Record USD5M Overbilling Fine Issued by UK Regulator

The UK’s comms regulator, Ofcom, has issued fines worth GBP3M (USD5M) to UK comms providers TalkTalk and Tiscali. This is the most severe fine that Ofcom has ever issued to a telco. In their initial investigation, Ofcom found that between 1 January and 1 November 2010, 62,055 customers had been billed for services not received. These errors occurred following the integration of Tiscali into TalkTalk. The regulator responded by ordering the problems be fixed by 2 December 2010. However, customers were still overbilled after the deadline passed, with Ofcom finding a further 2,928 faulty bills between 2 December 2010 and 4 March 2011. Because the fault applied to both the companies that were merging, Ofcom split the penalty between the two, with TalkTalk Telecom Limited fined GBP1,524,728 and Tiscali UK Limited fined GBP1,512,392. Ofcom issued a news release, which can be seen here and the history of Ofcom’s investigation is available here.

It is good to see a regulator finally getting tough with telcos that cheat customers. Although the guilty parties reimbursed customers at a cost of GBP2.5M (USD) the industry is dogged by the cynical attitude that it is okay to abuse a customer today so long as you make amends tomorrow. This fine sends a clear signal to other UK telcos that they should get customer charges right first time, each time and every time. It is simply not good enough to wait for a mountain of complaints before making internal checks and discovering internal faults. The burden should be on the provider of the service (note that – it is meant to be a service) to deliver accurate bills. The burden should not be on the customer to find errors and respond by complaining. Sadly, the resulting statement from Dido Harding, the CEO of TalkTalk Group, did not inspire confidence:

We are pleased that Ofcom has recognised the significant steps we’ve taken to solve this problem and has acknowledged that the issues surrounding the integration of the Tiscali business in 2010 are behind us. The billing migration was completed last year and in the last 3 months Ofcom has received only 12 complaints on the issue. In addition, as announced in February, every customer impacted has been reimbursed and compensated with payments totaling over £2.5 million…

…We are of course disappointed at the scale of the fine and feel it is a
disproportionate penalty…

…TalkTalk is receiving 40% fewer customer service calls year-on-year
as customer loyalty increases

In short, it was a miserable and mealymouthed statement (you can read it in full here). 60% of a lot of service calls can still be far too many service calls. ‘Pleased’ at recognition that TalkTalk took steps to fix the problem – as opposed to doing nothing at all? The worst non-fact was that Ofcom has only received 12 complaints recently; the UK industry has been heavily geared to drive customers to complain first to the telco and then to an independent complaints body, discouraging them from ever complaining directly to Ofcom. What is more, widescale failures of this type always result in fewer complaints than errors; some customers will pay any bill sent to them. However, this weasel-word statement omitted the one word that it really should have included: “sorry”. So presumably TalkTalk’s CEO does not feel the least bit sorry for the trouble and distress caused by the business.

It is easy to slam the telco in a case like this – they deserve it for treating customers so badly. However, Ofcom can hardly play the white knight either. They already mandate that bills are accurate, and with that end they impose a billing audit regime on UK telcos. This audit regime is unique in the world. Obviously it is not fit for purpose. This is how TalkTalk’s bill auditors, BABT, describe themselves:

The UK Metering and Billing Approval Scheme has been designed to monitor the accuracy of UK Communications Providers’ Total Metering and Billing Systems (TMBS). BABT has been involved for over 25 years throughout the history of the scheme…

…BABT has been appointed as an Approval Body under the Scheme to assess Communications Providers’ compliance against the Direction’s requirements and assesses over 80% of the current scheme members…

Scheme Guidance has been developed with considerable input from BABT’s experts and provides guidance to applicants about meeting the specific requirements of the Direction. The scheme’s main requirements are that operators set appropriate internal targets to ensure that certain agreed performance standards are met and that they measure their performance against these targets to demonstrate to their Approval Body and to Ofcom that targets are being achieved in practice.

Where do you begin with unpacking the clear evidence of a conflict of interest? One audit firm dominates the supply of the service, dominates the writing of the rules whilst also providing

….access to the leading UK experts in their field, who will be able to advise you on the best way to meet the requirements of the Direction

In other words, they say what the rules are, tell telcos how to produce accurate bills, then do the checks that are supposed to verify if the bills accurate. But nobody is willing to question the inadequate separation of duties, presumably because the naive customer thinks that having an independent audit body guarantees the independence of their judgement. BABT also promise:

…reduced customer complaints…

…compliance with regulatory requirements…

Well, obviously that is a promise not being kept, given that over 60,000 customers were overbilled and the regulator has just issued a huge fine as a result.

Let us be clear what happened here. TalkTalk and Tiscali violated General Condition 11.1, one of the conditions that all UK telcos have to satisfy. The condition reads:

11.1 The Communications Provider shall not render any Bill to an End-User in respect of the provision of any Public Electronic Communications Services unless every amount stated in that Bill represents and does not exceed the true extent of any such service actually provided to the End-User in question.

That obligation is reiterated on the association website of the billing audit firms. So if telcos can get so many bills so badly wrong, what are these auditors getting paid to do? And why is Ofcom issuing fines and conducting investigations, but not identifying the flaws in their existing consumer protection scheme?

One of the problems with improving bill accuracy in telcos is the tendency for everyone to pass the buck. It could be internal to the telco, and take place between departments. This case demonstrates that buck-passing is also external. But the buck is too often passed to customers, who have to complain when over charged. Only then do people take adequate care to get things right and fix what is wrong. Fixing should not be a routine necessity; bills should always be accurate in the first place. By continually passing the buck to customers and waiting for them to push back, everyone in UK telecoms – providers, auditors and regulator – is letting the customer down.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.