Friday 21 February 2020 6:46 am

The revolution is imminent, and big Telco needs to change

Alexander Fitzgerald is chief executive of Cuckoo Internet and a former Treasury official.

Complex deals. High prices. Bad service. Guess which industry I am talking about?

Four old incumbents own more than 90 per cent market share, nearly nine million people pay a loyalty tax every year, and yet “industry leaders” get invited to Downing Street for tea and biscuits.

The answer is telecoms. It’s front-page news: 5G and Huawei, Labour’s free broadband pledge, the Conservatives’ full-fibre rollout. But behind the headlines, there seems to be a missing actor: the consumer.

People are not happy. Complaints about broadband and mobile are almost 40 per cent higher than every other sector in our economy, according to research from the Institute of Customer Service. 

Some 38 per cent of people pay for a landline they have never made a call from. And those who do are being price gouged. For BT, the normal retail charge is £12 per hour, yet the regulated wholesale cost of that call is less than £2. Loyal broadband customers who stay after their contract ends are often rewarded with a 50 per cent bill increase. Charming. 

There is also massive information asymmetry. Take my parents. They call India regularly to speak to my grandmother who only uses a landline. 

When looking to change provider, BT quoted a £500 exit fee to leave a contract that my parents hadn’t realised they had signed up to. A customer service representative then played back a recording of my dad’s conversation about it from more than a year ago, that he had no recollection or record of. How is the consumer expected to hold their supplier to account?

I know why Big Telco do it. They are afraid. Who wouldn’t be? Shareholder revolts, activist hedge funds, the need to justify executive pay — in a competitive market landscape, fear gets the best of them and in their panic, they turn on an easy target: the consumer.

Vulnerable people are being left behind, and no one is banging the drum on their behalf. The new chancellor Rishi Sunak has a telecoms and IT background. He must make it one of his first priorities to respond in the Budget next month. 

There is a great table in the government’s recent consultation that compares spending on advocacy in key sectors with average weekly household spend. Telecoms is the major outlier by far.

The Treasury should fund Citizen’s Advice to become the statutory consumer advocate. Direct consumer advice, expanded publicity and increased lobbying on behalf of the individual, will help change things for the better. 

This will give a voice to the vulnerable, shine a light on bad service, and highlight the hypocrisy at the heart of telecoms. We are the first broadband company to publicly support this move. We hope others will join us.

Ofcom is doing what it can, despite its dual mandate of “improving the business case for fibre investment” and “protecting customers” being somewhat in conflict. End-of-contract notifications should start coming out this month from every supplier. Automatic compensation came out last year. You also no longer need a special code to switch. 

But Ofcom’s new chief executive Melanie Dawes should not rest on these laurels. The Prime Minister’s adviser Dominic Cummings might have a thing or two to say if she does. 

When BT moves into its new east London office, the capital’s startup scene will be laid before them. From energy to banking, the old guard are being toppled by innovative companies that put the customer at the heart of their business models: Bulb, Octopus and Ovo; Monzo, Revolut and Tide.

Big Telco bears the mark of Cain. Disruption will soon wash over its shores too.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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