New Ofcom rules require customers of telecoms services, including broadband, mobile and landline, to be provided with ‘short and simple’ contract details as well as a summary of their contract before signing up to a new deal.
These new rules will affect every single communications provider in the UK and their importance cannot be overstated. To help resellers understand and act on the new rulings UCaaS specialist Voiceflex staged a webinar last month during which the company’s lawyer Marcus Andreen (pictured) answered the following questions posed by Chief Commercial Officer Paul Taylor, and also from delegates among the 150-plus channel business representatives that attended the educational session. Here’s a summary of the Q&A session...
What changes came into effect on June 17th?
Firstly, there are some new requirements to provide customers with both a contract information document and, separately, a contract summary. The other major change relates to contract modification. This is where the service provider is looking to make a change to its contract with the customer.
Who do the changes apply to?
These new conditions apply to all providers of communication services. There are some minor exceptions but fundamentally any business providing communications services in the UK. From a customer perspective, in broad terms the contract information and contract summary requirements apply to all business customers with 10 or fewer personnel. The contract modification changes apply to all customers.
What if you are a dealer or agent for a service provider?
These rules will not apply to you, because legally you are not the provider of the communication services.
What are the new contract information document requirements?
The first of the documents that the service provider needs to provide is the pre-contractual information, such as a description of the services, price and price increases, duration of the commitment and termination/renewal terms. The template for the contract information document can be found at the Annex to Condition C1 of the Ofcom General Conditions of Entitlement (pp 31–36). Ofcom
The document needs to be provided in a durable medium, in a clear and comprehensible manner. So, we’re talking plain English and something that the prospective customer can cut out and keep. Ofcom will accept a download, but the link must make it clear that customers should keep a copy.
What should a contract summary look like?
The contract summary requirements are very prescriptive, including the font size and the number of pages it should comprise. It is possible for a prospective customer to provide their consent to waive their right to receive a contract summary, but it’s unlikely that many customers would do so. In practice, this is additional documentation that communications providers will need to include in their pre-sales process. Be aware that if you don’t provide the contract summary, then that is likely to make the final contract unenforceable against the customer. The template for the contract summary can be found here: www.legislation.gov.uk/eur/2019/2243/annex
Are there other elements to consider, such as price increases?
Yes. Ofcom’s guidance in Annex 11: Revised guidance on GC C1 contract requirements June 2022 (ofcom.org.uk), makes it clear that if you are looking to implement a price increase it is not enough, for example, to have told the customer that there will be a Consumer Price Index related increase every 12 months.
The contract information must provide an example of how the current rate of inflation would affect the price at the time when the price increase takes place. If a communications provider fails to provide that level of detail in the contract information the price increase will not be enforceable against the customer.
What changes do partners have to make to their terms and conditions due to the new contract information and contract summary requirements?
None, because these are all pre-contract requirements. Service providers need to update their pre-sales process and documentation before they enter into a contract, but the terms of the contract itself will not need to be amended.
Can you outline the Ofcom changes to contract modification?
This is where a provider is looking to make changes to the terms of their contract with a customer. The new rules are quite detailed, but in summary, a provider needs to give the customer at least one month’s notice of any change to the contract terms, and unless the change is exclusively to the benefit of the customer and solely of an administrative nature, the customer has an automatic right to terminate that contract within that one-month period. Not only does the one-month notification to the customer of the change need to be clear and comprehensive and presented in a durable medium, it must also clearly confirm the customer’s right to terminate during the one-month period.
Can an auto-renewal still take place on organisation with more than 10 employees?
For large customers, yes. For customers with up to 10 personnel, the service provider must obtain the customer’s Express Consent prior to each renewal. Express Consent is defined by Ofcom as consent obtained ‘in a manner which has enabled the Customer to make an informed choice’.
If a customer is on a 36-month contract because they have 15 employees, would the contact have to reduce to 24 months if they went down to eight employees?
The commitment period in the existing contract would not need to reduce to 24 months, but the 24-month limit would apply to any future contracts with that customer.
What happens if you have a 30-day rolling contract? Surely you don’t need to keep providing the information every 30 days?
Although the General Conditions are not clear on this point, in its Guidance Ofcom refers to a contract with a 30-day termination notice period as not having a commitment period. My view therefore is that Ofcom would regard a 30-day termination notice period as falling outside the commitment period rules.
Most people in the comms industry sign customers on a 36-month contract, so it is detrimental if resellers have to purchase the equipment with the customer paying over 24 months to own it. Can resellers include a waiver in their contracts for companies with less than 10 employees, so they agree to not be bound by a 24-month maximum term?
The short answer is yes. The 24-month commitment period limit applies to all small business customers, unless a customer has ‘expressly agreed otherwise’. Ofcom does not specify what the customer’s express agreement should look like in this context, but to reduce the risk of challenge service providers may, for example, want to include separate language in the customer signature box with a tick box. Also, note that the 24-month limit does not apply to Instalment Contracts for Physical Connections or Machine-to-Machine Transmission Services (as defined in the General Conditions).
In summary, what should comms providers do now to make sure they comply with these new Ofcom rulings?
They need to get their heads around section C1 of Ofcom’s General Conditions, including contract modifications, commitment periods, auto renewal and other changes that have been brought in since last December, and ensure their customer Ts&Cs are compliant. I imagine for many businesses that will be an arduous and dull task, but it’s very much doable. Other businesses may have more complex sales models, product mixes etc, in which case they may need to take advice.
It must be stated that while the Voiceflex webinar and this article highlight some of the key changes made to the Ofcom General Conditions, the changes are extensive and complex and the information provided is not intended to be exhaustive, nor does it constitute legal advice.
Marcus Andreen can be contacted at marcus@marcusandreen.com
COMMENT:
Paul Taylor, Chief Commercial Officer, Voiceflex:
The biggest issue for comms providers with these new rules is that you can no longer sell a service/product on a 36-month contract to companies with less than 10 employees. To complicate the matter, the rules still apply if the company starts with 15 employees and reduces to 9 during the term. You must send a pre-contract to advise potential customers. If your supplier only supplies a 36-term agreement, you will need a break clause or change providers. Secondly, selling hardware is going to be more expensive as the maximum term will be 24 months and most suppliers offer 12 or 36. When competing for business, providers should make sure the customer is aware of the Ofcom regulations before, or it will cause problems, and could make you look uncompetitive.