When is a bad debt problem not a bad debt problem? When a regulator is looking for new ways to protect vulnerable customers despite there being no evidence that anybody has been mistreated, and without admitting that reducing the number of paying customers must inevitably lead to higher charges for those who do pay. This is the context in which Ofcom, the UK comms regulator, has chosen to launch one of the strangest consumer protection reviews you may ever come across. To be specific, Ofcom will consider whether there is a need to ‘strengthen protections’ because ‘it is… particularly important that people in debt, or who are struggling to pay their communications bill, are treated fairly by their communications provider’. Nobody argues against the fair treatment of customers. What makes Ofcom’s new review so peculiar is Ofcom’s figures confirm that British telcos have been exemplary when dealing with customers suffering financial stress as a result of the COVID-19 pandemic. Irrespective of the economic damage caused by long lockdowns, Ofcom’s own research tells us that:
- the number of UK customers who are behind with paying their comms bills is no higher now than it was before the pandemic;
- the number of disconnections for non-payment fell during the pandemic and has only recently returned to pre-pandemic levels; and
- UK telcos provide timely advice to customers on how to manage their debt when they fall into arrears.
Ofcom also noted that they already have “rules in place which require customers to be treated fairly when they have not paid their bills” and other, separate rules “requiring the fair treatment of vulnerable customers”. Intuition may tell us that debts and disconnections will rise because a major calamity prevents millions of people from doing paid work for many months, but the data from the UK tells us that government intervention to prop up the economy and the voluntary relaxation of telco policies on debt collection has had the opposite effect. And data always trumps intuition. In summary, between 2 and 3 percent of UK comms customers fall into arrears, between 0.1 and 0.2 percent are disconnected for non-payment, and the figures are no worse now than they have been during all the previous years when Ofcom’s existing rules were considered sufficient. So why is this regulator trying to find additional solutions to reduce a problem that is currently as small as it has ever been?
The few areas of apparent inequality between telco policies offer a hint about Ofcom’s real motivation. Though Ofcom did not find any evidence of a telco disproportionately disconnecting a larger proportion of their customers, they were able to identify that:
- there were differences in the period of time customers were allowed to fall into arrears before they were disconnected, with the most relaxed telcos taking five times as long to disconnect a customer;
- some telcos communicate significantly more frequently with customers in arrears than other telcos; and
- not all telcos use their website to present comprehensive advice about how to manage debts, the consequences of falling into arrears, and opportunities to switch to more affordable tariffs and more accommodating payment plans.
That Ofcom identified these differences makes me believe the telcos who have done most to help their existing customers have probably been complaining (off the record) about some of their competitors. No business is daft enough to advertise themselves as the best choice for customers who do not pay their bills. Imposing a few additional rules about minimum periods before disconnection and the presentation of information on websites will help to level the playing field for rival telcos whilst also giving Ofcom an opportunity to garner some easy positive publicity.
Ofcom is seeking responses to their debt and disconnection review by September 30. You can read through their preliminary analysis or submit a response here.