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.