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Consumer Protection in the Communications Industry: Moving to best practice - Issues Paper (July 2008)
4.2. Best practice co-regulation for the telecommunication sector
- 4.2.1. Legislation
- 4.2.2. Code development
- 4.2.3. Code content
- 4.2.4. Dispute resolution
- 4.2.5. Code compliance monitoring
- 4.2.6. Code review
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This paper has identified a number of weaknesses in the consumer protection framework for telecommunications in Australia. The current framework is unique, complex and cumbersome. It is neither effective co-regulation or effective self regulation. This section sets out recommendations for aligning the consumer protection framework in the telecommunications sector with best practice co-regulation. Considerable reform will be required to achieve this goal.
4.2.1. Legislation
An area of considerable weakness in the telecommunications co-regulation framework, is the lack of integration between the legislation and the codes of conduct – especially regarding the content of codes of conduct. Most sectors establish a core set of consumer protection principles or requirements in legislation. These are then the subject of further enhancement and elaboration in codes of conduct.
This approach is common in other industry sectors. For example, ASIC has been a key supporter of this approach in the financial services sector:
For self-regulation to be effective it needs to be properly integrated into the overall regulatory framework – that is, it needs to dovetail with the law and the regulator's policies – not repeating or confusing requirements, but assisting and possibly extending them in some areas. As you would appreciate, the regulator relies on self-regulatory schemes to cover many day-to-day complaints and industry issues that it would otherwise not have the capacity to deal with. If self-regulatory schemes are inconsistent with the underlying principles of the overall regulatory framework, or do not operate within the parameters clearly laid down by the law, then the fundamental purpose to be served by self-regulation may be defeated and consumer welfare may be compromised.[36]
It is possible to develop a list of core consumer protection principles for the telecommunications sector. For example, the Consumers Telecommunications Network (CTN) has developed a draft Charter of Communications Rights that contains the following core protections:
1. Universal Access to Communications Services
All people are entitled to a choice of communications services, wherever they live or work in Australia. Communications services include voice, video, text and data, or equivalent depending on the most appropriate technology for a particular user.
2. Universal Accessibility of Communications Services
All people are entitled to equal access to communications services regardless of ability. The needs of people with disabilities must be taken into account in the design of all communications services, and must be met with guaranteed and subsidised additional and/or alternative equipment and services if necessary. Services, including equipment, must be interoperable and allow for backwards compatibility wherever possible.
3. Universal Affordability of Communications Services
All people are entitled to communications services at reasonable cost, including price controls on basic services, and the availability of tools and mechanisms that allow them to control and limit their expenditure on communications. All communications services must provide a reasonable and accessible financial hardship policy to customers.
4. Guaranteed Quality of Communications Services
All people are entitled to services that guarantee a minimum level of performance to ensure reliable communications and, in particular, access to effective emergency services. Furthermore, all communications equipment and services must be safe, and both delivered and repaired in a timely manner.
5. Consumer Protection
All people are entitled to mandatory consumer protections of their communications services, including the right to be given the facts needed to make an informed choice, the right to education resources, the right to fair contracts, the right to privacy, and the right to security.
6. Consumer Representation
All people are entitled to have their needs represented in the development of communications services and policy in Australia through well-resourced consumer consultation and representative processes.
7. Right to redress
All people are entitled to an appropriate form of redress if a breach of their communication rights occurs, including access to an independent dispute resolution body.[37]
A code of conduct framework could then be established that allowed the industry to further develop these protections for particular products, services or issues. The framework could adopt the approach (which is common to other sectors) that codes must not deliver protections that are weaker than the core principles in the legislation.
There is also some industry support for developing more specific objectives. See for example the Communications Alliance submission to the Productivity Commission inquiry:
The current consumer policy framework has worked well in providing outcomes for consumers, however there are opportunities for improvement which could usefully be considered. These include:
- A statement of specific objectives for consumer policy in telecommunications; and
- Consideration of overseas approaches which include specific objectives of consumer empowerment.
In the absence of this approach, codes are developed in a regulatory vacuum, and the establishment of significant consumer protection relies on the relative strengths of the stakeholders consulted during the code development process.
Recommendation 1:
Develop a set of core consumer protection principles in the telecommunications legislation. Require codes of conduct to be developed within this framework – allowing them to enhance these protections or provide more detail, but not to weaken these basic consumer rights.
4.2.2. Code development
The process for the development of codes of conduct in the telecommunications sector is unique and complex. Significant improvements could be achieved by aligning the process with code development processes in other sectors.
Improvements that could be considered are to:
- Concentrate resources on a limited number of comprehensive codes rather than numerous fragmented codes;
- Achieve industry buy-in and commitment through a meaningful signature process based on an expectation that all industry members would sign any consumer protection code relevant to their operations (to replace the current bizarre situation where signing a code is not a priority and where a company does sign, it means very little);
- Change the emphasis in the code approval / registration process to focus on the content of the code rather than process issues;
- Set standards or develop a good practice statement for consultation in the development and review processes; and
- Improve resourcing for consumer input.
It is interesting to note that this last recommendation also has some limited industry support, in that the industry at least recognises the value of funding consumer input. For example, the Communications Alliance submission to the Productivity Commission inquiry sought:
A more ‘macro approach’ to consumer participation rather the overlapping/duplication of consumer bodies in ACMA, Comms Alliance, the TIO, ACMA and suppliers, for example the creation of a well-resourced single organisation.[38]
Recommendation 2:
Align the telecommunications code development process with best practice code development processes in other sectors. Improvements should include:
— Concentrating resources on a limited number of comprehensive codes rather than numerous fragmented codes;
— Achieving industry buy-in and commitment through a meaningful signature process based on an expectation that all industry members would sign any consumer protection code relevant to their operations (to replace the current bizarre situation where signing a code is not a priority and if a company does sign, it means very little);
— Changing the emphasis in the code approval / registration process to focus on the content of the code rather than process issues;
— Setting standards or developing a good practice statement for consultation in the development and review processes, and
— Improving resourcing for consumer input.
4.2.3. Code content
Co-regulation in the telecommunications sector appears to have resulted in an unbalanced approach to assessing the adequacy of the content of codes. There is a significant emphasis on some process issues. There is virtually no consideration of content issues.
This is in contrast to other sectors where the core consumer protection content of a code is the key focus of the entire framework.
For example, the development and approval of codes of conduct in the financial services sector is guided by ASIC RG 183:
59 Our approval process will focus primarily on the adequacy of a code’s core rules. Core rules are the substance of any code, and the main vehicle for improving industry practices. It is therefore essential that core rules address existing and/or emerging problems in the marketplace, rather than merely restating the law.[39]
The TIO also criticised the absence of core consumer protections in their submission to the Productivity Commission inquiry:
In the TIO’s experience, some providers fail to recognise that, taken as a whole, Sections 3 (Objects) and 4 (Regulatory Policy) of the Act establish a co-regulatory mechanism. As a result, and given the absence of a strong enforcement regime, many consumer groups see the co-regulatory safety net set far too low.[40]
It is essential that a core set of telecommunications consumer protection principles is embedded at the heart of co-regulation in this sector. This might take the form of a charter of rights or a set of core principles in the legislation. Code content should then reflect these protections, building on them and enhancing them in the day-to-day practice of industry members.
In addition, the inclusion of a formal market inquiries power in the legislation should be considered, so that the subject matter of code content can be determined by reference to the consumer experience, rather than waiting for industry to develop codes.
Recommendation 3:
Align the telecommunications code content requirements with best practice code content requirements in other sectors. Improvements should include:
— Establishing a core set of telecommunications consumer protection principles in the telecommunications legislation;
— Requiring code content to reflect these protections, building on them and enhancing them in the day to day practice of industry members;
— Ensuring that code content cannot be weaker than the core consumer protection principles in the legislation; and
— Including a formal market inquiries power in the legislation, so that the subject matter of code content can be determined by reference to the consumer experience, rather than waiting for industry to develop codes.
4.2.4. Dispute resolution
Dispute resolution in the telecommunications sector has been the subject of detailed review and reform – these issues are not the focus of this current paper save to note that as with Code development, review and monitoring, dispute resolution in the telecommunications sector would be improved if it complied more fully with best practice approaches and benchmarks developed in other sectors, particularly relating to governance.
In addition, we do recommend the consideration of a more innovative approach to complaints in the telecommunications sector through the introduction of a super-complaints model – similar to the model operating in the UK.
Super-complaints should be available to designated consumer and dispute resolution providers. This will enables consumer groups to bring to the attention of the regulator market features harming the interests of consumers. Super complaints are also relevant to code compliance monitoring, and could play a useful role in identifying the failure of specific codes of conduct.
Recommendation 4:
Dispute resolution in the telecommunications sector should to be aligned with best practice in co-regulation.
A super complaints mechanism should be introduced to enable consumer organisations and dispute resolution providers to formally raise significant issues directly with the regulator.
4.2.5. Code compliance monitoring
Code compliance monitoring in the telecommunications sector is unusual and fragmented. The CA monitoring process appears to be quite elaborate but as it only applies to signatories it only applies to a tiny fraction of the relevant industry. It is very secretive and does not appear to have been effective in practice.
The ACMA compliance monitoring regime is even more complex, but has resulted in very little enforcement activity. This is despite significant evidence of non-compliance.
Many other industry sectors have adopted more independent, innovative code compliance monitoring. See for example the approach taken in financial services under ASIC RG 183.
76 The monitoring process overseen by the code administration body should also provide for some form of external or independent monitoring or auditing from time to time. Further, if the monitoring process relies on self-reporting by subscribing members, then the code administration body should consider selected shadow shopping exercises to verify code compliance.[41]
See also the banking code compliance monitoring regime – which now involves an independent body dedicated to code compliance monitoring, the publication of regular compliance reports, and the use of innovative monitoring tools such as shadow shopping.
Recommendation 5:
The co-regulatory framework should include an open, comprehensive, independent and innovative code compliance monitoring function, which results in effective monitoring and enforcement. Improvements should include:
— A consistent compliance monitoring approach should be used for the entire industry, replacing the current disjointed approach which is split between signatories and non-signatories;
— Code compliance monitoring should include external independent monitoring;
— Code compliance monitoring should include innovative tools such as shadow shopping;
— Regular compliance reports should be published.
4.2.6. Code review
The code review process in the telecommunications sector has required considerable input and resources from consumer stakeholders due to the plethora of codes and the regularity of reviews. The resourcing of consumer input has been inadequate to ensure effective consumer input to these reviews.
The number of codes and reviews in the telecommunications sector requires some rationalisation, so that limited resources of all stakeholders can be shifted to important monitoring and enforcement tasks instead of the constant demands of review committees.
Regular, independent review of each code, a feature in other industries, should also be required.
Recommendation 6:
The code review process in the telecommunications sector should be rationalised by reducing the number of codes and reviews to a reasonable amount. Adequate resources should be provided for consumer input to code reviews. There should be a requirement that each code is subject to regular independent review.
[36] Segal J, Institutional self-regulation: what should be the role of the regulator?, address to the National Institute for Governance, 8 November 2001, <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/NIGConf_081101.pdf/$file/NIGConf_081101.pdf>.
[37] Consumers Telecommunications Network (CTN), Charter of Communications Rights (Draft), 2007.
[38] Communications Alliance, Submission to the Review of Australia’s Consumer Policy Framework Issues Paper, 14 May 2007, pages 2–3, <http://www.pc.gov.au/__data/assets/pdf_file/0020/63731/sub050.pdf>.
[39] Australian Securities and Investments Commission, Regulatory Guide 183 (RG 183), 4 March 2005, guideline 183.59, <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps183.pdf/$file/ps183.pdf>.
[40] Telecommunications Industry Ombudsman, Submission to the Review of Australia’s Consumer Policy Framework Issues Paper, 3 July 2007, page 7, <http://www.pc.gov.au/__data/assets/pdf_file/0004/65794/sub097.pdf>.
[41] Australian Securities and Investments Commission, Regulatory Guide 183 (RG 183), 4 March 2005, guideline 183.76, <http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps183.pdf/$file/ps183.pdf>.
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