Mobile network O2, the UK operation of Telefónica, has been fined GBP10.5mn (USD14.5mn) for overcharging a quarter of a million customers between 2011 and 2019. UK regulator Ofcom trumpeted its ‘investigation’ into the error, which began the day after O2 identified and confessed to its mistakes. As usual, the regulator had nothing to say about why eight years of errors went undetected by the billing accuracy audits they have imposed on every major telco serving the British public for the last two decades.
Incredibly, the announcement from Ofcom admitted:
O2 had initially identified issues with its billing processes in 2011, but efforts to address these problems were not successful and customers continued to be overcharged.
The charging errors occurred when O2 customers sought to cancel their services, with final bills demanding payments that duplicated amounts which had already been collected. Around 251,700 customers were sent bills that overstated what they owed, though only 140,000 of those bills were actually paid. Over GBP40mn (USD55mn) was billed in error, of which customers paid GBP2,410,000 (USD3,327,000). Other customers simply refused to pay or had already been disconnected for non-payment.
Anyone familiar with the UK’s inept billing accuracy audits can instantly tell how this eight-year failure could remain unnoticed for so long. The auditors simply do not bother to check ‘unusual’ situations like customers ending their contracts. The auditors also pretend to review complaints from customers as a safeguard meant to cover gaps in their threadbare work, but it beggars belief that nobody noticed a single complaint from any of the quarter-million customers who were overbilled.
The problem of who watches the watchmen was evident to the ancient Romans, which is why they coined the phrase. There is no justification for refusing to recognize the same problem when it occurs in the context of modern telecoms billing. The pattern of failure for UK billing accuracy is more and more obvious every year. Auditors insist that the telcos they review “can demonstrate continual improvement” but each year the fines go higher and higher. The auditors say they have a “holistic approach to assessing telecoms service providers covering end to end activities” but it took until 2019 to identify errors caused by issues that the telco knew about in 2011. Decades of auditing of the same telcos by the same auditors has delivered none of the promised improvements in billing accuracy.
In recent years Ofcom has punished all of the following telcos for overcharging.
- In January 2017 EE was fined GBP2.7mn for overcharging 40,000 customers between 2014 and 2015.
- In March 2017 Plusnet was fined GBP880,000 for overcharging 1,000 customers between 2011 and 2015.
- In November 2018 Ofcom jointly announced two overcharging penalties at the same time; EE was fined GBP6.3mn for overcharging 400,000 customers between 2012 and 2018 and Virgin Media was fined GBP7mn for overcharging 82,000 customers between 2016 and 2017.
- In May 2020 EE was fined another GBP245,000 for overcharging 6,000 customers between April and June 2019.
Looking at this, you might not appreciate that during the first 13 years of Ofcom’s existence it did not fine a single telco for overcharging, though it mandated regular billing accuracy audits throughout that period. This changed in October 2016 when Vodafone was fined GBP3.7mn for overcharging 10,000 prepaid customers between 2013 and 2015. However, this fine only came after Ofcom decided in February 2016 not to punish Vodafone for overbilling so many postpaid customers that it set new records for complaints about a British mobile operator. Later in the same year Ofcom tried to disguise their mishandling of Vodafone’s billing fiasco, which was generating numerous newspaper headlines, by issuing the prepaid overcharging fine at the same time as they issued a separate GBP925,000 fine for Vodafone’s failure to handle all its postpaid billing complaints in a timely fashion.
The pattern is clear. Ofcom spent well over a decade pretending its regulatory audits were perfect, and that nobody needed to be punished for errors. When insouciance stopped being a tenable strategy they reluctantly started fining telcos for egregious mistakes that hurt thousands of ordinary people but which were only identified years after they took place. Each time there is a fine the regulator uses this to highlight the need for regulatory intervention to protect customers, whilst pretending this does not also highlight the long-standing failings of their existing audit program.
All of these cases also had something else in common: Vodafone, EE, Plusnet, Virgin Media and O2 all have their billing accuracy audited by the same business. TÜV SÜD BABT is a German business that bought the British former monopoly on telco bill accuracy auditing so they could milk the regulator’s cash cow indefinitely. Their business strategy has worked perfectly. Every year they get paid to audit most of Britain’s big telcos, few of which have ever had their bills audited by anyone else. Every year they give the telcos a clean bill of health. And every year we see the regulator ‘investigate’ overcharging errors that occurred years before but which seemingly went unnoticed until customers complained so much that the telco was forced to address the root cause.
Regulatory intervention and independent audits cannot be satisfactory answers to questions posed by the past mistakes of the same regulators and auditors. Or to put it another way, if all these telcos deserved fines for failing to ensure their charging was accurate, when will there be a fine for the auditor that repeatedly said their charging is accurate?
