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Consumer switching A consultation on proposals to change the processes for switching fixed voice and broadband providers on the Openreach copper network Redactions are indicated by [] Consultation Publication date: 9 February 2012 Closing Date for Responses: 23 April 2012 A consultation on proposals to change the processes for switching fixed voice and broadband providers on the Openreach copper network Contents Section Page 1 Executive summary 2 2 Introduction 9 3 Current switching processes 25 4 Problems with the current switching processes 35 5 Reactive save activity 80 6 Options 95 7 Assessment of the options 116 8 Next steps 153 Annex Page 1 Responding to this consultation 154 2 Ofcom‟s consultation principles 156 3 Consultation response cover sheet 157 4 Consultation question 159 5 Switching Working Group 163 6 Recent literature on switching costs 166 7 Stakeholder comments on reactive save 170 8 Supporting calculations 185 9 Glossary 207 1 Ofcom Section 1 1 Executive summary 1.1 Competitive communication markets are more likely to work well for consumers when it is quick and easy to switch between providers. 1.2 Our review of consumer switching processes is focussed on ensuring that: An individual consumer's experience of switching communications services is easy and hassle free. Switching processes do not get in the way of providers competing with each other to deliver benefits to all consumers in terms of lower prices, greater choice, innovation and value for money. 1.3 Our review focuses not only on addressing current problems but also on ensuring that switching processes and systems are capable of providing good consumer and competition outcomes in the future. 1.4 In order to benefit from competition, consumers must have the confidence that they are able to exercise choice. This means that consumers should be able to switch between services and providers without undue effort, disruption and anxiety. A lack of confidence in the switching processes may mean consumers choose not to switch. This means consumers will not receive the benefits from competition they should be able to expect. 1.5 Switching processes also need to be robust to accommodate market developments such as increased bundling of services and any future emergence of new technologies and services. 1.6 In this part of the review, we are consulting on specific proposals for switching fixed voice and broadband services delivered over the Openreach copper network. Future parts of the review will consider cable technologies, next generation access (NGA) technologies, mobile and Pay TV services. Problems with current switching processes 1.7 We have identified a number of problems with switching fixed voice and broadband services delivered over the Openreach copper network. The nature and extent of the problems varies according to the different switching processes currently in use. Some of the problems identified are also likely to get worse in the future as a result of developments in the market. 1.8 The processes that are currently used for switching fixed voice and broadband services over the Openreach copper network are: The Notification of Transfer process. This is a Gaining Provider Led process where the consumer only needs to contact their (new) Gaining Provider to switch. The Gaining Provider informs the (current) Losing Provider on behalf of the consumer in order to organise the transfer. The consumer receives letters from both providers confirming the planned switch before it happens. This provides an opportunity for the consumer to stop the order going ahead where they change their mind or in cases 2 A consultation on proposals to change the processes for switching fixed voice and broadband providers on the Openreach copper network where they have no knowledge or have not given their consent to the attempted switch. The Migration Authorisation Code process. This is a Losing Provider Led process which applies to broadband only. It means that if a consumer wishes to change their provider, they need to obtain a code from the Losing Provider and give it to the Gaining Provider. On receiving a request for the code, the Losing Provider carries out checks to confirm that the consumer making the request is the legitimate account holder and has an opportunity to discuss the implications of switching with the consumer. The consumer must supply the code to their Gaining Provider to allow the switch to go ahead. The Cease and Re-provide process. Where there are no agreed switching processes in place which enable a seamless transfer of services between providers, we describe the process as Cease and Re-provide. Here, the consumer terminates their contract with the Losing Provider and requests a new service from the Gaining Provider. This process requires the consumer to manage the stopping and starting of their services. Multiple processes 1.9 Currently there are multiple switching processes for switching the same type of service. The switching process that a consumer should follow depends on a number of factors that are not visible to the consumer such as the technology used by their Losing Provider and by their Gaining Provider. This makes it difficult to give clear general advice to consumers about how to switch their fixed voice and broadband services and may increase consumer perception that switching is difficult. 1.10 The technologies underpinning fixed voice and broadband services are getting more complex and this will make it more difficult in the future for Gaining Providers to reliably and accurately inform the consumer of the correct switching process to follow. 1.11 Consumers switching bundles may need to navigate different switching processes at the same time, adding to the complexity and hassle associated with changing provider. The continuing trend towards bundling suggests that this concern is likely to get worse in the future. 1.12 Multiple switching processes can distort competition between providers. A lack of competitive neutrality arises when it is easier and/or less costly to gain customers under some processes than others. Providers who are more likely to gain customers under the relatively easy process and less likely to lose them under the relatively difficult process are likely to be at a competitive advantage relative to other providers. Back end system deficiencies 1.13 Our evidence suggests that there are problems with current switching processes behind the scenes (away from the consumer) and these are likely to get worse in the future. This involves providers correctly identifying and validating the services and physical line to be switched and then coordinating the processes to allow the switch to go through seamlessly. 1.14 In certain circumstances the current switching processes cannot reliably identify the correct line to take over which leads to the wrong line being taken over. This affects an estimated 130,000 households per year and can result in households losing 3 Ofcom service, telephone number, or both. We expect that, absent changes to the processes, reliability will get worse in the future as new services and technologies are rolled out and it becomes more difficult to identify the right line and service to switch. 1.15 To enable consumers to efficiently switch between providers that are delivering the service over Metallic Path Facility technology, the new provider needs to support some additional system capabilities. However, some of these providers have chosen not to support these capabilities making it more difficult for consumers to switch. 1.16 Because of the deficiencies outlined above, some providers do not follow industry agreed switching processes and instead ask the consumer to „cease‟ their existing service and start a „new provide‟ with them – this is called Cease and Re-provide. This approach is burdensome to the consumer (e.g. connection and cease charges, more hassle and potential loss of telephone number and/or service) and inefficient for providers. Evidence suggests that 42% of consumers that went through Cease and Re-provide should have gone through the industry agreed processes. 1.17 The industry agreed back end switching processes are intended to ensure continuity of service when the consumer is switching providers. If they are followed, this tends to work well when switching one service. However, many providers‟ current systems can‟t easily cope with switching more than one service simultaneously. This means that they sequentially switch services in a bundle with around one in five broadband switchers losing service for an average of one week. Insufficient consumer consent and slamming 1.18 „Slamming‟ occurs when a consumer is switched to another provider without their explicit knowledge or consent. Slamming occurs largely due to a lack of upfront checks within the Notification of Transfer process to ensure the correct identification of the customer, together with their authority and agreement to switch. An estimated 520,000 households have their fixed voice and/or broadband services slammed each year. 1.19 Slamming often creates significant harm for consumers affected, whether that is in the form of distress, time and effort trying to resolve the situation, and/or financial harm where consumers are charged an early termination charge (ETC) if they are slammed during a minimum contract period. 1.20 Slamming creates significant costs for providers who need to deal with consumers who have been slammed and take steps to rectify the situation where the customer decides to switch back to their original provider. These costs may ultimately be borne by consumers in the form of higher prices. 1.21 Slamming may also distort competition. Research provides indications that a significant proportion (between 28% and 60%) of consumers who had been slammed were not restored to their original provider. This may be because they did not want to spend time trying to resolve the situation or because they did not want to pay an ETC to the provider who slammed them.

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