TIO Annual Report 2002/03

Ombudsman’s Overview

The past year has been an unusual mix of stasis and change for the TIO. The primary driver of the TIO’s business is the level of industry activity and, with some exceptions, 2002/03 was a quiet period for many telecommunications providers. The pace of activity and change dropped away as providers consolidated their positions and attempted to cut or contain costs.

This relative decline in activity is the principal reason for the decline in complaints to the TIO. As I noted in the last Annual Report, care must be taken in interpreting past years’ complaint statistics. On the face of reported statistics this is the second successive year in which complaints to the TIO have declined. However, when the figures for 2000/01, the last full year when OneTel was an active contributor to the complaint base, are adjusted by deleting OneTel complaint numbers, a different picture emerges. On this standardised basis, TIO complaint numbers increased year on year until 2001/02, only falling off in the last twelve months. It is too early to be certain whether this decline is a definite trend, or whether complaint numbers will again climb during 2003/04 as the expected level of industry activity picks up. In fact, the TIO is predicting a modest 2% increase in complaints to the Scheme during 2003/04.

Of course, other factors such as public awareness levels about the existence and role of the TIO also play a part in determining complaint levels. Higher awareness levels generally result in higher complaint levels. It is significant that data from the most recent survey commissioned by the TIO shows fairly static levels of public awareness, with the exception that awareness amongst small business has actually declined.

Some quite subtle factors, difficult to measure, are also at work. It is clear that the top half dozen TIO members as measured by complaint numbers have made significant strides over the past year in either reducing or containing the rate of increase of complaints. This is particularly pleasing because it suggests that these members are looking closely at internal dispute resolution (IDR) mechanisms – an area where they have been criticised as being weak in the past. The TIO has been active in this area, marketing its Complaint Handling Booklet as an important pro-active approach.

There is also evidence of a more effective approach to the identification of systemic issues by members. Here, the TIO’s Systemic Complaints Investigation Procedure is clearly bearing fruit. Again, it is pleasing that TIO Members have reacted so positively to this initiative. The great difficulty we face is in trying to quantify the impact of this procedure on the overall level of complaint numbers.

At an operational level, the TIO continued to deal which increasingly complex and novel issues. The decision by some members, particularly Telstra, to factor customer debt, added a layer of complexity by involving a third party – the factor – in the TIO’s complaint handling procedures. Debt factoring raised two important operational issues.

Firstly, a significant number of disputes were due to the factored debt being relatively old. The TIO has had previous experience of this issue. Secondly, there were complaints that the factor had acted too quickly in credit or default listing affected customers, even though these customers were disputing the debt. Such an approach is quite unreasonable and is a clear breach of a fundamental policy of the TIO Scheme.

It is interesting that while total complaints to the TIO declined in the past year, complaints concerning debt recovery increased. Put simply, the main industry players tightened their credit management procedures in 2002/03 partly as a result of their own drive on costs and partly because of the increasing tendency of customers to change providers without paying final accounts.

In other fixed line complaint areas, complaints about charges for premium rate services and dumping continued their rapid rise. TIO welcomes the Minister’s Direction to the Australian Communications Authority to introduce a price-capping regime for premium rate services. Consumer concern about this area appears to have played a part in Telstra’s decision to conclude its agreement with Internet diallers. It is too soon, however, to be certain whether these twin developments will lead to the larger content providers moving their services offshore and possibly beyond Australian regulatory reach.

On the mobile telecommunications front, complaints about early termination fees (ETFs) continued apace. The TIO continued its investigations into ETFs, insisting that members could only properly recover amounts which represented genuine pre-estimates of loss. The TIO also extended its enquiries on this issue into the use of SIM unlock fees for various prepaid products.

The TIO has devoted considerable resources to investigating and reporting on breaches of ACIF codes, an area which is becoming an increasingly important part of our work. It is interesting, however, that despite the great effort which the industry has put into developing these codes, the vast majority of complaints handled by the TIO in 2002/03 did not involve even potential or possible breaches of codes – these complaints involved issues simply not covered by Codes.

On the policy front the TIO Council has been particularly active in three key areas.

Firstly, it devoted considerable time to considering the Report of the Review of the TIO Scheme delivered in July 2002. It was joined in this task by the Board which also had to consider recommendations specific to its tasks. Secondly, the Council considered two important amendments to the TIO Constitution. With the Board’s approval the Ombudsman was given the power to investigate, facilitate the resolution of and determine complaints relating to the factoring of debt, a provision designed not to extend but to preserve the TIO’s powers. Also approved was an amendment to allow the Ombudsman to publish Determinations, Directions and Recommendations.

Finally, the Council approved a new Position Statement on the Extension of Unlimited Credit and Overcommitment in relation to liability for charges for premium rate services.

Looking to the future, continuing technological change and the adoption of new applications are now clearly driving the convergence of industries and blurring the accepted distinction in telecommunications between carriage and content. Here, the most immediate challenge for the TIO is the bundling of services (and products) by providers, particularly the bundling of fixed line, mobile and Internet services with subscription television services (Pay TV). For a variety of reasons, it appears that the provision of Pay TV whether as a single service or as part of a bundle is outside the TIO’s jurisdiction. This means that a consumer who is using a bundle of services which includes Pay TV does not have a one-stop shop for complaints about billing, credit management provisioning and fault repair. It is clearly in the interests of consumers for the TIO to cover the field in this area.

I conclude by thanking the TIO staff and TIO members and the Council and Board for their commitment to and support of the Scheme throughout the year. I remember particularly the great contribution throughout her term by Susan Holmes, the TIO’s Independent Director, who died during the year. She was an inspiration to everyone who knew her.

John Pinnock
Ombudsman

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