Summary of key points:
- Billmonitor met separately with the CMA and Ofcom following the publication of the Billmonitor Investigation Into The B2B Mobile Provider 'Wild West' (Nov 2018)
- The core matter discussed at both meetings was the significant cost differences between the ‘big three’ providers for the average SME customer
- The meeting on 21st January 2019 was welcomed by the CMA and while Billmonitor formally invited the CMA to launch an investigation into the B2B mobile market, the CMA said they would be unlikely to launch such an investigation as protocol dictates that the relevant market regulator needs to request the CMA to launch an investigation
- Billmonitor then met with Ofcom on 23rd January 2019, where their position was decidedly one of continued disagreements over the key issues, with Ofcom rejecting the idea of a CMA investigation
- Billmonitor’s research shows that the UK mobile phone market is fundamentally inefficient, a position that was echoed by Professor Tommaso Valletti, who stated:
“These findings, if verified by independent investigations, raise serious questions. Price differences of 15-20 per cent, not attributable to differential consumption patterns, indicate that a market is not close to being competitive”
Billmonitor strongly believes that a CMA investigation would significantly improve market fairness and accelerate the opening of the telecom market to more competition, similarly to what Ofgem has achieved in the utility space. It makes little sense that Ofcom is resisting following Ofgem’s lead, and we urge the regulator to reconsider.
Following the publication of the Billmonitor Investigation Into The B2B Mobile Provider 'Wild West' (Nov 2018), Billmonitor met with the Competition and Markets Authority (CMA) and Ofcom. The meetings were set up to brief key people about our findings and to invite them both to launch an investigation into the unfair and uncompetitive practises of Mobile Operators in the B2B mobile marketplace.
The core matter discussed was the significant cost differences between the ‘big three’ providers for the average SME customer, which was uncovered by the ‘Wild West’ investigation. The report built on research released in February 2018, which showed that nine out of ten UK SMEs significantly overspend on their mobile bills.
Billmonitor’s ‘Wild West’ data suggests a 16.3 percent cost difference between the big three providers for the average SME customer, with Ofcom’s own data originally confirming a "15 - 20 percent" cost difference (FOI request, February 2018). Such a significant cost difference is baffling, and demonstrates severe uncompetitiveness of the B2B mobile market.
The day before the report was officially launched, however, Ofcom retracted their figure, saying its own data "cannot now be considered reliable”. This raised further suspicions of the regulator not doing its job to protect businesses from the lack of market transparency by mobile providers.
Following is an overview of the meetings with both Ofcom and CMA:
CMA – ‘The investigation needs to be requested by Ofcom’
The meeting between Billmonitor and the CMA took place on 21st January, 2019. The time was used by Billmonitor to explain our research findings, detailing specifically the uncompetitiveness of the business mobile market, and why we believe it has happened.
Reasons discussed included lack of industry oversight and legislation combined with a lack of tariff transparency and an absence of popular B2B price comparison tools. This, we believe, has resulted in a ‘Wild West’ approach from mobile providers, in which a likely combination of opaque sales tactics and / or stealthy tariff options has left SMEs with no-one to turn to for support.
This briefing was welcomed by the CMA and many interesting questions were raised and discussed. Based on our research findings, as well as Ofcom's continued lethargy, we then formally invited the CMA to launch an investigation into the B2B mobile market.
Despite acknowledging the potential basis for an investigation, the CMA said they would be unlikely to launch such an investigation. This is because protocol dictates that the relevant market regulator needs to request the CMA to launch an investigation. That is what happened when Ofgem invited the CMA to pursue its investigation into the Energy market published in 2016, which resulted in a damning report and lead to much needed reform.
Without Ofcom's request, the CMA's discretionary ability to pursue investigations was very limited, and severely curtailed by a lack of funding.
This action from Ofcom did not appear likely. Indeed, following the publication of our report, when Ofcom was interviewed by City A.M. about our findings, the Ofcom spokesperson's response was that “The vast majority of smaller businesses are satisfied with the value they get from the mobile market"... Unfortunately, this disregarded the main finding of our report, namely that SMEs are unaware that they are overpaying to the tune of 49% on average.
Ofcom – Will you launch an investigation? ‘Absolutely not!’
On 23rd January, 2019,we met with Ofcom, where their position was decidedly one of continued disengagement with the key issues. When we asked Ofcom to invite the CMA to launch an investigation, the response was a resounding: “absolutely not”. When asked why, we were given wishy-washy (and, in our view, politically motivated) answers, including a repetition of the fact that most smaller businesses are satisfied with the value they get from the mobile market, as shown by Ofcom's own research. However, once again, this did not consider the main point of the report that SMEs are unaware that they are overpaying.
We explained that, based on our findings, it would be Ofcom's duty to investigate the market. However, the inexplicable position was maintained: there would be no investigation launched despite the key findings of our research, which should ring major alarm bells about the B2B market's uncompetitiveness.
Our position was echoed by Tommaso Valletti, Professor of Economics at Imperial College Business School and currently Chief Competition Economist of the European Commission in Brussels, when he stated:
“These findings, if verified by independent investigations, raise serious questions. Price differences of 15-20 per cent, not attributable to differential consumption patterns, indicate that a market is not close to being competitive.”
Ofcom ended the meeting by saying they would consider whether it was worth pursuing a campaign to help raise awareness among SMEs about the potential to save money on their bills.
Ofcom and Ofgem comparison
While Ofcom has initiated two major changes in recent years, we at Billmonitor are always baffled about the speed of action at Ofcom when compared to Ofgem, even in respect of these two changes:
- The requirement for users to call their existing provider to request a Porting Authorisation Code (PAC) will be replaced with an instant text message system in July 2019. In theory, this is good, but does feel like a halfway compromise with the networks. Ofgem, in contrast, adopted the agent-approach years ago, allowing the new provider to deal with the old one directly, negating the need for a user middle step.
- Ofcom recently announced that consumers that are out of contract will need to be informed about it, together with their renewal options. Again, this has been mandatory in the energy sector for years, but will only apply to mobile phone users from February 2020.
Ofgem has much more forcefully opened the energy market to new competition, using the tool of a CMA investigation to facilitate positive change… we are calling on Ofcom to do the same!