ComCom cuts through confusion in telecommunications pricing

Telecommunications Commissioner, Tristan Gilbertson, says it can be difficult for consumers to understand exactly what they'll be paying, given the complexity of offers in the market.  

“We’re cutting through the marketing confusion by helping consumers understand the true cost of different offers from telecommunications providers. We want Kiwis to be able to compare offers more easily and avoid any surprises,” Mr Gilbertson said.

The guidelines require providers to state a monthly average price when this is different from the advertised price, and make standardised offer summaries available, so that consumers can more easily compare different offers. 

“Consumers told us that understanding how much they'll end up paying each month, and having access to standardised offer summaries, would make it easier for them to find the best deal. Our guidelines give Kiwis what they need to compare offers on a like for like basis and make informed decisions,” Mr Gilbertson said.

The Commission is also tackling early termination fees by ensuring consumers know when they apply and how much it will cost them to exit a contract early.

"Early termination fees are a recurring pain point for consumers –  either because they didn't realise they signed-up to them or because it's not clear what the exit costs are when a better deal comes along," Mr Gilbertson said.

The guidelines require early termination fees to be prominently disclosed up-front to consumers and reduce over the period of the contract. Providers must also ensure their customers can easily find out how much is left to pay at any point in time. 

“With clear and consistent pricing and penalties information customers can make more informed choices and know what they’re signing up to – right from the start,” Mr Gilbertson said.

Background

The Telecommunications Act gives the Commerce Commission powers to improve retail service quality (RSQ) through monitoring and reporting. The Commission can also review industry RSQ codes, provide guidelines to the industry on RSQ matters, and create Commission RSQ codes.

The Product Disclosure – Price and Cost Guidelines were developed after extensive consumer engagement and consultation with industry.

Multiple rounds of consumer research and engagement showed that an average monthly reference price made it easier for consumers to compare offers with different billing periods or up-front discounts. For example, some consumers did not realise that 28-day mobile plans meant that they would be paying 13 times a year. Also, offers with initial discounts were tempting, but some consumers found they were paying more over 12 months than if they had chosen a plan with a flat monthly price.  

The new disclosure requirement only applies when the monthly average price for a service is different from the advertised price and allows providers to continue innovating on pricing or discount structures while making it easier for consumers to compare different offers. 

Several providers already produce standardised offers summaries for broadband services.  Consumer research and engagement shows that these are a useful comparison tool. Our guidelines introduce a requirement for all providers to produce these summaries for both broadband and mobile services. This will mean consumers can compare them side by side, making it easier to see what different plans offer.

The guidelines clarify to providers that Early Termination Fees should be based on the cost to the provider of early exit, that they should be prominently disclosed up-front prior to purchase and that consumers should have a means of easily finding out while they are in a contract how much time is left to run on a fixed-term contract and the early termination fee that applies if they terminated the contract at that point.