ACCC warns telcos about misleading broadband advertising

By Adrian Kuti and Sunita Kenny 

16 Feb 2017

A new ACCC Report sets out six principles for telcos to consider when advertising broadband speeds.

The Australian Competition and Consumer Commission (ACCC) has placed internet service providers (ISPs) firmly on notice that broadband speed advertising must be improved to avoid misleading consumers.

Misleading advertising practices, in particular speed claims, have long been a key enforcement target for the ACCC and the subject of repeated investigations and court proceedings. In December 2016, the Full Federal Court imposed a record penalty of $6 million against the manufacturers of Nurofen pain relief products for making misleading representations in its product advertising. (This was a significant win for the ACCC which continues to advocate for increased penalties for consumer law contraventions).

In light of the increased prevalence of the nbn network and other superfast broadband networks, as well as further developments in wireless broadband technologies, the ACCC's particular focus on advertising and informational campaigns about the capacities of those networks is only set to increase.

On 10 February 2017, the ACCC released its Broadband Speed Claims Report which sets out the following six principles that the ACCC considers will assist ISPs to present broadband speed information in a simple and standardised format that is useful to consumers:

  • Consumers should be provided with accurate information about typical busy period speeds that the average consumer on a broadband plan can expect to receive;
  • Wholesale network speeds or theoretical speeds taken from technical specifications should not be advertised without reference to typical busy period speeds;
  • Information about the performance of promoted applications should be accurate and sufficiently prominent;
  • Factors known to affect service performance should be disclosed to consumers;
  • Performance information should be presented in a manner that is easily comparable by consumers, for example by adopting standard descriptive terms than can be readily understood and recognised; and
  • Service providers should have systems in place to diagnose and resolve broadband speed issues.

Increases in broadband use and consumer confusion

Ensuring clear advertising of broadband speeds becomes increasingly important as consumer demand for broadband soars - both via the rollout of the national broadband network (nbn) (which expects to reach 5.4 million homes and businesses by 30 June 2017, and 9 million premises by June 2018), and connections to other next generation networks - including wireless and mobile broadband networks.

There are currently around 7 million fixed broadband subscribers in Australia and a further 6 million mobile broadband users (although mobile broadband was beyond scope of the ACCC's consultation).

As fixed broadband subscriptions have increased, so too have consumer complaints about internet data speeds to the Telecommunications Industry Ombudsman. Significantly, complaints to the Ombudsman increased almost 50% during 2015-2016.

The main issue raised by consumers is that vague and unclear speed claims by ISPs make it difficult to understand exactly what they are purchasing, and to readily compare different products on the market to ensure they are making a purchase that fits their requirements.

In releasing the ACCC's Report, Chairman Rod Sims commented that

 "Four out of five consumers have trouble comparing broadband speeds and this is causing a high level of complaints, confusion and dissatisfaction. Consumers believe they aren't getting what they sign up for, and pay for, when it comes to home internet speeds."

ISPs' broadband advertising varies considerably between providers and across advertising mediums, but many of the typical advertising approaches used have been identified as potential problem areas by the ACCC especially where the advertising purports to contain seemingly comparable speed information.

What ISPs should - and shouldn't - do

The Australian Consumer Law prevents businesses from engaging in misleading and deceptive conduct of any kind and from specifically making false or misleading representations about the nature, standard, quality, value or grade of goods and services. This includes any representations made in advertising materials, on websites and on packaging, and any information provided by staff to consumers. It applies to claims made in print, online, and in social media.

When considering broadband speed advertising, businesses should look at the upfront provision of:

  • "typical" download/upload speeds likely to be accessed by consumers;
  • clear, accurate and comparable information about service performance and speed at different times, especially busy end-user demand times (6pm-12am);
  • performance information about specific, data intensive applications known as subscription video on demand (ie. Netflix, Stan and Presto).

Businesses should avoid advertising that is likely to mislead consumers about the typical broadband speeds likely to be experienced over their services, including by:

  • use of vague terms such as "fast" or "high speed", or use of visual references that suggest high speed, such as an athlete or a cheetah;
  • reference to the speed of the wholesale broadband network or speed tiers, usually on an "up to" basis, which is likely to confuse or mislead consumers about the speeds that the ISP is realistically able to deliver to them;
  • over-reliance on disclaimers or detailed product descriptions to provide crucial information about factors likely to affect retail speeds, such as (for example) busy periods, type of plan, and quality of home equipment.

The ACCC's guidelines should sound as a warning for all businesses concerned about reducing their exposure to claims of misleading advertising.

Clear advertising, particularly for products that have a technical component, can be very difficult to get right, but as the laws apply even when business do not intend to mislead consumers, it is essential that businesses making technical performance claims are familiar with their obligations under the Australian consumer law.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.