Broadband ISPs Face New Advertising Rules to Stop Misleading Prices - ISPreview UK
A new joint study from Ofcom and the Advertising Standards Authority (ASA) has ruled that the current approach to broadband price advertising is “likely to mislead” and as a result UK ISPs will, from 30th May 2016, be forced to adapt their approach. But the new approach may create some problems of its own.

At present the current approach typically involves prices for several elements of the advertised offer being presented separately (e.g. broadband, introductory offers, router delivery charges, line rental, contract length, non-Direct Debit surcharges, vouchers, installation costs). Most ISPs also have to buy broadband and phone services separately from their suppliers.

As a result there are tons of smaller ISPs that sell broadband and phone services as separate, rather than bundled, products to consumers. For example, you could buy phone line from one provider and then get your broadband service from a different provider. Furthermore there are some pure fibre optic (FTTH/P) and cable providers that can sell true standalone broadband packages via a single fee, where there is no need to take a separate “phone” (line rental) service from the ISP.

On the other hand there are plenty of providers that also try to game the system, such as by hiding the cost of line rental in their small print or confusing potential customers via introductory discounts that fail to clarify how much you will pay once that discount period is over.

Highlights from the ASA UK Research

  • 23% of participants correctly identified the total cost per month after the first viewing of an ad when asked simply to recall as much information as they could about the deal on offer without prompting. In response to the same question, 34% of the total sample recalled pricing information, but only provided partial information or an incorrect figure for the broadband service or line rental costs.
  • 22% of participants, were still not able to identify correctly the total cost per month after the second viewing (If this proportion were reflected across the population of fixed broadband subscribers, this would mean around 4.3 million UK households being unable to figure out what they would be paying)
  • 64% of those who couldn’t calculate the total cost per month, despite a second review, thought the headline price for the broadband element of a package constituted the total cost per month and that line rental costs did not apply
  • 81% of the sample were not able to calculate correctly the total cost of a broadband contract when asked to do so.
  • 74% of the total sample believed that information about one-off and on-going costs after an introductory period was either fairly or very unclear.

At this point it’s worth noting that only 300 participants took part in the above survey, which seems like an incredibly small sample size for such important research, especially if it’s going to be used as evidence for making a significant change to the industry. Never the less we’ve seen plenty of confusing offers in our time and thus it’s easy enough to agree with the ASA’s concern.

Guy Parker, ASA Chief Executive, said:

It’s essential we make sure people aren’t misled by pricing claims in broadband ads. That obviously wouldn’t be good for them, but nor would it benefit broadband providers, because advertising works better when it’s trusted. We’ll now be moving quickly, working alongside broadband providers, to clarify the presentation of price information.”
Sharon White, Ofcom Chief Executive, added:

Ofcom wants to see clear and accurate broadband prices for consumers. Our research with the ASA shows many people are confused by complicated adverts and offers, so we welcome the ASA’s plans to simplify broadband advertising.

Ofcom has already introduced measures to ensure customers receive accurate information on broadband speeds when they take out a contract. We’ll continue to work with industry and other regulators to ensure that broadband customers are treated fairly and have the best possible information to make the right choices
The New Approach

The ASA claims that they remain “open minded as to how pricing should be advertised so as not to mislead consumers,” although they have made the following suggestions to broadband ISPs. The final recommendation on advertised pricing is expected to be communicated to industry and the public before 30th May 2016 when it will need to be adopted.

ASA Suggestions to Broadband ISPs

  • Advertise all-inclusive up-front and monthly costs; no more separating out line rental.
  • Greater prominence for the contract length and any post-discount pricing.
  • Greater prominence for up-front costs.

The only real contentious aspect of this is likely to be the recommendation for an “all-inclusive up-front” monthly cost, which seems to be another way of saying that ISPs should combine line rental and broadband into a single price.

On the surface we think this is a very good idea, but the issue is that it might not work for every ISP and different consumers may also attract different costs (e.g. some only need to pay a small migration fee when swapping service, but others have to pay for a new line installation; this could become hard to promote via a single cost in adverts).

A TalkTalk Spokesperson said:

TalkTalk absolutely supports the ASA’s findings and we’ve already called on Ofcom to bring in all-in pricing. It’s obvious that a single headline price is much clearer and better for customers, and we’re actually already doing it on a pilot project up in York.
But until the whole market moves to single prices, any company that advertises its products like this will struggle to compete with what look like better deals from other providers. We want Ofcom to be bold and tackle this problem in their strategic review and we would absolutely support them in doing so.”
Nicholas Lansman, Secretary General of ISPA, said:

ISPA welcomes the ASA research into how consumers engage with broadband adverts, but believe that more detailed research is needed to corroborate the survey findings. Price is only one factor when a consumer chooses a service and the engagement with an advert is only one part of a purchasing decision – we urge the ASA to consider the whole customer experience when consulting on changes to its advertising guidelines.

The UK has a highly competitive broadband market and informed and empowered consumers are an important part of this. This is supported by Ofcom’s own figures that show the UK benefits from some of the most competitive broadband pricing. Beyond adverts, ISPs provide clear information if consumers engage more closely with them, for example by going to their website, visiting a shop, working with comparison and consumer websites or by calling the providers. This has not been reflected in the survey which is based on a small sample size with some of the reviewed adverts only being shown to 8 participants.

We look forward to working together with our members and the ASA on how to empower and inform consumers, and it is worth emphasising that the adverts that were used in the survey fully comply with current guidelines
Naturally it should work for most of the big ISPs and packages just fine, although it’s unclear how they’d handle discounts like the pre-paid Line Rental Saver offers (big ISPs often offer a standard monthly line rental or a cheaper annual pre-paid discount). Likewise the hundreds of smaller ISPs that offer line rental and broadband as optional / separate services, rather than bundles, may be left to scratch their heads about the best approach.

Speaking as a site that also does basic price comparisons, this gives us a headache too because of the variety and depth of choice in the market. Our usual approach is just to make both the broadband and line rental costs, as well as any other charges, visible together (we also already do a single / combined price on our bundles list). But if ISPs are now forced to combine broadband and line rental then those providers that offer broadband, but which let you to choose your own line rental provider, could become more difficult to compare without a confusing two-tier approach.

As TalkTalk says, until the whole market moves to the same model then there is a risk of creating problems. On the other hand a single-price approach could become a very effective way of tackling the culture where ISPs attempt to conceal broadband price rises by passing the hikes onto phone line rental, but it might require further action from Ofcom in order to effect true change.

Otherwise there’s really no reason why ISPs cannot promote their pricing in a clearer way by being more transparent with what they’re doing / discounting. Similarly there is also nothing inherently complicated about line rental, so long as it’s presented and costed clearly alongside the broadband cost when applicable.

UPDATE 7:27am

Added a comment from Citizens Advice below.

Gillian Guy, Chief Executive of Citizens Advice, said:

Misleading broadband ads have been duping consumers for too long.

Burying the cost of line rental in the small print of adverts or not properly explaining the duration of a contract are blatant attempts to mislead people. It is confusing and makes it difficult for consumers to know how much they’ll be charged or to compare deals from across the market.

Our evidence shows some people are paying up to six-and-a-half times more for broadband than advertised, customers are being promised one thing, and charged for another.

It is good the Advertising Standards Authority has listened to consumers’ concerns. If the ASA can get broadband providers to advertise all-inclusive up-front costs and make contract lengths clear it will help consumers make informed choices

UPDATE 9:35am
Ofcom has published the full report, which can be downloaded here.