Government criticises Telecoms Market and Support for Consumers

Oftel spent only £45,000 (or 0.2%) of its overall budget of £19.5M on messages to consumers in 2002-2003. 'It nevertheless told us that if consumers continued not to switch to the most beneficial options, it would have to question human nature in the face of overwhelming information,' reports the Select Committee on Public Accounts in "Helping consumers benefit from competition in telecommunications".

The report argues for a more decisive role for OfCom, the new regulatory body that has recently replaced Oftel. In summary, the committee says:

* The market is confusing for consumers. Competition in the telecommunications market is well established, bringing a wide range of choices for consumers, including which company will provide their phone line and which tariff they should choose. Whether consumers can make informed choices depends on whether they can make meaningful comparisons between companies.

* Consumers may not have the right information to identify the best deal. Many telephone bills do not provide enough information to allow customers to determine the best tariff and discount options, and the differing ways in which companies quote phone tariffs means that comparisons can be difficult. Ofcom should disseminate guidance on how consumers should identify the best supplier, using a series of typical phone bills as case studies.

* Consumers may be confused about what they are paying at present. Consumers will find it harder to make an informed choice if their current phone bill is obscure. Ofcom should work with phone companies to develop more standardised and transparent charging structures that enable comparisons to be made.

* Many consumers are not taking advantage of existing opportunities to save money. Ofcom should conduct a study into the take-up of the BT Light User scheme, to quantify the existing level of take-up and establish the reasons why more eligible consumers do not take advantage of the scheme. Ofcom should also conduct an education campaign to ensure that consumers know that it costs more to rent than to buy handsets.

* Oftel was remote from consumers and did not do enough to help them. Its guidance did not give practical examples of how consumers might make choices, and its external publicity budget in 2002-03 of £45,000 was only 0.2% of its overall budget of £19.5M. It nevertheless told us that if consumers continued not to switch to the most beneficial options, it would have to question human nature in the face of overwhelming information.

* Ofcom should actively encourage consumers to switch supplier. Oftel did not follow the practice of Ofgem and Energywatch in encouraging consumers to switch supplier to get a better deal. Switching supplier or tariff is, however, the best way to take advantage of competition and Ofcom should tell consumers about the opportunities and risks of switching, and draw public attention to the savings available from switching supplier.

* Ofcom should undertake a research programme into the information needs of consumers. Oftel claimed to place the consumer at the heart of its work, yet adopted a hands-off approach to consumer information, allocated a small proportion of its resources to improving consumers' knowledge, and assumed that consumers conformed to a model of "rational" behaviour. Where the market is complicated and changing rapidly, however, there is a greater, rather than a lesser need for the regulator to understand consumer needs.

Associated Link: Further details

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