Alun Michael speech at launch of Otelo Annual Report 25 July 2005

The launch of Otelo’s annual report gives us an opportunity to celebrate the good work done by Otelo in resolving consumer disputes in telecoms, and also to take stock of the challenges that are being faced by all of us involved in dealing with consumer issues in this important area.

The communications industry has met the Government’s challenge to develop an effective system of dispute resolution and consumer redress. In the Communications White Paper of 2000, Government encouraged the industry to come up with a scheme. We then formalised the approval of dispute resolution procedures in the Communications Act 2003. Telecoms are to be congratulated on creating a government-backed, industry-funded, independently run scheme for the resolution of many kinds of consumer dispute.

The steady rise in membership is a strong indicator of widespread industry support for self-regulation in this area. In its first year of operation, 40 companies joined the Otelo scheme, and the total is now 130. This means that together with the 147 who have joined the alternative approved scheme operated by CISAS (Communications and Internet Services Adjudication Scheme) the majority of the market is now covered. I understand that Ofcom is working to ensure that those companies who have not yet done so also join one or other scheme or develop their own, Ofcom-approved scheme.

Case fees and subscriptions are now covering costs, and initial loans have been paid back, which shows sound financial management and planning.

Otelo staff, under the leadership of Elizabeth France, can be proud of their achievement in setting up the organisation. They have dealt with 550 complaints in June alone, more than double the number for the same month in 2004. These have covered a wide range of issues including billing disputes, fault repair and customer service. The key task for them now is to win, to maintain and increase the confidence of businesses and consumers alike. That can only be done by resolving relevant disputes fairly and promptly where these cannot be settled quickly and directly by negotiation between the consumer and the company.

That is a big challenge in such a fast-moving industry. Many companies are efficient and responsible, but a minority - whether by default or design - fail in their obligations to their customers. The speed with which customers can obtain redress is crucial to Otelo’s future success, and I was pleased to learn that over the last 6 months Otelo has managed to meet Ofcom’s demanding target of 42 days for the time taken to deal with disputes. I hope this encouraging trend will continue.

Consumers enjoy a vast range of choice of goods and services in this country. In many areas of the economy, market competition is fierce. This is especially true in communication services. If the product or service proves unsatisfactory, the consumer will go elsewhere, unless they can rely on fair treatment of their complaint.

So, it is good to see that so much progress has been made in the relatively short time since the provision became effective. However, in our fast-moving industry new problems and areas of consumer concern are constantly arising and all of us need to play a full part in identifying and dealing with them as quickly and effectively as we can, I understand that Ofcom will shortly be publishing the results of a major review which it has undertaken of the alternative dispute resolution schemes, and I look forward to its findings and recommendations with great interest.

Various problems around certain premium rate telephone services, and more recently, ‘silent’ marketing calls are currently high on my agenda, although I appreciate that Otelo is not designed to deal with the latter, and the self-regulatory body ICSTIS has primary responsibility for the former. I’m sure there are many who agree with me that tackling them requires a serious effort from all concerned, including the Government. These are matters of increasing concern to MPs and to the public and the cause of reputational damage to the industry.

Having acknowledged the work of the industry let me refer to some recent Government contributions to this partnership.

Premium Rate Services

Premium Rate Services are an established part of the communications sector, which Government wants to flourish. Providers supply services ranging from sports and TV voting lines to competition, directory enquiries and business information services.

And it’s not just bad for consumers, customers and the general public, but also bad for the industry when a minority of less reputable operators disregard the regulatory Code administered by ICSTIS. This can lead to consumer harm and a loss of confidence.

Everyone has the right to use these services with the confidence that they are not going to be exploited.

So last year DTI asked Ofcom to report into Premium Rate regulation and to ensure consumers are adequately protected. The recommendations from the report are being implemented in full. The key points are:

Meanwhile, I understand that Otelo is being as helpful as possible to consumers with disputed Premium Rate bills.

Silent calls

I’ve seen the impact on an elderly relative of ‘silent’ calls from marketing and other companies. It may not be the intention, but they cause a real nuisance and concern among consumers. Silent calls often spoil the lives of consumers, including the elderly and vulnerable people. We are determined to find ways to prevent the distress these calls cause.

DTI, Ofcom and the Direct Marketing Association are now working together to find solutions, and will need to consider all possible options.

The Communications Act 2003 gives Ofcom powers to take action against those that make silent calls, and in appropriate cases to impose financial penalties on them. I am considering whether there are any areas in which Ofcom's powers in this area could usefully be strengthened.

At the end of last year, Ofcom investigated two companies who were making silent calls, and accepted undertakings from them as to their future conduct. These were not empty gestures. Ofcom has been monitoring the situation, and recently initiated a second investigation into one of those companies to ascertain whether they are complying with the undertakings given, and it is open to Ofcom to take legal action against them if they are found not have been complying. Last month Ofcom also launched an investigation into seven companies suspected of making silent calls, it is good to see that action is now being taken by Ofcom and I hope that the outcome will offer reassurance to the public and clarity about what we expect from any company.

The Direct Marketing Association last month amended its Code of Practice to ensure that members have to provide call line identification for all calls. That will enable consumers to find out the number of the caller that has made the silent call by dialling 1471. This is an enormously important step forward, which I welcome. In addition, there is a recommendation that the name of the company be provided (eg by a recorded message) when 1471 is dialled, with a free-phone number for them to call for further information. Members have 3 months to comply with this requirement.

But we need to ensure that this nuisance stops. Prosecutions and punishments and other enforcement action will have their effect, but to put it another way, ‘laws cannot always prevent what they forbid’, and fining the miscreant is no help to the consumer who just wants the misery to stop.

The Telephone Preference Service can be of help to some in this matter, but it was not intended to deal with this specific problem and I remain to be convinced that there are no unintended consequences. Related facilities that are offered by telephone service providers, including some recent innovations, may also help, though these are not always provided free of charge or universally. There remains a problem to be tackled, and it requires the joint approach to which I referred earlier.

Close

To sum up.

Consumer protection is a key aim of Government.

Otelo is contributing to that objective

All stakeholders’ benefit when organisations like Otelo is respected by consumers and the industry alike. However, we must recognise that gaining and maintaining that respect, against a background of continued innovation by those who act against consumers’ interests, as well as those who do, requires significant and continuing efforts by all concerned. I’m sure that Otelo is prepared to play its part in that in the coming year, and I wish you success.

Briefing for Alun Michael speaking at Reception to launch Otelo 2nd Annual Report on Monday 25 July 2005 in the Cholmondeley Room, House of Lords.

Steering Introduction

This reception is aimed at presenting Otelo’s 2nd Annual Report to the industry and interested MPs, and also to receive the outcome of Ofcom’s review of complaints handling and dispute resolution. We expect the outcome to recommend no major changes to the current regime, with a broad endorsement of Otelo.

Background on Otelo

There are two Alternative Dispute Resolution Schemes, the Computer and Internet Services Adjudications Scheme (CISAS) and the Telecoms Ombudsman scheme (Otelo). The Ombudsman scheme was put together during 2002 by the telecoms industry in anticipation of the Communications Act allowing Ofcom to recognise an industry scheme or to establish its own scheme if the industry did not come up with an effective one. The Ombudsman started receiving unresolved complaints from residential consumers and small businesses from January 2003. Otelo has powers to decide on whether a complaint can be upheld and what award of compensation might be appropriate in any given case, up to a maximum of £5,000. Important to bear in mind that Otelo has 96% of the fixed line market, over 55% of the mobile market and about 30% of Internet Service Providers. The rest of the market is catered for by CISAS. All electronic communications companies have to be a member of one scheme or the other.

A Council of 7 members appoints, maintains and safeguards the independence of the Ombudsman. A member board of up to 7 members is responsible for ensuring that Otelo is adequately funded and that it adheres to the scope of its activities. Peter Holland heads up the Council. In September 2003 Otelo was approved by the former telecoms regulator Oftel. Otelo has more than 30 staff and is funded entirely from case fees and subscriptions from the industry. Fees are 20% by subscription and 80% case fees.

Otelo’s role is focused on those telecoms and Internet Service providers who have a direct relationship with the consumer, and a high proportion of complaints considered are about customer service and billing disputes. Otelo has considered a number of disputes about PRS charges incurred by PRS Internet diallers, but Otelo has only rarely required BT to compensate consumers who have been the victims of these scams, because its remit does not cover the contractual relationships between BT and other network operators and service providers in the value chain.

Ofcom Review of complaints handling and disputes resolution.

Ofcom’s report is due to be published more or less on the day of the reception and will make a number of recommendations for best practice. Those recommendations will be subject to a three month consultation period.

The review has considered:

The methodological approach comprises a number of strands:

Formal information requests to Otelo and CISAS and to a random sample of members of both schemes

Independent research looking at customer satisfaction with the schemes

Comparative analysis of Ofcom contact centre data

Speakers:

Baroness Dean has had a wide variety of roles in official bodies and trusts ranging from Chairing the Independent Committee for the Supervision of Standards of Telephone Information Services from 1993-1999 to the House of Lords Appointments Commission from 1999 to the present.

Peter Holland is Charmian of Otelo having previously had a career in Reuters, and was more recently the Chairman of Hertfordshire Police Complaints Authority and Vice-Chairman of the Aossociation of Police Authorities.

Ian El-Mokadem is the well-respected Managing Director of Onetel, one of the largest and most successful competitors to BT which provide services to consumers over BT lines.

Elizabeth France

Elizabeth France was the Data Protection Registrar from 1994 and then the Information Commissioner after taking on responsibility for the Freedom of Information Act from January 2001 until she was appointed the first Telecoms Ombudsman in October 2002. She was made a CBE for services to data protection. In her current role she decides whether to uphold complaints against communications providers, and what type of sanction to impose.