UK Regulator Investigates Vodafone Bill Accuracy

Ofcom, the UK communications regulator, has announced an ‘own-initiative investigation’ into Vodafone’s compliance with regulations relating to billing accuracy and complaints handling. Details are scarce, but the regulator’s official announcement states that the investigation was prompted by complaints received from customers.

No telco has ever been punished by Ofcom for issuing inaccurate bills. The relevant regulations were first imposed on BT in 1991, and were subsequently rewritten and extended to all major British comms providers around the start of the century. However, this is the second unprecedented regulatory action relating to bill accuracy in just a few months. Ofcom announced a more general ‘monitoring and enforcement’ program in March, suggesting that the UK regulator needs to take hands-on responsibility for bill accuracy because of doubts concerning the effectiveness of the outsourced compliance audit regime it has relied upon for over 20 years.

Commsrisk previously asked Ofcom to explain why it needs a monitoring and enforcement program for bill accuracy, but Ofcom declined.

After previously imposing the toughest accuracy targets in the world, Ofcom scrapped all quantitative targets for bill accuracy in 2014, and issued contradictory statements explaining that change. At times they suggested the targets were scrapped to make the regulation even tougher, arguing that any tolerance for overbilling was too much, because customers should never be overcharged. At other times, they suggested the change had reduced the regulatory burden on British telcos. Since changing that rule, Ofcom has decided it needs to do more to check that telco bills are accurate in general, and now it has named a specific telco whose billing accuracy will be investigated.

This burst of activity comes after 20 years of the UK regulator imposing the same accuracy targets, whilst repeatedly saying that its audit regime was working fine. But compliance audits do not suddenly fall apart after being fine for 20 years in a row. Why would bills be less accurate now, when systems and controls are so much better than they used to be? British telcos now spend a lot more on revenue assurance and billing integrity than they used to, assurance tools and test equipment are the best they have ever been, and UK telcos have passed every single billing accuracy compliance audit. Not a single regulatory fine for non-compliance has ever been threatened, never mind imposed.

UK compliance audits of bill accuracy are mandated by regulation but outsourced to third-party auditors. BABT are the auditors of Vodafone bills, and they are the dominant supplier of UK billing accuracy compliance audits. They were the monopoly auditor when the bill accuracy regulations were first imposed, and they continued to retain the majority of market share even after rival auditors were allowed into the market. BABT has always been the billing accuracy auditor of Vodafone; their audit contract has been continuously renewed for over 10 years without interruption. Vodafone’s current bill accuracy is still nominally approved by BABT, meaning that if a Vodafone customer complains about their bill today, they can be told that Vodafone’s billing accuracy has been independently verified by BABT. The regulations require ‘continuous improvement’ of billing accuracy. The stated purpose of the regulation is to improve customer confidence in the accuracy of their bills. So why is Ofcom now saying they need to directly intervene to check the accuracy of Vodafone bills, instead of being able to rely on the audit performed by BABT?

Something is very wrong here. Instead of being transparent to British phone users, Ofcom is saying the least it can state publicly about an urgent need to respond to complaints received from customers, whilst simultaneously assuring all customers they need not complain because their bills have already been proven accurate by independent auditors!

BABT has previously – and misleadingly – argued that its billing accuracy audit clients receive fewer billing complaints than other telcos. Hopefully this investigation, prompted by complaints from customers, will mean the end of that lie.

On the other hand, you have to suspect that Ofcom might cover up any wrongdoing relating to the audit of British phone bills. For a start, now that all quantified accuracy targets have been scrapped, how can Ofcom rationalize the scale of any penalty it might levy for inaccurate bills? Saying that every telco should be at threat of being punished if they ever overcharge a single customer was always going to be idealistic nonsense. What if Vodafone complains that its audit – and its bills – are no worse than the audits and bills of most other British telcos? If Vodafone did fail its customers, then what will be done to reform the regulations, and to change the way the audits are conducted? Who can lead this change, when Ofcom has allowed itself to be reliant on advice received from BABT, who still dominate the audit market? Would they dare to force a rotation of auditors, even though this would drive up audit costs and upset the dependable revenues generated by BABT? The audits are outsourced to independent ‘expert’ auditors because regulators lack the skills to do such audits, so how will Ofcom acquire the skills to do investigations of this type? And the original purpose of the audit was to check for errors that customers cannot identify for themselves, so what conclusion should be drawn if Ofcom now relies on customer complaints to highlight audit failures?

UK billing accuracy regulations are a total mess, and they have been for a long time. They serve the needs of a small clique within the British telecoms/regulatory industry, and not the needs of customers. As ever, it is up to customers to protect themselves; there would be no investigation of Vodafone’s billing accuracy if customers had not complained. However, there are some checks that customers cannot do for themselves. If this investigation finds that Vodafone’s bills were more inaccurate than previously allowed by the old tolerances – even though they have now been scrapped – the correct response would be a thorough and independent review of the regulations and audits. This review must be led by people with the necessary skills and experience, but not by BABT or their rival audit firms. In fact, any review should inspect their audit work to determine why it fails to spot actual errors with real bills.

A review is needed because the goal should always be maximizing the protection of customers. It is not good enough to rely on customers finding errors with their own bills. That conclusion shows the audit is worse than worthless – it generates false confidence. I believe that independent audits are a necessary component of ensuring bill accuracy, and the cornerstone of those audits must be objective testing and measurement of errors that customers will never detect for themselves. Sadly, the UK billing accuracy regime has now deviated so far from this goal that it is no longer fit for purpose.

Update 16.30 UTC, 15th June 2015: A new Ofcom announcement suggests that Vodafone has a problem with taking prepayment for services that were never subsequently delivered:

Our investigation focuses on Vodafone’s alleged sale of Pay As You Go services to a group of customers who were not provided with such services.

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.