Broadband Confusion Prompts ACCC to Implement Internet Service Principles

Tuesday 14 February 2017 @ 10.59 a.m. | Legal Research | Trade & Commerce

A recent Australian Competition and Consumer Commission (ACCC) consultation on fixed broadband speeds has found that 80 per cent of consumers are confused and want broadband speed information to be presented in a simple, standardised format to enable them to easily compare offers.

The ACCC has recently published principles to help ensure internet service providers’ claims about broadband speeds aren’t misleading under the Australian Consumer Law (ACL) [contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)].

Background to the Principles

Complaints to the Telecommunications Industry Ombudsman (TIO) about internet data speeds increased 48 per cent during 2015-16, making it the single largest issue for consumer complaints during the year. According to ABS figures, as of December 2015 there are around 7 million fixed broadband subscribers and a further 6 million mobile broadband users.

During July 2016, the ACCC began a public consultation on broadband speed claims issuing Broadband Speed Claims - Discussion paper. The ACCC received over 400 individual responses to the paper.

The ACCC continues to support the implementation of an independent Broadband Performance Monitoring and Reporting program, which would provide consumers and industry with regular verified independent performance information about broadband speeds and would complement improved marketing and business practices.

Current marketing practices

Current marketing practices were investigated during the public consultation process and identified that there are three types of problematic practices in the marketing of broadband services:

  • Headline representations — where headline claims typically focus on data allowance/service inclusions and price, rather than stating the speed that the advertised broadband plan typically supports in practice;
  • Product descriptions and speed tier offers — some RSPs have moved to advertise broadband services on the basis of wholesale speed “tiers:, usually on an “up to” basis, without informing consumers of the speeds that their retail products typically deliver; and
  • Comparable speed information — where few RSPs are presenting quantified speed information to consumers.

The Six Principles

The ACCC issued the following principles as they believe consumers have limited information and support in identifying broadband plans that meet their speed requirements and believe that this is raising consumer search costs, inhibiting competition and feeding into an increasing level of consumer complaint. The Principles are as follows:

  • Consumers should be provided with accurate information about typical busy period speeds that the average consumer on a broadband plan can expect to receive;
  • Wholesale network speeds or theoretical speeds taken from technical specifications should not be advertised without reference to typical busy period speeds;
  • Information about the performance of promoted applications should be accurate and sufficiently prominent;
  • Factors known to affect service performance should be disclosed to consumers;
  • Performance information should be presented in a manner that is easily comparable by consumers, for example by adopting standard descriptive terms that can be readily understood and recognised; and
  • Retail Service Providers (RSPs) should have systems in place to diagnose and resolve broadband speed issues.

Reaction from the ACCC

Commenting on the outcome of the report, ACCC Chairman Rod Sims said:

“The ACCC is concerned that the use of vague speed claims is not providing consumers accurate, comparable, or useful information. Four out of five consumers have trouble comparing broadband speeds and this is causing a high level of complaints, confusion, and dissatisfaction. Consumers believe they aren’t getting what they sign up for, and pay for, when it comes to home internet speeds. It is time the industry met consumer demand for accurate information about broadband speeds so consumers can compare offers and make informed decisions about their internet services.”

Where to next?

During March 2017, the ACCC will conclude consultation with industry respondents and interested stakeholders on how best to implement the ACCC’s new principles.

In the first half of 2017 the ACCC intends to publish new guidance providing implementation details for the principles, then will move to actively monitor steps taken by RSPs to apply the ACCC principles and guidance, and to comply with the ACL. Further action may be needed if RSPs elect not to apply the ACCC principles and guidance.

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Sources:

Confusion about broadband claims prompts ACCC guidance - ACCC Media Release MR 10/17

Broadband 'speed' claims - information papers - ACCC Consultation Outcomes

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