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Summary

On Dec. 1, 2016, the German parliament approved telecoms regulator BNetzA’s Transparency Ordinance for Telecommunications, which will enter into force after a transitional period of six months. The intention is to ensure that consumers can make more informed decisions by requiring fixed and mobile operators to be more transparent in the advertising of their broadband services, including clearly stating the contract duration, data allowances, and monthly costs. Operators will also need to provide customers with information regarding minimum, maximum, and actual data transfer speeds.

Germany’s Transparency Ordinance will help close the gap between theoretical and actual broadband speeds

Under the new broadband transparency rules, operators are obligated to provide and keep a record of contractual minimum, maximum, and actual data transmission speeds for both fixed and mobile services, which must be accessible to customers in an online customer center. The measurements can be taken from BNetzA’s speed measuring tool rather than measured separately, but either way, customers will be able to use the readings to bring any discrepancies between actual and contractual results to the attention of the provider. This should make it easier for customers to switch provider: Proof that they are not receiving the speeds they’ve been promised could be grounds for early contract termination. However, this might prove challenging for wireless operators, since reliability of mobile broadband is much harder to guarantee than that of fixed broadband, due to capacity constraints and its greater susceptibility to interference from factors such as the weather.

Regulators across Europe are beginning to address the significant gaps between theoretical Internet speeds and the actual speeds customers are receiving. According to an EC study released in October 2015, the speeds customers receive are on average just 78% as high as those advertised, with fiber-based connections performing better, at close to 85% of advertised speeds. This is a gap that many regulators acknowledge needs to be closed. As a result, consumer protection issues are continuing to move up the regulatory agenda, with regulators aiming to make providers more accountable and encourage them to keep their promises.

In addition to addressing broadband speed advertising, the German guidelines obligate operators to create product information pages that clearly and concisely provide customers with contractual details before they enter into any agreement. The information sheet must clearly outline contract terms, duration, contractually agreed data transfer rates including any conditions for rate throttling, conditions for contract renewal and termination, monthly costs and data volume allowances, and a list of which services are included in the allowance. The intention is to ensure that customers are able to make more informed decisions when purchasing broadband services and to alleviate bandwidth throttling and bill shock. BNetzA expects to publish sample information sheets and draft contracts as examples for providers to replicate, after a further period of consultation.

In April 2016, the FCC in the US launched broadband labels similar to BNetzA’s information sheets, to provide customers of mobile and fixed broadband services clear and simple information regarding price and performance metrics such as speed, reliability, and data limits. Unlike the FCC’s labels, though, BNetzA’s guidelines will be mandatory, which should ensure that they are effective and universally adopted.

The German guidelines not only protect customers before they enter into a new agreement, they go further by putting a focus on transparency throughout a contract’s term, in an effort to promote competition. Monthly bills, for example, will have to be much clearer and include the end of the minimum contract term, notice period, and the last calendar day on which termination must be made before the contract is automatically renewed, to make customers more aware of when they can change provider. If fewer contracts end up being automatically renewed, operators will have an incentive to work harder to keep their customers happy.

Appendix

Further reading

Germany (Country Regulation Overview),TE0007-000977 (January 2016)

"The introduction of "nutrition labels" could put an end to misleading broadband advertising”, TE0007-001019 (April 2016)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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