After Ofcom announced back in November 2017 that broadband and landline customers will automatically be able to get compensation from their providers when things go wrong without the need for a claim, it appears that an £8-per-day deal agreement has finally been reached between Openreach and five of the UK’s internet service providers.

Agreement

The voluntary agreement, which will only apply only if a fault takes longer than two days to fix, is between BT, Sky, TalkTalk, Virgin Media, and Zen. Plusnet and EE had indicated previously that they would be prepared to sign up.

This should now mean that the new automatic compensation system will, from early 2019, bring automatic compensation to consumers (home, small and medium business customers) for a total loss of fixed broadband and phone connectivity.

Although Openreach, which looks after the infrastructure, is keen to point out that it has been offering compensation for broadband failures since 2008 and would pay compensation even when others prevented it from accessing its network, it has said that it is not prepared to pay-out for measures beyond reasonable control / force majeure events e.g. flooding. Openreach also has another exclusion under its Service Level Guarantee (SLG) arrangements.

The new agreement, which was reached after more than 6 months negotiations, and is subject to a 12-month review of Cancelled Provisions, will mean £8 compensation per-day, £25 compensation if an engineer does not arrive on schedule, or cancels within 24 hours, and an offer of £5-per-day for new services not starting on.

What Happened?

The voluntary, automatic compensation agreement only came about because of a review and intervention in the broadband market by regulator Ofcom, which introduced a voluntary Code of Practice.

It was found that compensation was only paid in approximately one in seven cases (15%) where landline or broadband customers suffered slow repairs, delayed installations or missed engineer appointments. The actual amount of compensation paid in these cases was also widely recognised to be small.

Considering that BT, Sky, TalkTalk, Virgin Media and Zen Internet, collectively serve around 90% of landline and broadband customers in the UK, it was thought that an automatic compensation agreement that reflects the harm consumers suffer when things go wrong would help consumers and the industry alike as well as satisfying Ofcom.

Openreach

Openreach has been set its own set of tough Quality of Service (QoS) standards by Ofcom, but Openreach’s position of not paying out for force majeure-type events, and Ofcom expecting retail ISPs to cover those costs themselves has led to ISPs perhaps feeling that they will end up paying for Openreach’s failures.

What Does This Mean For Your Business?

For retail ISPs, although the agreement may go some way to making them improve their quality standards (which is good for customers), the regulator estimated in 2017 that such an agreement could mean that 2.6 million UK customers could receive up to £142 million per year in automated compensation payments.  This could represent a significant extra service cost to the ISPs, and hopefully one that won’t end up being passed on to customers in raised prices. 

Ofcom’s research shows that nine in ten adults report going online every day and three-quarters of internet users say it is important to their daily lives. For businesses, a fast and reliable broadband connection is now vital for them to operate and compete effectively in today’s marketplace. Problems with broadband services can be very costly and frustrating for businesses, and many businesses feel that they shouldn’t have to fight for compensation on top of the problems caused by poor broadband services, and that current levels of compensation are too low, and don’t come close to reflecting the harm caused. Automatic compensation at higher levels is, therefore, good news, and it is good news that an agreement has finally reached and the (voluntary) scheme can start operating as soon as early 2019 (we hope).

The new automatic compensation scheme is particularly good news for small businesses because one-third of small and medium-sized enterprises (SMEs) choose residential landline and broadband services, and around half (49%) of SMEs don’t know if they’re entitled to compensation when service falls short (Ofcom figures).