Commerce Commission tells telcos to create new code to ‘reduce consumer confusion’ within 60 days

An industry watchdog says it has given the telecommunications industry two months to sort out its marketing, which some consumers have found confusing – particularly those who are abandoning their old copper line, or are losing it, and are trying to weigh alternatives.

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Craig Young, head of consumer-advocate the Technology Users Association of NZ (Tuanz), said: “The decision by the Commission comes after a lengthy consultation with individual consumers and industry bodies, including Tuanz, which highlighted the use of deliberate confusion to onboard new, uninformed, and unsuspecting customers.”

Young said it was a “step in the right direction” to correct what his group calls a “confusopoly”.

“We have been deeply concerned about the tactics being used by retail service providers. Copper migration is being used as an excuse to move unsuspecting consumers to preferred services without their express consent, or the information they need to make an informed decision about the alternatives,” Young said.

“Telcos are notorious for using confusion to avoid competing on price, and the practice has a long history in New Zealand,” the Tuanz head said.

“The current product disclosure regime has serious weaknesses, so it is pleasing to see the Commission outlining new requirements around understanding, and clarity of the service performance of alternatives to their current service.”

But telcos are playing down the demand, saying they are already close to being on the same page as the regulator. They say they had already taken steps to ensure their messaging is clear.

The Commerce Commission this morning said it has instructed the industry to develop a marketing code that “ensures consumers receive all the information they need from telco providers to make informed choices about the technology options and plans that best suit their needs”.

Telecommunications Commissioner Tristan Gilbertson said the issue has become urgent as a result of increased marketing activity linked to Chorus withdrawing the old copper network and Spark removing public switched telephone network (PSTN) connections.

“Consumers have told us that marketing of alternatives to legacy copper-based services is often incomplete, confusing or misleading,” Gilbertson said.

In the background, an industry spat

“Providers have also contacted us with concerns about their competitors’ behaviour,” Gilbertson said – in an indirect reference to a Chorus complaint about what it saw as overly-aggressive marketing tactics by Vodafone and Spark for their own fixed-wireless products, which resulted in a warning letter to the entire industry in August.

At that time, Vodafone said it was happy to cooperate and that Chorus )which gets no clip of the ticket from fixed-wireless connections) had complained out of self-interest.

A political and commercial bunfight has been underway for some time between UFB fibre network operator Chorus on the one hand, and Spark and Vodafone on the other.

Thanks to a regulatory update, the wholesaler Chorus now has the right to withdraw copper phone line service in areas where fibre is available.

A battle is on for the hearts and minds of just under 500,000 households who are still on copper lines. Spark and Vodafone say they’re happy to sell them Chorus fibre if it suits, but are also pushing their own fixed-wireless (or “wireless broadband”) service as an upgrade alternative.

Chorus has delayed its copper switch-off by seven weeks due to the Delta lockdowns, and says, in any case, it wants to take a softly-softly approach, with copper service withdrawn from only around 5 per cent of homes over the first 12 months of its programme.

But Spark is switching off the PSTN technology that enables copper service, which means some Spark and Vodafone customers (who use Spark’s PSTN) will lose their copper lines before Chorus’ official withdrawal programme begins. (Spark said the copper technology, which is no longer manufactured, had just become too old to support.)

The industry responds

This morning, Gilbertson said he had directed the Telecommunications Forum (TCF) – an industry body whose members Chorus, Spark, Vodafone, 2degrees, Orcon and other telcos – to create the new marketing code within 60 working days.

TCF chief executive Paul Brislen framed it as just another step in the process that began in August, and said the group’s members were happy to cooperate.”

“The TCF welcomes the Commission’s clarity around what areas of the marketing landscape it would like to regulate and from first reading it appears to largely align with a number of our existing codes. We’ll work through the detail and aim to include this material in our guidelines early next year,” Brilsen told the Herald.

Spark and Vodafone both said they supported the Commission’s initiative.

A Vodafone spokeswoman said, “Providing our customers with simple, easy-to-understand, and relevant communication is an ongoing focus for Vodafone so we support measures by the Commerce Commission to increase marketing transparency across the entire telco industry spanning everyone who markets to consumers, including retailers and wholesalers [such as Chorus].

“Internet users value and can choose a broadband option based on a range of factors including price, speed, ease of install, and availability at their location. With significant network upgrades taking place across Aotearoa New Zealand and the necessary retirement of legacy technology, New Zealanders need to ensure they have a modern connectivity option in place.

“Similar to the car market, there are a range of internet options with different technical specifications, and we agree it’s important that people understand if they’re buying the equivalent of an economical Suzuki Swift, or a top-of-the-range BMW, depending on their individual needs and what they value most.

“We’ll continue to work with the TCF and other industry players on an appropriate industry code.”

And a Spark spokeswoman said, “We share the Commerce Commission’s objective ofensuring consumers have the information they need in a format that is easy to understand when transitioning from legacy technology such as the PSTN onto newer, modern technology like fibre and wireless.

“In a market with over 100 different retail service providers we think it is sensible to have a consistent industry approach to large-scale pan-industry technology migrations.

“We are supportive of, and already acting consistently with the principles outlined by the Commission. When we communicate to customers about switching from the PSTN to an alternative technology we are clear with our customers about what their technology options are, what they can expect, what will stay the same, what’s different and important things to know.

“We let them know the choice of which technology they go with is theirs. We also include that they have the option of moving to an alternative provider if they wish to do so. See here the online version of what we provide customers to help them make an informed decision.

“Furthermore, last month we launched our new fibre and wireless broadband plans which were designed to remove complexity and help customers pick a plan that best suits their households needs. Each plan includes a simple description of what type of online activity and household the broadband plan would be best suited for, as well as an indication of national peak-time average speeds where available based on the Commerce Commission’s Measuring Broadband New Zealand report.”

Chorus and 2degrees have been asked for comment.

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