The New ACMA Telco Code: What's Changing And Will It Prevent Bill Shock?


WhistleOut
03 September 2012

On September 1st, the Australian Communications and Media Authority (ACMA) launched its revised Telecommunications Consumer Protections Code (TCP). Pegged as a solution to bill shock and a way of getting a fairer deal for consumers, the new code will focus on addressing the ‘confusopoly’ the telcos have created through their frequently ambiguous advertising and product descriptions. The big changes will be an overhaul of advertising practices, an increase in information provided to customers before and at point of sale, new spend management tools to prevent customers exceeding plan limits, and an increased efficiency in the complaints resolution process. The code has been designed to be applicable to new telecommunications and technological developments, including the impact of the NBN: the ACMA has pointed out that issues such as the quality of customer service will still be relevant irrespective of changing technology.

The ACMA has ‘conservatively estimated’ that over the last three years the approximate annual cost of consumers choosing the wrong mobile phone plan was around $1.5 billion. The cost of telephone complaints (factoring in costs to the industry, to the Telecommunications Industry Ombudsman and to consumers themselves) was around $108 million between 2011-12. And the annual cost of writing off bad phone debts is calculated at $113 million. Clearly there is a real need for industry reform, and a more transparent way of providing information to customers in an area that is rife with misleading, confusing and often deceptive communication.

The ACMA have highlighted the ten main ‘wins’ for customers outlined in the new content:

1. Unit pricing charging information to be included in text advertising.

This means it will be easier for customers to shop around and compare, as standard charging information is to be included in all text-based advertising for included value plans.

2. Introduction of Critical Information Summaries detailing key pricing and product information.

Provided at point of sale to customers, this should enable customers to better understand what it is they’re actually signing up for.

3. Automatic spend management alerts notifying customers when they have reached certain percentages of their allocated usage.

These will be sent to customers when they have used 50%, 85% and 100% of their allotted voice, text and data usage. This is one of the main initiatives to address bill shock, but the downside is the messages may not be received until up to 48 hours after a customer has hit each percentage, meaning it’s still very possible to go over your plan’s allocated amounts and not be informed in time. Suppliers will also be required to provide additional information about applicable charges after the customer has exceeded 100% of their usage.

4. Claims made in advertising – such as broadband speed – must be substantiated.

Providers must now be able to prove any claims made in advertisements to the ACMA, which will lead to more realistic information being provided to customers before they sign up.

5. A ban on confusing or misleading advertising terms (e.g. ‘caps’ that aren’t actually caps).

Aimed at protecting customers from being misled. Providers must include in advertising all important conditions, limitations and qualifications about their offers.

6. Information about charging – whether here or overseas – will be readily available.

Customers must have ready access to all relevant information about current products on offer, including details about international roaming agreements – this is designed to prevent unexpected overseas bill shock.

7. Access to information about your call and data usage, both current and historical, will be made readily available.

Suppliers must include information on all bills on how to access information about usage, and give customers access to at least two years of past billing information. Hopefully this will aid customers in choosing a plan that meets their usage needs, and enables them to modify usage under their existing plan.

8. An overhaul of the industry’s complaint resolution procedures.

Complaint-handling procedures will be overhauled and brought in line with the Australian standard, which should lead to timelier, easier and more satisfying resolution of complaints for customers.

9. Each complaint will be given a unique reference number.

The new code requires a ‘comprehensive’ process for complaint management and tracking, so this should enable consumers to follow the progress of their complaint without repeating themselves.

10. Establishment of the industry-regulated Communications Compliance to ensure providers implement and follow the new code.

Customers can have confidence that their providers will be compliant with the new regulations.

What’s Changing

Regarding both advertising and product and plan information available to customers, the TCP has ruled that providers need to use language which is clear, accurate, suited to the intended audience and free of any exaggeration or omission of key information. The other big changes can be broken down into these key areas.

Offer and Contract Information

Providers will need to provide the following three documents to customers as part of a ‘Critical Information Summary’.

Information About the Service which includes:

  • A description of the service to be provided.
  • Whether the offer depends on a bundling arrangement with other telecommunications services, and what they are.
  • If there are any other products that are mandatory as part of the offer, what they are and if the charge is not already included in the overall offer pricing, what the separate charge will be.
  • The minimum term applicable for the product set out in the offer.
  • The inclusions, exclusions and any conditions, limitations, restrictions or qualifications for the offer.

Information About Pricing which includes:

  • The minimum monthly charge payable.
  • The maximum monthly charge (where calculable).
  • The maximum charge payable for early termination of the offer.
  • The cost of making a two-minute standard national mobile call (including flagfall where applicable).
  • The cost of sending a standard national mobile SMS.
  • The cost of using one megabyte of data within Australia.
  • For an Included Value Plan, an estimate of the number of standard two-minute calls (including flagfall) that a customer may make within the included plan, assuming they do not use the included value for anything else. This should be in a standard format such as: $250 worth of calls are included, the standard charge for a two-minute call is $2.50, so the number of two-minute calls included is 100.

Other Information which includes (where relevant):

  • A link to an area of the supplier’s website where customers can access call and data usage information.
  • Warnings about roaming costs – both international, and in any circumstances where additional charges may apply in Australia when the service roams into a different network.
  • Customer service contact details.
  • Information about how to access internal dispute resolution processes.
  • Contact details for the Telecommunications Industry Ombudsman.
  • Access to information about the company’s financial hardship policy.

Advertising

A major change the TCP is implementing is modifying the content of advertising. Providers will be required to ensure that all their advertising is clear and comprehensible, suited to its intended audience, with an amount of information that is appropriate to the advertising format so customers don’t miss important details. Any disclaimers included must not negate or contradict the ad’s principal message, and in the case of special promotions, any limitations which apply must be included in the advertising content.

One of the big deals being promoted is bans and restrictions on using common advertising terms, which means telcos won’t be able to do the following:

  • Use the term ‘unlimited’ or an equivalent term when referring to usage, unless the use of the service in Australia is genuinely unlimited and not subject to exclusions or selected parts of the network.
  • Use terms such as ‘no exceptions’ ‘no exclusions’ or ‘no catches’, unless there are genuinely no exceptions to the offer.
  • Use the term ‘free’ to advertise handsets or other products or services, unless the cost is not recovered from customers by way of higher costs and fees over the course of the contract.
  • Use the term ‘price per minute’, unless there is disclosure of extra charges such as flagfall or call connection fees.
  • Use the term ‘cap’ to advertise any new offers launched after the implementation of the code, unless the offer contains a hard cap.

As well as tight restrictions on terms providers can use, other areas of advertising content will be limited, including:

  • Headlines offering benefits that, according to the terms and conditions, are unlikely to be achieved by customers through ordinary use of their service.
  • Advertising network coverage unless it is ‘generally’ available to customers in the claimed coverage area.
  • Any claims relating to performance characteristics – for example, broadband speed or network coverage – unless the supplier can substantiate those claims to the ACMA.
  • Headlines that list prices for an offer, unless any exclusions are prominently displayed.
  • Headlines that list ongoing prices for specified data allowances, if the price is likely to increase within a reasonable period.
  • Advertising prices for products or services available as part of a bundle, unless they are available at the same price individually or the advertising clearly states the price applies only as part of a bundled package.

For post-paid internet plans with an included data allowance:

  • The cost (prior to any discounts being applied) of using one megabyte of data within Australia. If the above usage is unlimited, the provider is not required to list a cost for the unlimited usage in text advertising.

Billing

Significant changes will also be made to the content of bills sent to customers and the information that is made available:

  • Information about billing procedures and options must be available to consumers before they sign up or purchase.
  • Billing procedures must be made available online.
  • Suppliers will need to provide billing information free of charge for up to 24 months prior to the request date.
  • They will also be required to provide billing information for up to six years prior to customers upon request, although they are entitled to charge for statements more than two years old.
  • Suppliers must provide itemised details of all charges if requested.
  • All providers much offer at least one free method of bill payment, listed on customer statements, and advise whether additional charges will apply to use other payment methods (e.g. credit card merchant fees).

Access to Spend Management Tools and Information

Due to the complaints and media attention generated by unexpectedly high phone bills, the ACMA has made it essential for telco companies to give their customers access to spend management tools. The most publicised of these is the introduction of spend management alerts being automatically sent to users, when their data, voice and text usage has reached 50%, 85% and 100% of their plan’s included allowance. Other reforms include:

  • Customers must be informed about the availability, cost and use of spend management tools – this must be displayed and described comprehensively on the provider’s website.
  • Suppliers must also inform customers when sending the 100% notification (either in the same notification or separately) the charges which will apply for further usage after the limit has been exceeded.
  • They will also need to alert customers that this information may be up to 48 hours old and does not include calls/texts to overseas, or any usage outside Australia.
  • The usage notifications won’t apply to any usage which occurs overseas, or calls or SMS sent overseas.
  • The notifications must be provided to customers free of charge.

In addition to the usage notifications, providers must offer at least one additional spend management tool to their customers, and must give them the ability to access usage information that is nearer to real-time than the automatic usage notifications. They will also be required to offer products which will cut off or limit a customer’s use if that customer exceeds their agreed spending limit within a billing period.

While the code doesn’t implement the introduction of a charging cap on plans that means customers can’t overspend, as other countries have done, the ACMA has expressed that the TCP is designed to enable and empower customers to moderate their use to stay within their plan limit, or knowingly exceed it if they are comfortable with doing so.

Although there is still a year to go before these notifications are mandatory for providers, Optus launched its usage alert service at the end of August as per the above 50, 85 and 100% guidelines, being the first of the telcos to take on board the new spend management procedure.

Complaints Handling

The ACMA has stated that it recognised a need for a quicker and easier complaints resolution for both customers and providers. Under the new rules:

  • Complaints must be resolved within 30 days.
  • Customers will be provided with a unique complaint reference number to enable them to track the resolution process.
  • Providers are required to clearly inform customers of their rights regarding the services of the Telecommunications Industry Ombudsman (as part of the Critical Information Summary).
  • New processes will be introduced to address urgent complaints.
  • Phasing In

    The ACMA introduced the code on September 1st but not all of the changes will come into effect immediately, with the revisions scheduled to be phased in over the next two years. ACMA has stated that many of their new rules will require telcos to make significant changes to their systems and practices, and believes it reasonable to allow the industry some time to implement these changes. The first three months of the code’s launch will be allocated for ‘industry education’ but the ACMA states that it will be ready to enforce substantial non-compliance by providers within this initial period. The scheduled timeline of when each change will be introduced is as follows:

    September 2012

    • New complaints handling rules
    • New credit management rules
    • First stage of advertising changes – must include all conditions, limitations, restrictions etc. and cease using misleading terms

    October 2012

    • Second stage of advertising – inclusion of standard charging information

    March 2013

    • Inclusion of Critical Information Summary in offers
    • Comparative billing information required
    • Communications Compliance in effect

    September 2013

    • Introduction of Spend Management Alerts for large providers

    September 2014

    • Introduction of Spend Management Alerts for small providers

    International Perspective

    ACMA has been pointing out that the new code will offer protections to consumers that are unique to the Australian telecommunications industry. Compared with the United Kingdom, United States and New Zealand, the new reforms are substantially better – none of these countries have one distinct telecommunications instrument of consumer protection. In New Zealand in particular, there is no sector specific regulation regarding advertising and the supply of information to customers - as this falls under Fair Trading Act general provisions - and there is no regulation at all to assist with bill shock prevention or hardship provisions. The complaint handling process appears to be comparatively better under the TCP, and the new inclusion of a comprehensive Critical Information Summary will be unique to Australia. Similarly, Australia will be the only country where providers are required to issue spend notifications to customers – in the UK and US this is ‘encouraged’ or voluntary, but not enforced. Australia will also be the only one of the aforementioned countries to ensure all providers have an accessible financial hardship policy available to their customers.

    Enforcement

    Under the Telecommunications Act, the ACMA will be empowered to enforce the code and address breaches. There are two measures the ACMA can take if a provider is not compliant: issuing a formal warning, and directing a supplier to comply with the code. If a direction to comply is breached, the ACMA has several options:

    • Issue an infringement notice of $6600 per breach.
    • Accept an enforceable undertaking – written directions enforceable in a court.
    • Give a remedial direction which requires the service provider to take specific, measured steps.
    • Seek a civil penalty of up to $250,000 in the Federal Court.

    Under the Telecommunications Act the ACMA doesn’t have the power to issue financial penalties themselves. The Australian Communications Consumer Action Network (ACCAN) has expressed criticism at the ACMA’s inability to fine or otherwise penalise providers, arguing that the organisation should be given greater powers of enforcement. However, the Telecommunications Industry Ombudsman is able to direct providers to reimburse financial detriment experienced by customers who are dissatisfied with the compliant resolution the provider has offered.

    Communications Compliance

    Another major feature of the TCP is the introduction of Communications Compliance, a self-regulatory industry body which aims to improve industry members compliance with the new rules. Communications Compliance won’t handle consumer complaints directly (this will stay with the TIO) or enforce penalties like the ACMA. Instead, it is designed to encourage and demonstrate industry compliance with the new regulations. It will receive verified attestations from all service providers as to whether they are compliant with the new code provisions; suppliers who are not will be required to submit an action plan detailing areas of non-compliance and how they plan to address them. CC will be able to publicly identify which suppliers are and are not compliant, and the nature of their non-compliance, and focus on ways to help providers meet their obligations under the TCP through the use of action plans, external investigations, and recommendations of corrective actions. Communications Compliance can also refer providers to ACMA for investigation and enforcement if they can’t or won’t become compliant with the new standards.

    ACMA is confident that the new inclusion of more information at point-of-sale will alleviate some common causes of confusion and complaints among customers. However, there is trepidation that the higher standards for complaint handling and customer’s increased awareness of their ability to access the Ombudsman (as outlined in the Critical Information Summary) may lead to a higher number of complaints initially, as customers start exercising their new rights under the code.

    Conclusions

    Overall, there are some clear wins for consumers outlined in the new code. The advertising restrictions and introduction of the Critical Information Summary will hopefully lead to better informed customers and go some way in enabling the general consumer to choose an appropriate plan for their needs. Similarly, giving customers better access to their billing history, with itemised lists upon request and more information about payment methods, will assist customers to have a more realistic idea of just what they’re spending each month. Much has been made of the spend management alerts being introduced - but as they won’t be issued immediately as a customer hits each percentage of their usage allowance, there’s still plenty of room for users to exceed their monthly limits, meaning bill shock won’t be going away any time soon. The introduction of standardised unit pricing for a 2 minute call probably won’t benefit customers as much as the ACMA promises, as these prices don’t show incremental billing and often call times aren’t the issue. Displaying the price for one megabyte of data might not be helpful when most people aren’t sure what exactly a megabyte translates to; perhaps it would be better quantified as cost per Facebook page or sent email. The spend management tools will unfortunately not cover international roaming – mainly because the Australian service provider does not receive information from the carriers their customers are using to roam until sometime later. However, provider must notify consumers of unavoidable exclusions such as international roaming and of the roaming costs on websites.

    The ACMA keeps telling us that the revised TCP will offer improved customer protections, and in theory it should. However, one issue that has been pointed out by the ACCAN and industry analysts is that the ACMA’s current powers are limited, and this may lead to problems with enforcing the new rules. Rather than being a legal requirement, the TCP is voluntary for telcos unless the ACMA issues a direction to comply; even under those circumstances, they cannot fine or impose any other penalties on suppliers, instead only being able to request the Federal Court to do so if providers ignore a direction. Unlike the Australian Competition and Consumer Commission (ACCC) which monitors competition and advertising practices, and has recently instigated action against both TPG and Optus, each for misleading advertising (leading to the companies being forced to pay $2 million and $5.6 million in civil penalties respectively), the AMCA can’t impose commercially significant consequences for non-compliance. ACCAN points out than going to court is a longer and less effective route than giving ACMA direct powers to make sure consumers are fully protected; however, currently this can’t happen without legislation to amend the law governing the agency. The ACCAN’s official view is that the new rules aren’t going to be strong enough to ‘transform the customer experience’, produce completely transparent advertising free of hidden catches or prevent bill shock.

    Realistically we’ll have to live with these changes for a while, and wait until all the new rules and restrictions are being enforced, to know how much of a difference the new code will make. The ACMA is expecting a significant reduction in the costs associated with unsatisfactory performance from the telco companies as a result of the anticipated drop in bill shock and customer complaints, but this depends on how well the providers can implement the new rules, document and audit their accordance and report their progress to Communications Compliance. Smart consumers will make use of the increased availability of information and authenticity in advertising, and take advantage of the new spend management alerts – but at this stage it’s probably safe not to rely on the TCP as the answer to all your telco troubles.


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