ACM: telecom providers must inform consumers in a clearer and more transparent manner about fixed broadband

The Netherlands Authority for Consumers and Markets () expects that, going forward, telecom providers will communicate in a clearer and more transparent manner towards consumers regarding contract expiration dates, renewal options, and price changes for fixed-broadband plans. In addition, they must offer their customers appropriate download-speed recommendations that are based on their actual internet usage. ACM announces these measures following the draft version of its market investigation into fixed-broadband prices, which was published on February 9. By this summer, ACM will publish guidance for telecom providers, in which it will explain how they must inform their customers as well as how it will enforce compliance with these rules.

Previous ACM studies have revealed that consumers that take out plans in the lower-speed segment (download speeds of up to 100 Mbps) pay, on average, more than consumers with higher download speeds. In this new publication, ACM examined what the causes thereof are.

Automatic price increases of passive contracts

The market investigation revealed that the price difference between higher and lower download speeds was primarily caused by the fact that, in the lower-speed segment, many consumers have so-called 'sleeping' contracts. These are passive contracts the initial end dates of which have already expired, and which are automatically renewed. Since telecom providers implement price increases for existing customers every year, subscription costs for customers with passive contracts (so those that do not switch providers or take out a new contract with their current provider) can add up real fast. The longer a consumer is a customer with the same provider, the greater this 'loyalty penalty' becomes. After a couple of years, this price increase can be as high as 10 euros a month compared with the advertised price from when the internet plan was taken out. Previous studies have revealed that, for 79 percent of fixed-broadband plans, the initial contract period has already expired. For this new market investigation, ACM also looked at the demographic characteristics of individuals with passive contracts. It appears that these are often seniors (65 years and older) that are customers with relatively expensive telecom providers and that have plans with lower download speeds.

Manon Leijten, Member of the Board of ACM, explains: "It is mostly consumers that do not or hardly switch that are disproportionately harmed right now. We want telecom providers to offer clear information in a timely manner, including information about what download speed is right for an individual's actual internet usage. In that way, it becomes clearer to consumers how and how much they can save on their broadband plans by taking out a new contract or by switching providers. Our market investigation has revealed that this information is often insufficient, which is why we have decided to publish guidance for providers, and we will subsequently also enforce those guidelines."

Information and download-speed recommendations

ACM's market investigation reveals that telecom providers give insufficiently clear and transparent information on contract status, price changes, and download-speed recommendations. Providers are statutorily required to inform customers actively about contract end dates as well as about rates that are the most attractive for them. Research shows that, in practice, this does not always happen uniformly nor as clearly. That is why, by summer at the latest, ACM will publish clear guidelines for telecom providers about how they must inform their customers. In addition, telecom providers must give their customers appropriate and fact-based download-speed recommendations. For most households, download speeds between 50 and 100 Mbps are, in most cases, already sufficient. However, stimulated by online download-speed recommendations and 'upselling' practices by some providers, consumers often take out higher speeds than necessary. ACM will check whether providers comply with the rules and give honest download-speed recommendations.

A more-sweeping option

ACM does not have any tools for banning excessive price differences between customers for the same product. It can be explored though, as a possible, more-sweeping option, whether price discrimination can be restricted by introducing a statutory cap on what consumers with passive contracts pay, which is then linked to the standard list price. Such an approach could lead to a simplification of the tariff structure, in which only sign-up offers and standard list prices are used. It is up to the legislature to examine in greater detail if and how such a legislative amendment could be realized.

New broadband contracts pay off

ACM advises consumers that wish to save money every month to switch providers or to take out a new contract with their current provider as soon as their contract has expired. In that context, consumers are also advised to find out what download speed they really need. The Dutch Consumers' Association (in Dutch: Consumentenbond) says that, for an average household with normal data-consumption needs, a download speed of 50 Mbps is already sufficient in most cases. For broadband plans with lower speeds, a new plan can save up to 250 euros a year. On the website of its consumer information portal ACM ConsuWijzer, ACM will soon publish sample conversations for consumers that wish to stay with their current providers, but who wish to have more-competitive rates.

Next steps

ACM invites stakeholders, such as businesses and other organizations (for example consumer organizations), to submit their opinions or suggestions regarding the investigation's findings and the recommendations. They have until Friday March 6 to do so by going to this page (in Dutch).

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