Lord Stoneham of Droxford
Main Page: Lord Stoneham of Droxford (Liberal Democrat - Life peer)Consumer Rights Bill
Lord Stoneham of Droxford Excerpts“Communications services: change of service provider
In section 3 of the Communications Act 2003 (general duties of OFCOM), after subsection (2)(f) insert—“(g) the maintenance of processes that promote the consumer interest and competition, to include a switching regime that is led by the receiving provider”.”
Lord Stoneham of Droxford (LD)
I rise on behalf of my noble friend Lord Clement-Jones, who has a conflicting commitment this afternoon.
This amendment—I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, for their support for it—is designed to ensure that consumers experience a consistent, simpler and quicker switching process when seeking to switch communication provider, led by the receiving provider.
UK consumers, now more than ever, depend on a range of communication services. Ofcom research has shown that 94% of all UK adults own a mobile phone and that 15% of UK consumers live in a mobile-only household. It is therefore vital that the communication market works well for UK consumers. However, the current switching processes, not just for mobile phones but across the communication sector, are complicated and slow, working against consumers and distorting fair and open competition.
Recent reforms mean that banking and energy customers are able to switch by contacting their new provider—a system known as gaining provider-led switching. However, mobile, pay TV and broadband customers must contact their original provider before switching.
Under current legislation, communications providers operate a losing provider-led switching regime, which forces consumers to contact their current provider to terminate their old contract before being able to switch to a new provider. Not only is this time-consuming and can lead to breaks in service or periods of double-billing when switching between providers but it has a negative impact on competition and pricing.
Consumers who threaten to switch are usually offered preferential deals in order to stay. The retention offers made to these consumers are effectively subsidised by the supplier’s remaining customers, who pay higher prices. Competitive offers are often reserved for new customers or those who attempt to switch, with existing customers often losing out. The existing complicated switching regimes across the communication sectors are leading to real consumer harm. For example, Ofcom data show that of the 9 million UK mobile customers who switch annually, as many as 1.2 million are double-billed or experience a total loss of service. The hassle and confusion for consumers deters them from switching provider. By contrast, the car insurance market has a switching level of 38%, compared with 9% in the mobile and broadband market and just 3% in digital television.
Forcing customers to contact their original supplier often leads providers to operate poor retention practices. The best deals are hidden away and are available only to those who can play the system. This means that the vast majority of UK consumers, including the inactive, the out of contract and the vulnerable, face higher prices while only a minority of savvy customers, willing or able to game the system, get the best deals. A gaining provider-led system forces operators to place their best deal on the open market, accessible to all.
When Ofcom attempted to introduce the gaining provider-led switching system in 2007, it was subjected to appeals from the major mobile networks. Ofcom, in its 2010 strategic review of switching in telecoms, concluded that gaining provider-led switching systems perform better than those led by the losing provider, they are easier for customers to navigate and they are more likely to support competition, yet there has been no progress since then. This amendment would free the path for Ofcom to achieve the outcome it sought as long ago as 2007.
By contrast, last year Ofcom mandated a gaining provider-led switching process on BT’s Openreach network, which supports the services of BT, Sky, TalkTalk, the Post Office and EE’s broadband. This will be in place by June 2015, meaning that customers will need to contact only the provider they are moving to, not the one they are leaving. This will simplify switching for landline and broadband services and will also apply to BT’s Sport TV. In fact, the gaining provider-led system has been acknowledged by both government and the regulator as the best switching system.
In July 2013, DCMS published Connectivity, Content and Consumers, which set out its plans for the communications sector. In it, the department supported a move to gaining provider-led system switching across all communications services. It said:
“We recognise that switching processes work better for consumers when only one call needs to be made to the company the consumer wishes to switch to for the switch to happen, and there is no need for consumers to contact their existing provider … Working with Ofcom, we will do everything we can to move towards a system of gaining provider-led switching across the board. Consumers are increasingly buying services in bundles, for example, phone, broadband and pay TV. This can make switching providers more difficult as there are different switching processes attached to each component of a bundle. We will legislate to give Ofcom a duty to ensure a consistent and effective experience for consumers switching between bundles”.
Given that Ofcom has consulted extensively on switching processes, the Government's subsequent reluctance to legislate is frustrating and baffling for all concerned. On behalf of consumers, Which? has confirmed that it agrees and supports this amendment precisely because it would introduce gaining provider-led switching across all telecommunications markets, drive forward competition and significantly improve the consumer switching experience, enabling people to switch with greater ease and convenience.
This amendment would bring communications providers into line with other markets—including energy and personal current accounts—which operate a gaining system. It would force companies proactively to offer best deals on the open market, rather than withholding the best offers to retain customers threatening to switch. Having a single gaining provider-led switching regime across the whole sector would alleviate confusion around the process of switching, and would help give consumers a consistent experience when switching. Increasingly, consumers view broadband, landline, TV and mobile as complementary services.
If consumers did not have to contact their existing provider before switching, there would be more incentive for suppliers to focus on retaining customers at all parts of the journey rather than at the end point. This would result in more competition and better- value deals for all consumers, with prices harmonising across customers of the same supplier. Gaining provider-led switching in communications markets is already standard practice across most other EU countries, where it works well. I hope that the Government will support this amendment and get this policy moving in the interests of consumers.
Lord Stevenson of Balmacara (Lab)
My Lords, I am sure that I saw the noble Lord, Lord Clement-Jones, only a few moments ago, asking questions in the Chamber, so his conflicting engagement is extremely irritating because we were looking forward to his contribution here. Of course, we now have his parasitic packaging analogue who is gradually inhabiting all of his previous positions on matters to do with this, and we should not complain, because he once again has managed to introduce a very complicated and not very easy to grasp topic with exemplary clarity, and I thank him for that.
We on this side support the amendment in the name of the noble Lord, Lord Clement-Jones; indeed, we signed up to it for very much the same reasons as those just explained by the noble Lord. It is a huge gap in the telecoms area that there is no simple and easy switching regime: such a regime would be the foundation of ensuring a competitive market that would drive down prices, while at the same time empowering consumers. Who could be against that?
The problem we have at the moment is completely the reverse, because in the mobile industry—but also in broadband and pay TV—there are very complicated switching processes. These are huge disincentives to consumers to changing provider and this can lead to very real consumer harm in the form of either double bills—which have been well reported in recent days—or a loss of service when providers are switched, because of the difficulty of making all the ends join up.
We think that the gaining provider-led system across the communications sector will make a huge difference. It puts the customer in charge of the process; it prevents competitors in the market using different and complicated switching processes—which, as the noble Lord said, creates hassle and confusion; and it will make it much more competitive.
At the heart of the issue is an irony that does not happen in many other sectors, such as banking. If you force customers who wish to switch to contact their original supplier, you often get problems and disincentives built in, because it is not in the best interests of the supplier who is losing the customer to ensure that that egress is smooth and uncontested. That inevitably means that consumers get a raw deal, possibly do not get good price comparisons and have a lot more hassle than they otherwise would. I am happy to support the amendment.
Baroness Jolly (LD)
My Lords, a requirement for the switching of communications providers to be receiving provider-led—RPL—is part of the EU Connected Continent package. The European Parliament’s First Reading version would amend the universal services directive to require RPL switching. I assure noble Lords that the UK is engaging actively in those discussions to ensure the best outcomes for UK consumers.
The Government have considerable sympathy for RPL switching in the UK. In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board. I am very pleased to say that, as my noble friend said, RPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, although it does not yet operate for mobile services or for pay TV.
Ofcom has the power to mandate RPL switching for all communications services. In July 2014, it called for inputs from stakeholders on consumer switching. Ofcom announced that it is considering mandating RPL switching for mobile services and bundles of services, including pay TV and services over the Kcom network. The Ofcom work is essential to ensure that we get any new rules right first time, so I welcome my noble friend’s interest in consumer switching but, given the good work done so far, Ofcom’s ongoing consultation and the response to it to be published before the end of the year, I ask him to withdraw his amendment.
Lord Stoneham of Droxford
My Lords, I am encouraged by the news of Ofcom’s consultation nearing completion. I should point out that Ofcom has been trying to do that since 2007. There is a danger that Ofcom and the Government are hiding behind each other. However, I accept what my noble friend said, I am grateful for the support that I have received, and I am happy at this stage to withdraw my amendment.
Baroness Wilcox (Con)
My Lords, there are far too many of us in this Room who have been through this issue. I look across and see “credit unions” written right across the noble Lord’s forehead. It is a more difficult situation than we are making it sound. First and foremost, we know that we must be very careful not to push people into illegal borrowing or illegal credit. If we do that and they get into trouble, there is no way that we can get at them to save them. The issue of when to lend money to people has always been difficult. You can see that some of them will get into trouble, but at least you can see them and they can come to you for help. Credit unions are a wonderful idea. They are a gathering of people who come together to save money and, when they have done so, they can then take out the small loans that they need—because it is their money; they put it in there.
This is not about payday lending, which is for borrowing quickly when your child needs a pair of football boots, which every other boy has and without which he cannot play in the football match. This issue is not as simple as it sounds. I tried to tackle it, as did the Minister who followed me, and I am sure that this Minister will try again now. I remind us all that, in the best of all possible worlds, we would not want these telephone calls to happen. However, I urge us to be careful in seeing what the Minister can or cannot do because, if it is that easy, the Labour Government—a socialist organisation—would have done a lot more about it when they were in power—and they could not do it, either. I wish the Minister the best of luck today with this one.
Lord Stoneham of Droxford
My Lords, my noble friend Lady Bakewell is unable to be here today, but I am sure that she would like me to associate us with the right reverend Prelate’s amendment. There are two questions that we have to ask ourselves. First, if the selling of mortgages over the phone is banned, why should these loans not be banned as well? Secondly, there is a problem with existing debtors—principally, I suspect, because the company selling the loans has phone information. Given how vulnerable these people are, they are likely to be very mobile in terms of their telephone accounts, and therefore this is particularly dangerous for them. For that reason, the Government have to act. I accept the points that the noble Baroness, Lady Wilcox, very sensibly raised. This is something which seems to have been overlooked and needs action.
Lord Kennedy of Southwark (Lab)
My Lords, I support these amendments. I very much agree with the comments of the right reverend Prelate and the noble Lord, Lord Deben, in particular. There is a real problem here. People are at home, unemployed and quite vulnerable, and they are being harassed over the phone by these people who are offering them all sorts of deals to sort out their problems. We have to deal with that: it is a really serious problem.
I am a big supporter of the credit union movement. It is not the solution to payday lending but is part of a suite of measures to deal with it. We have to deal with this, and it is right that the Government should act. It is not right that we leave people in this situation, which is completely wrong and intolerable. People can be driven into the hands of very unpleasant organisations that lend them money and allow them to get into a mess. They then offer more deals to round it all up, with a “special offer this week”, and so on. We here are very lucky that we are not in that sort of mess. Some people are having a very terrible time and I think that the Government need to take action against the people responsible.