Businesses left out in the cold following Ofcom broadband compensation review
5 min read
10 November 2017
Despite a number of SME businesses in the UK using residential internet services, broadband compensation rules have failed to address the needs of corporate customers.
Following a review earlier in the year, communications regulator Ofcom has set out new rules determining how broadband compensation will be distributed following the loss of service to residential customers.
Major providers including BT, Sky, TalkTalk, Virgin Media and Zen Internet, which account for roughly 90 per cent of the landline and broadband customers in the UK, have committed to the compensation policy which will see £8 handed back for each calendar day the service is not repaired, £25 compensated for a missed engineer appointment and £5 returned for each day a new service is delayed. All compensation, which does not come into effect until 2019, will be paid as a refund through a customer’s bill.
Research from Ofcom found compensation was paid out in only 15 per cent of cases, with many not aware of the rights afforded to them. Now, customers are set for £142m in payouts – an amount Ofcom says is nine times the current level.
Despite introducing the new compensation charges, the amounts have dropped from original proposals. Originally, Ofcom had mooted £10 a day for a fault not being fixed. Refunds also only start applying after service has been down for 48 hours.
Lindsay Fussell, Ofcom’s consumer group director, said: “Providers will have to pay money back automatically, whenever repairs or installations don’t happen on time, or an engineer doesn’t turn up.
“People will get the money they deserve, while providers will want to work harder to improve their service.”
Real Business got in contact with an expert in the business telecoms field, who said there are not set remedies for business customers.
Dave Millett, a director at Equinox, said businesses must make individual claims which are then judged on a case by case basis – so many don’t bother.
“If one looks at the impact on a business of not having broadband or phones then it can be devastating,” he added. “Until penalties are of a sufficient level to incentivise improvement in the service they are worthless in real terms.”
Millett believes compensation rates for businesses are at such a low level that they amount to little more than a “slap on the wrist”. Assuming the fully-laden cost of an engineer including tools and transport is mourned £75,000, he calculated an engineer could mist 12 appointments a day and it would still be cheaper than hiring the extra resources to improves services.
Real Business also reached out to all of the broadband providers which have signed up to the new voluntary policy. However, at the time of going to press, none had provided information on what business customer broadband compensation packages look like.
While the new broadband compensation package is only available to residential customers, Ofcom believes a third of all SMEs currently use these kinds of services. It also said many business customers don’t know compensation is already available – some 49 per cent do not secure refunds when service falls short.
Dan Howdle, consumer telecoms analyst at broadband comparison and advice site Cable.co.uk, commented: “This should be viewed more as a way to force providers to spend money improving service-levels across the next 15 months (when these measures will finally be implemented) so these problems do not occur in the first place – to vastly increase the cost of their failure.”
Ofcom has calculated that under current compensation efforts, people receive an average of £3.69 per day for the loss of service and £2.39 per day for delayed installations. However, the development of the Digital Economy Act 2017 in parliament earlier this year paved the way for stricter broadband compensation policy.
Despite the new plans, Alex Neill, Which? MD of Home Services, added: “For all consumers to get what they’re entitled to, it’s vital that all providers play fair and sign up to this scheme.”
This sentiment was echoed by Citizens Advice. Gillian Guy, chief executive of the organisation, said Citizens Advice will be “looking closely” at Ofcom’s full review of the scheme after 12 months to ensure it works for consumers.
While Plusnet and EE have not formally signed up to the new policy, Ofcom said both have “indicated they’d like to join the scheme”.