Office of the Telecommunications Authority Industry Forum on Quality of Service of Public Telecommunications Services - 'Delivering Consumer Expectations'

Mrs Pamela CHAN WONG-Shui
Chief Executive
Consumer Council

I.  INTRODUCTION

1. I was asked to speak on ' Delivering Consumer Expectations'. I can summarize my thoughts on this topic with one sentence - to offer consumers the best price, product choice and quality of service. However, it is incumbent on the trade to devote sufficient resources in order to meet such consumer expectations and I suggest that this better be done, otherwise, you may lose out in the competitive market.

2. It is an interesting fact that in highly contested markets such as those in the telecommunications industry, the issue of setting quality of service standards should arise. I say this because one would expect that in a highly competitive marketplace, the three determinants of competition, i.e. price, product choice and performance levels, would find their natural levels of optimal efficiency. If this is not the case, then it suggests market failure.

3. As OFTA has noted in its Quality of Service Discussion Paper, the nature of telecommunications services is such that when consumers are making their purchasing decisions, price is the main, if not the only information they have before them. The quality of the service is something that only becomes apparent after the transaction has been completed and may be too late, as the consumers would have been bound by the service contracts already.  Complaints received by the Consumer Council reveal that price information is not that reliable either, consumers have sometimes discovered that they had to pay much more than what they were led to believe in the first instance. 

Council complaints received

4. The Council received a substantial number of complaints regarding telecommunications services throughout the year. For example, in year 2000 there were 3112, in 2001 there were 4684, in 2002 there were 5800, and in the first half of 2003 there have been 4224. 

5. Telecommunications complaints top all complaints received by the Council and represent an average percentage of the total complaints per year of 25%. 

6. The Council further categorises the telecommunications complaints, into three broad categories: trade/sales practices, price/charges disputes, and quality of service, and others. 

Nature of Complaints on Telecommunications Services

Let me quote some examples:

Trade/sales practices:

7. The recent public censure of a number of companies by OFTA well illustrates consumer detriment from trade malpractices of these companies. One of the most common and unacceptable practices is for companies to try and avoid liability by putting the blame on frontline sales force, be they directly or indirectly employed. However, these sales force personnel are agents of the companies and hence, the companies should be responsible for their misconduct and misrepresentations. 

8. Lack of transparency and clarity in the services offered and in billing is of particular concern and is the root of many complaints. For example: 

• Calls on mobile phones that are promoted as being cheaper but subject to conditions of inter and intra net charges, but details of the charges are not clearly explained to consumers.
• Some companies only providing e-bills causing great inconvenience to those who do not have an Internet service.
• Companies refusing to provide details of incoming calls, as a result consumers did not have access to information whenever there was a billing dispute.
• An internet service provider promoting its services via the telephone and refusing to provide information in writing.

9. The above examples make one wonder whether the lack of transparency and clarity regarding service information and bills is deliberate. If this is the case, it is unacceptable, in any case it adds to the asymmetry of information between the operator and the consumers, which works to the disadvantage of the consumer.

10. Other problems made know to the Council have included:

• Automatic renewal of contract for Internet services but at a higher price. This is unfair as consumers should be informed of any change in service conditions and their consent sought before the change becomes effective.
• Operators frequently introducing its service over the phone, through cold calling. These calls not only cause interruption to whatever consumers are doing, what is most annoying is that consumers have to foot the bill at long distance rates for such unwanted promotional calls. Cold calls should not be allowed, the companies can always promote services through short messages.

Quality of service

11. Quality of service complaints as a percentage of telecommunications complaints for each reporting period were 22%, 30%, 32% and 26% respectively: an average of 27%. 

12. The complaints on quality of services included such failures as slow network speed, insufficient bandwidth for high quality data communication services, frequent line drop out, unstable connection, and noisy telephone connections.

13. The complaints noted above are reactions by consumers to the failure by some market participants to satisfy quality of service standards. What the Council and OFTA actually record in their complaints data bases are not only an indication of market failure and consumer dissatisfaction, but a record of consumer detriment.

14. For each consumer complaint there is a cost. The cost is not only what is expended in resources to record the complaint and attempt a resolution by the relevant complaints handling agency, such as the Council or OFTA. There is also a cost to the economy as well as the company, through the loss of goodwill.

15. Quality of service complaints are an indication that at least one of the fundamental aspects of economic efficiency is not reaching optimal levels. That aspect of efficiency is dynamic efficiency, for example, that there is a constant drive for innovation and improvement in the product.

16. OFTA's initiative in addressing performance standards, by proposing a means to improve information on performance levels, is therefore to be welcomed as a means of 
assisting the market in achieving optimal levels of efficiency.

II.  SETTING AN INDUSTRY BENCHMARK

OFTA's General Principles

17. OFTA has noted in its Discussion Paper that the market should be the main determinant of quality of service. The Council agrees with this approach. 

18. In fact, the making of pledges by service providers as to their quality of service standards; and the monitoring of standards which OFTA proposes in its Discussion Paper to be mandatory, is essentially what should be happening if the market is properly functioning.

19. The question before us is therefore, how can the consuming public be adequately informed as to telecommunications operators' service attributes and qualities and how can these be actually delivered.

20. While it is important that a benchmark on quality of service is established for the industry, it is even more important that the benchmark should not become the lowest common denominator, and that service providers constantly aim to improve their standards and pledges to the public.

21. I note that OFTA has indicated that the amount of resources devoted to the task of reporting statistics should not be too onerous. While the Council can accept that costs of operation should be kept low, the benefits that can be attributed to having a high level of performance, in terms of capturing more market share, means that the amount of resources devoted to the task is not necessarily a cost that does not contribute to the bottom line.

22. Operators may also see an advantage in publicizing their pledges on performance levels and other information through its marketing and advertising campaign.

23. Once more attention is given to performance standards, service providers will see the this area of work as just as important to the success of their company, as the ability to provide consumers with low prices.

24. Of course, the Council is willing to participate in any working groups that might be created, in order to examine the performance indicators and methodology of measurements relevant to individual sectors.

III.  CONSUMER SATISFACTION SURVEY & TECHNICAL PERFORMANCE INDICATORS

25. The Council supports OFTA'S suggestions for customer satisfaction surveys to be conducted. The Council has substantial experience in conducting consumer surveys, and would be willing to offer it services in this regard.

Service performance and technical performance indicators

26. OFTA has also suggested that service performance and technical indicators should be discussed as separate issues in working groups. I think this is helpful, given that consumers' ability to comprehend the indicators differs according to each category.   For example, while performance indicators such as service provisioning time and complaint handling time will be easy to understand by consumers, the technical indicators will be less so.

27. For example, some consumers might not immediately understand whether a particular stated ratio of local bandwidth to number of users is good or bad, or even suitable for their purposes.

28. The determination of technical indicators will therefore not only need to consider the technical aspects but also the means by which the data is produced and explained so that it is readily comprehended by consumers.

29. Moreover, it should be noted that the performance pledge covers targets that are largely technical issues such as those listed above, but the problems with trade practices, as highlighted from the complaints noted earlier, can only be addressed through codes of practice and remain to be addressed by the trade.

30. In addition, while apparently OFTA will require operators to publish their performance pledges and level of accomplishment, a question that ensues is whether such accomplishment reports have been independently verified by a third party through 'mystery shopping' and other means, rather than accepted as claimed by the operators.

31. Of course, an important issue is what sort of discipline is imposed on service 
providers to ensure that their pledges are actually observed and are truthful. In this regard, the Telecommunications Ordinance has rules governing misleading and deceptive conduct in telecommunications markets. The rules should be vigorously applied in assessing whether service providers are meeting their obligations towards making the market better informed.

IV.  ENHANCING QUALITY OF SERVICE

Proposed scope of monitoring

32. OFTA has proposed that four services, fixed line service, mobile service, broadband Internet service and external call service should be included within the scope of monitoring. It is also proposed that not all broadband service providers and ETS providers should be included within the monitoring scheme.

Which services should be covered?

33. As regards the identification of the four services to be monitored, the Council considers it is important that some degree of prioritising should be applied to the monitoring. For example, taking the Council's complaints statistics into account, it can be seen that broadband attracts the highest number of complaints on performance standards, and that there are key areas within performance concerns that should be addressed as a matter of priority.

34. Likewise, while fixed telephony is important, the extent to which there are concerns on line quality is limited when considered against mobile. Mobile subscriptions have now surpassed fixed in terms of the number of subscribers, and

• given the degree of substitutability as far as providing a basic voice telephony service is concerned; and 
• that there are potentially more concerns over performance of mobile services, given the inherent technical circumstances, mobile performance standards would be of more interest to consumers when making decisions as to which service provider should be chosen for a basic telephone service.

Non inclusion of service providers

35. The suggestion that some service providers should not be included within the scheme of monitoring can be viewed in two ways. On the one hand, those service providers not included will not face the costs of becoming involved in the scheme. 

36. While this might be seen as an unfair advantage for this group, the real costs of non participation could be in the loss of customer that might otherwise be attracted to a service provider under the scheme. Surely consumers can have a higher degree of confidence in dealing with a service provider whose performance standards are known.

37. As such, the separation of service providers into non participating and participating categories based on market shares, could perpetuate the status quo.

38. The Council considers that as a basic principle, the option should be open for any service provider to participate in the scheme, regardless of market share.

V.  CUSTOMER SERVICE - ANOTHER QUALITY OF SERVICE ISSUE

39. Quality of service outcomes should not only address the actual products marketed by service providers. The Council's data base of complaints also includes dissatisfaction with the manner in which service providers treat their customers. In this regard, another important measure of testing quality of service is to examine the following two aspects of a service provider's business.

a. The extent to which a service provider respects the privacy of its customers. For example, whether it:

• has appropriate mechanisms in place to ensure the security of consumer transactions and privacy of consumer information; 
• makes the mechanisms clearly known to customers; and 
• whether it is overly aggressive in marketing its products to the extent that it invades consumer privacy through using consumer data to facilitate cold calling.

b. The ease with which customers can inquire about problems they have encountered and obtain a satisfactory response. For example, does the service provider:

• provide easy access to information on how to contact the management of the business, and procedures on how to lodge complaints;
• provide handy locations for hearing complaints, reasonable operating hours and low waiting/queuing time;
• ensure that complaints are dealt with in a fair manner, quickly and effectively and that staff that handle complaints are informed on the products and are consistently courteous;
• monitor the service provided by complaints staff to ensure it is operating smoothly, and in order to predict future problems so as to prevent them from arising;
• establish an open dialogue with user/consumer/community groups for practical guidance on what customers expect from the business and how best to serve them; and
• ​have a performance pledge that lists in detail how it will handle customer complaints.

VI.  ENSURING OUTCOMES

40. But most important of all, operators should devote sufficient resources into customer service. From complaints received by the Council, it is obvious that some operators have devoted substantial resources into marketing and there is no proportionate increase in customer service staff. This is not acceptable. Ensuring service quality through making and accomplishing of service pledge enhances consumer confidence on the operator and in turn bring financial gains and this is a positive incentive for the operators.

41. With escalating complaints being lodged with OFTA and the Consumer Council, the question arises as to whether there is an effective mechanism to prevent complaints in the first place and encourage efficient handling and early resolution of such complaints. We may need to look at this incentives as well . In Australia (as in some other countries)consumer complaints against a service provider that are accepted by an Ombudsman for an investigation and found to be valid, will result in a penalty payment from the service provider to the Ombudsman to foot the bill for handling the complaint. In some cases, the longer it takes to resolve the complaint, the higher the charge. Perhaps Hong Kong should consider introducing such a system one day.

VII.  CONCLUSION

42. In conclusion, the Council welcomes the initiative of OFTA in proactively addressing the issue of quality of service and putting forward proposals to implement a formal scheme for monitoring and reporting the quality of service of public telecommunications services so that consumers can make better informed choices in the market.

43. The Council looks forward to cooperating with both industry and OFTA to ensure the scheme achieves this worthwhile objective, and doing its best to maintain the momentum in delivering positive outcomes for consumers.

44. Thank you.