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National Audit Office report: The Office of Telecommunications: Helping consumers benefit from competition in the telecommunications market

The Office of Telecommunications: Helping consumers benefit from competition in the telecommunications market

"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."

"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."

Sir John Bourn, head of the National Audit Office

 

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.

 

Publication details:

ISBN: 0102922209 [Buy a hard copy of this report from TSO]

HC: 768 2002-2003

Published date: July 11, 2003