Guest blog: The success of automatic compensation depends on manual monitoring

Already floated as a possibility in its Strategic Review of Digital Communications, Ofcom has now confirmed that it will be pursuing plans to make ISPs automatically compensate customers who experience “quality of service problems.???

By proposing to require ISPs to automatically compensate customers, Ofcom has taken a remarkably positive step, since it expects that automatic compensation will “act as an incentive for providers to improve the quality of service they deliver.???

However, its proposal begs an important question. Namely, how exactly will Ofcom ensure that providers are delivering automatic compensation fairly?

While Ofcom includes a section in its consultation “Monitoring automatic compensation,??? all this sets out is the regulator’s intention to have providers report annually on the amount of automatic compensation paid out to customers.

There is no proposal on how Ofcom will confirm that such self-reporting is accurate, and that the amount of automatic compensation recorded by providers isn’t less than what customers are rightfully owed.

And without such a proposal, there will always remain the chance that the systems providers put in place to award automatic compensation will make errors. There’s the possibility that these systems may process customers or certain types of problems incorrectly, resulting in automatic compensation not being awarded when it should.

That this is a distant possibility is given, for example, by the occasional tendency of ISPs to make large-scale billing errors, as was demonstrated this week when Plusnet were fined £880,000 for continuing to bill over a thousand former customers.

This is something that may very well prove a significant challenge to Ofcom, who in wanting to automatise compensation, appear to lack an automatic framework of its own for determining whether or not compensation is being fairly awarded and accurately reported.

And short of simply relying on the figures provided by ISPs, it will have to launch investigations into their accuracy, requiring ISPs to hand over in-house data on faults and automatic compensation figures.

This may prove a costly process, something that could eat up a considerable degree of the regulator’s resources and put additional strain on its budget, which was cut by 28% in real terms between 2010/11 and 2014/15.

Still, while automatic compensation may therefore run the risk of stretching Ofcom’s capacities a little too far, the requirement for providers to report annually on their compensation – as well as the ever-present threat of investigations and fines if they don’t – will ultimately work to bring down not only faults and delays, but also the compensation paid out by providers.

And given that [pdf] “over 5 million consumers lose their landline or broadband service??? as a result of problems every year, if Ofcom can manage to keep up with automatic compensation’s demands, then these customers are about to see their quality of service improve considerably.

Lyndsey Burton, founder of Choose a broadband, mobile and finance comparison site.