29 Aug 2013

Broadband speeds under the ACCC's microscope

by Matthew Battersby, Bruce Lloyd

If your business operates in the telecommunications sector, your advertising campaigns must comply with the Australian Consumer Law as the ACCC will be closely scrutinising those claims.

Consumer protection in the telecommunications sector remains a key element of the ACCC's priorities in 2013. The ACCC is looking to implement a broadband performance monitoring and reporting program in Australia. This program will allow the ACCC to take a closer look at actual broadband speeds available to consumers and compare them with headline speed claims made by Internet Service Providers.

The ACCC released a consultation paper on 14 August 2013, "Broadband performance monitoring and reporting in the Australian context". While this consultation paper is the first step in the process, it suggests that the ACCC still has some concerns about performance claims being made in the telecommunications sector.

The ACCC's proposed broadband performance monitoring and reporting program will examine fixed-line, wireless and satellite broadband services in Australia. Mobile broadband services will be out of scope initially but the ACCC may consider including them in the future.

The purpose of the ACCC's consultation paper is to seek views from the industry, consumer groups and other stakeholders on an appropriate program design, including the testing methodology, scope, quality of service metrics and reporting framework. Submissions are due on 13 September 2013.

Do we need a broadband performance monitoring program?

The ACCC has publicly expressed concerns for some time about the marketing of broadband services in the telecommunications sector, particularly in relation to potentially misleading headline claims which may contravene the Australian Consumer Law. Representations about data speeds, pricing, data allowances and plan inclusions have attracted particular attention and resulted in the ACCC:

  • publishing "Information Papers" on broadband speed claims which outline its expectations of Internet Service Providers (ISPs) supplying services over copper, HFC, optical fibre, mobile and other wireless networks;
  • accepting a court enforceable undertaking from the three Australian mobile network operators Telstra, Optus and Vodafone on 14 September 2009 concerning various "truth in advertising" matters; and
  • taking enforcement action against a number of ISPs, including infringement notices issued to iiNet ($102,000) and Dodo Internet ($26,400) and recent pecuniary penalty proceedings against TPG, in relation to which the ACCC was granted special leave to appeal to the High Court on 19 August 2013.

The ACCC believes that a broadband performance monitoring and reporting program would be beneficial as it will:

  • provide transparency to consumers about the performance of broadband services;
  • allow consumers to compare broadband services based on real-world performance rather than theoretical maximum speed claims;
  • hold ISPs accountable for performance claims, including headline speed claims; and
  • encourage competition and efficient investment in infrastructure.

Implications for ISPs

A key element of the ACCC's broadband performance monitoring program will be regular public reporting. The ACCC believes that this will:

  • allow ISPs to "differentiate their products and services from their competitors based upon the results of the ACCC’s testing results"; and
  • reward ISPs who invest in their networks and "draw out an extra competitive dimension in addition to price and download quotas".

While the results of the broadband performance monitoring program may aid transparency, it will add an additional layer of scrutiny to broadband performance claims and could result in further enforcement action by the ACCC where the results do not substantiate representations made in advertisements, with the Commission warning that "if there was evidence of a network operator over-promising and under-delivering the ACCC could consider enforcement action for misleading or deceptive conduct and/or for failure to comply with any applicable regulatory determinations".

Program design

Scope: the proposed program would cover copper, HFC, optical fibre, fixed wireless and satellite broadband services. It will include services supplied over the National Broadband Network. The ACCC is proposing to limit testing to residential and small business broadband services at this stage.

Participants: the program would rely on consumers to volunteer their broadband service for testing using software provided by the ACCC.

Data speeds: the key metric examined would be data speed (download and upload data transfer rates). The ACCC is looking to monitor peak and off-peak speeds but is unlikely to monitor all speed tiers and may start by monitoring most popular speed tiers.

Quality of service: the ACCC may also include testing of additional metrics such as packet loss, latency, jitter, webpage browsing speed, DNS resolution and DNS failure.

Implementation: the ACCC would probably engage an independent third party to conduct the testing.

Overseas experience

The ACCC's consultation paper refers to similar programs which have been implemented by regulators in the US, UK, Singapore and New Zealand. The ACCC suggests an analysis of these programs will occur before implementation of its own.

The ACCC has already examined programs implemented by the FCC (US) and Ofcom (UK) and suggests, for example, that it might publicly report on actual performance compared against advertised headline speeds (as a percentage).

What next?

The broadband performance monitoring and reporting program is contingent on the ACCC securing financial support and the timeframe for implementation is unclear at this stage. Although the program is at the proposal stage, it suggests that the ACCC will continue to play an active role in the telecommunications sector as it perceives there is a need for protection especially of residential and small business consumers in this area.

Earlier this year, the ACCC released its updated Compliance and Enforcement Policy for 2013. The ACCC Chairman made it clear that "strong enforcement by the ACCC is at the top of the list" and referred to the TPG case as "the type of interventions you can continue to expect from the ACCC".

If your business operates in the telecommunications sector, there is a need to ensure that your advertising campaigns comply with the requirements of the Australian Consumer Law as the ACCC will be closely scrutinising those claims.

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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.