Press Release - The Office of Telecommunications: Helping
consumers benefit from competition in the telecommunications
market
11 July 2003
Oftel has taken steps to improve consumer awareness in the fixed
line telecommunications market to help consumers take advantage of
the choices available, according to a report presented to
Parliament today by Sir John Bourn, the head of the National Audit
Office. But the report recognises that while some consumers will
choose not to switch supplier, Oftel could focus more sharply its
efforts to raise consumer awareness so that more consumers can
realise savings. His report also found, however, that consumers are
benefiting from Oftel's work to improve competition by
investigating and addressing anti-competitive behaviour.
Raising consumer awareness
The report focussed on the fixed line market as competition is
less fully developed. Oftel aims to obtain the best deal for
consumers, but many consumers are not well motivated to change
their telephone supplier. The effort involved in switching may also
dissuade them from exercising their choice. Although numbers
continue to increase, with around one-third of consumers having
switched at some stage, an NAO survey in September 2002 found that
68 per cent of consumers had made no changes in the last two years
to the way they buy these services.
The savings, if any, that consumers can make varies according to
their circumstances - some of the bigger savings can be achieved by
moving to a more appropriate package with their existing supplier.
It is not, however, easy to identify which consumers can benefit
and by how much. The report recommends that Oftel should continue
developing its assessment of which consumers are losing out through
a lack of information, to identify the opportunities for them to
get more for their money.
Oftel uses various methods of distributing information to
consumers. Many consumers, however, are still not aware of
important features of the market, such as indirect access
operators. These operators are generally cheaper than BT's standard
tariff, especially for international calls. Although Oftels
research points to high general awareness of indirect access, the
NAO survey found that 77 per cent of consumers could not name a
single indirect access operator. The report recommends that Oftel
should provide, where appropriate, more practical guidance that
reaches the consumers it is targeting as part of its consumer
information strategy.
Suppliers offer a wide range of tariffs and discount schemes and
it is difficult for consumers to calculate which tariff, from which
supplier, would amount to the better deal than their existing
service. To help consumers, Oftel has encouraged the development of
price comparison services through an accreditation scheme - it
accredited the first scheme in June 2003. The report concludes that
Oftel should consider how to make it easier for consumers to make
choices.
Stopping and deterring anti-competitive behaviour
Anti-competitive behaviour by telecommunications suppliers can
lead to less choice and higher prices for customers. Oftel seeks to
resolve disputes between suppliers that may involve allegations of
such behaviour and initiates some investigations of its own. Oftel
found grounds for action in 33 per cent of the 187 investigations
in the two years to June 2002.
Oftel took, on average, just over six months to complete
investigations in the two years to June 2002, four weeks longer
than in 1998. In advance of a new EU requirement, effective from 25
July 2003, that disputes be resolved within four months (except in
exceptional circumstances) rather than the current six months,
Oftel is seeking to speed up its investigations. In the second half
of 2002 the number of investigations taking more than four months
fell to 40 per cent of the total. In April 2003 Oftel introduced
new procedures for handling disputes to ensure smooth
implementation of the new statutory obligations. The report
recommends that Oftel should ensure that the latest changes to the
way it manages its investigations enable it to complete them within
four months.
Oftel's internal assessment of the quality of its investigations
completed in the two years to June 2002 found that 56 per cent were
'good' or 'very good'. The report recommends that Oftel should
carry out each year a fuller overview of its work in identifying,
deterring and stopping anti-competitive behaviour.
Sir John Bourn, head of the National Audit Office,
said:
"It is hard for consumers to understand how to get a
good deal for fixed-line telephones, and therefore many do not try.
Oftel has been working to help raise awareness, but it needs to
have a better understanding of why consumers behave the way they do
and should also make it easier for them to compare the tariffs on
offer, for example by building on its tariff comparison
accreditation scheme."
Notes for Editors
- The report follows up the Offices 1998 report on how Oftel
tackles and deters anti-competitive practices by telecommunications
suppliers, and considers also how it encourages consumer awareness
of the market, focusing on the fixed-line market. The report should
provide the new communications regulator, Ofcom, with a foundation
for developing these activities when it takes over from Oftel in
December 2003.
- The Director General of Telecommunications, David Edmonds,
heads the Office of Telecommunications (Oftel). Oftel was set up
under the Telecommunications Act 1984. Its goal is to make sure
consumers receive the best quality, choice and value for money for
all their telephone services. Oftels functions are to be taken over
by the Office of Communications (Ofcom), which is scheduled to be
operational by the end of 2003 after enactment of the
Communications Bill.
- Individual households spend, on average, some 310 each year on
fixed line telecommunications, though this masks significant
variations by individual consumers. For almost half of consumers,
the cost of line rental exceeded call costs.
- Most residential consumers have a choice of three types of
fixed line telephone service:
- the original (mostly BT) network;
- one of two cable networks that provide television and
telecommunication services. Their networks, which cover separate
areas, are available to about 60 per cent of households; and
- over 200 indirect access operators. Consumers can choose to
route their call through a supplier that does not own the network
where the call originated. This is usually achieved by dialling a
four-digit routing prefix, and results in separate bills for call
and line rental.
- Oftel has a particular interest in raising consumer awareness
of the issues to be considered in choosing a supplier in view of
its policy of encouraging the development of effective competition.
It recognises this by making 'well informed consumers' one of its
four high level strategic objectives.
- The Director General of Telecommunications has a statutory duty
to investigate all complaints, including those involving
anti-competitive behaviour. He has statutory powers to carry out
investigations of suspected anti-competitive behaviour and to stop
it. In addition, he has a duty to resolve disputes about
interconnection, the process of linking suppliers' networks.
Preventing anti-competitive behaviour is another of Oftels four
high level strategic objectives.
- We reviewed the outcomes of the 187 investigations completed by
Oftel in the two years to June 2002. Oftel found grounds for taking
action in 62 cases (33 per cent). Oftels policy is to keep
regulatory action to the minimum necessary to achieve its aims. It
took formal regulatory action in 19 of the 62 cases (31 per cent).
For the remaining cases, Oftel felt that it could rely on the
companies to implement the action agreed with them, thereby
resolving these cases without the need for formal action.
- Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk.
Hard copies can be obtained from The Stationery Office on 0845 702
3474. The NAO has produced a leaflet which gives advice to
consumers on getting a better deal on their fixed line telephone.
It is also available on the website.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 50/03
All enquiries to Mark Strathdene, NAO Press Office:
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