuses on residential consumers in Latin America, consumer organizations from other regions were also consulted, and the research includes reports prepared by numerous consumer associations around the globe. National regulatory authorities were surveyed to compare their opinions with those of consumers (see Table 1). Note that survey results only reflect responses received.

Are consumers sufficiently involved in the regulatory process?

Consumer issues can be chronicled from the time of monopoly regimes, when consumers had no voice at all, to the advent of competition, which has given rise to greater concern about consumer welfare. As the survey indicates, consumers today “feel that they were excluded from the initial decision-making process that led to the sweeping changes in the provision of telecommunication services, including market structure, ownership and tariff regulation. They believe that their late arrival in the regulatory process provides them with limited opportunity to influence or even overturn critical decisions made at the onset of the sector reform process.” And so consumer perceptions and opinions about the new marketplace scenario are not particularly encouraging. “There is a broad consumer-related agenda yet to be pursued and if consumer views are neglected, regulators’ efforts to foster competition and to instil a sound regulatory framework may well prove to be unsustainable,” says Geoffrey Cannock, Project Director of Apoyo Consultoria and author of the report.

What do consumers complain about?

The report lists a number of major factors leading to consumer complaints, some of which are cited here. For example, lack of choice among alternative service providers due to a single or dominant operator may make consumers vulnerable. From the survey, consumers are more likely to require intervention where dominant operators are protected by the government, where regulators lack enforcement power, where there are no quality of service performance requirements or where dominant operators are authorized to set tariffs below cost and therefore drive out competitors. There is less need for intervention where operators are subject to well-designed incentives to meet consumer needs.

New services or new ways of providing existing services that are not properly explained to consumers can cause them to make uninformed spending choices. Furthermore, lack of sufficient pricing information regarding value-added services can also cause discontent. For example, value-added voice and information services (such as Small Office and Home, or SOHO, and entertainment) have given rise to various consumer complaints usually related to the complex pricing schemes used and the lack of information from service providers. Typical claims relate to the failure to advertise prices properly, disputed calls, metering and lack of customer services. In some countries, consumer associations have played an important role in bringing a number of these cases to the regulator. El Salvador’s Centro para la Defensa del Consumidor (CDC) obtained an 80 per cent refund for users that had been sent excessive bills for such entertainment services after a tripartite special commission was created that included consumer, operator, and government representatives. This was an ad-hoc solution devised in lieu of procedures and institutions to deal with these types of problems.

Then come high telecommunication service expenditures relative to household income and variable monthly bills. Household expenditure figures show that telecommunication services represent between 2 and 6 per cent of total expenditures. The introduction of new services, such as the Internet, mobile telephony and voice information services has raised the proportion of household expenditures spent on communication services. The fact that telecommunications account for an increasing share of gross domestic product confirms this trend. Highly variable household bills — especially where consumption is metered or where different rates apply throughout the day — affects consumers on a fixed income who are left with less money for other purchases. Consumers tend to compare their phone bills with water and electric bills, which may be more predictable.

Homes rarely have metering devices that can be compared with operator billing systems. This may lead to opportunistic behaviour both by users and operators and the risk that the parties may either reject a truthful claim or accept a false one. Some policy-makers have now put the burden of proof on the operator, holding the operator responsible for maintaining evidence regarding consumer claims.

Slamming and cramming are another cause for complaint. Even when competition is introduced, the transition to full competition may be plagued by consumer abuses such as “slamming” (the illegal practice of changing a consumer’s telephone service without permission) or “cramming”, the practice of placing unauthorized, misleading, or deceptive charges on the telephone bill, fraud, privacy infringement, lack of customer security and false and misleading advertisement.

“For-pay” voice messaging services have been the subject of complaints in several countries, including calls unwittingly placed to a voicemail service by consumers unaware of the costs for such service, or the service being provided on an unsolicited basis and in the absence of consumer consent. These complaints highlight the need for operators to inform both regulators and consumers about the impact of the introduction of new services. The report highlights that implementation of improved end-user services, such as moving from a per-minute billing system to a per-second scheme, often requires active involvement of the regulator.

Willy Jensen, Director General of the Norwegian Post and Telecommunications Authority (NPTA), says that regulators should not forget the essence of their mission, which is to ensure that end-users get quality service at low prices. “Regulators should shift their thinking from the supply side to the demand side of the equation. Norway has tried to focus on the demand side by introducing number portability and per-second billing for mobile services. An informed consumer is an empowered consumer. Regulators should make every effort to empower consumers. NPTA has developed a website called the ‘Interactive Price Guide’ in which all operators are required to provide data about the costs of their services, so that consumers can calculate the costs of different service offers and switch to the provider who best suits their needs.”

Consumer protection policies and rights

Consumer organizations are quite critical of consumer protection policies for telecommunication services. A general comment is that these policies have not been well-defined and that their enforcement level is low. Countries that have introduced competition, private operators and national regulatory authorities separate from the incumbent operator, if not separate from government ministries, received a better rating, but still fail to meet consumer expectations according to the survey.

Most specific consumer rights regarding telecommunication services are applications derived from general domestic consumer protection laws or from the United Nations Guidelines for Consumer Protection. The United Nations has defined the general principles for consumer protection and legitimate consumer needs to include:

Figure 1 — Are the following rights appropriately defined in national legislation or standards?

• The protection of consumers from hazards to their health and safety.

• The promotion and protection of the economic interests of consumers.

• Access of consumers to adequate information to enable them to make informed choices according to individual wishes and needs.

• Consumer education on the environmental, social and economic impacts of consumer choice.

• Availability of effective consumer redress.

• Freedom to form consumer and other relevant groups or organizations and the opportunity of such organizations to present their views in decision-making processes affecting them.

Figure 2 — Are these rights effectively enforced?

The most common policies adopted in a number of countries are those that deal with complaint resolution processes and the power to fine operators. Figure 1 highlights the responses of regulators and consumers with regard to whether a certain set of consumer rights are appropriately defined in their country’s legislation or standards. Figure 2 shows the perceptions of regulators and consumers on whether they consider these rights to be effectively enforced.

In the survey, consumers seek improvement regarding issues such as consumer participation, the representation of consumer interests both in regulatory processes and dispute resolution, education and imposition of fines.

Figure 3 — Specific rights of consumers of telecommunication services

As illustrated in Figure 3, consumers and regulators seem to converge in their ratings on issues such as blocking access to unwanted services, timely bill delivery and the right to suspend a telephone service. However, large disparities exist on consumer compensation for damages, and on the privacy of communications.

The extent to which consumer protection policies need to be codified is an on-going discussion. For example, some countries advocate the formal codification of consumer rights in law. Others argue that a better approach is to define general principles in a guideline and leave specific claims to be solved by jurisdictional dispute resolution bodies or alternative dispute resolution mechanisms.

Figure 4 — Are the rights of consumers of telecommunication services protected by regulation in your country?

As Figure 4 illustrates, some 21 per cent of the countries surveyed have enacted and are applying general consumer laws, 18 per cent have general regulations that cover utilities, whereas 21 per cent do not have any regulation in place to protect telecommunication consumer rights. While 39 per cent of countries have specific regulations providing for the protection of telecommunication consumer rights, these regulations are usually contained in various legal instruments, increasing transaction costs for consumers.

Figure 5 — Which means does your consumer organization use to participate in the regulatory process?

One common denominator is that consumer problems are often the same across countries. International consumer associations such as Consumers International are networking through in-person seminars and over the Internet to foster an exchange of experiences and to reduce the information asymmetries they face when dealing with global or regional operators. Figure 5 shows the means used by consumer organizations to participate in the regulatory process. Consumer associations are aware that they need to be more prepared in technical matters to be able to negotiate, comment and promote consumer interests.

Raising consumer awareness
Mobile roaming

An example of raising consumer awareness is the joint study conducted in April 2002 by the Irish Office of the Director of Telecommunications Regulation (ODTR) and the British regulator, the Office of Telecommunications (Oftel) on mobile roaming and the cost of using mobile phones abroad. ODTR had received numerous consumer queries and several complaints about mobile roaming prices. In addition, research from other European countries demonstrated that consumer awareness of mobile roaming charges was generally low. While ODTR has no direct control over mobile roaming prices, the regulatory body took the opportunity to address gaps in consumer awareness by issuing general advice to consumers on how to control costs. In view of the extensive travel by mobile users between Ireland and the United Kingdom, ODTR and Oftel agreed to release a joint mobile roaming study. Although it is difficult to quantify the exact impact on levels of consumer awareness without further research, the report did receive considerable attention from consumers, the industry and the media in Ireland. Coverage of the report in national print and broadcast media ensured that a large consumer base was made aware of the report.

Reaching out to consumers

Figure 6 — By what means does the government educate the population on their rights and duties concerning telecommunication services?

Specific educational mass-media campaigns may be needed to educate consumers about major changes in the market, such as introducing “calling party pays” tariffs, new numbering plans, or opening the long-distance market to competition. As Figure 6 illustrates, school textbooks are another useful but often under-used channel to educate consumers about their rights. Education is a powerful, albeit, long-term action to shape people’s attitudes about enforcing their rights as consumers. Activities that regulators should consider in setting up the consumer agenda include: establishing customer services such as call centres, creating mass awareness of consumer rights, enforcing those rights, creating nationwide offices to address consumer issues and offering dispute resolution systems.

The report concludes that because there are so many consumer issues to be addressed, policy-makers and regulators must carefully define roles and allocate responsibilities between the public and private sector to avoid shifting responsibilities from operators to the regulator and to identify which activities, for example, consumer complaint call centres, may best be outsourced to the private sector. Careful analysis is needed, however, to avoid consumer protection policies that impose undue costs on the market, which may ultimately harm consumers.