Telstra to compensate FttN customers after 56 percent could not hit 100Mbps

According to the consumer watchdog, more than 40,000 of Telstra's FttN and FttB NBN customers were unable to attain the maximum speeds they signed up for, with the telco now offering compensation to those affected.
Written by Corinne Reichert, Contributor
(Image: ACCC)

The Australian Competition and Consumer Commission (ACCC) has announced that Telstra will be compensating around 42,000 National Broadband Network (NBN) customers for not providing them with the speeds advertised in their plans.

According to the ACCC, between September 2015 and November 2017, the telco had offered and promoted "Super Fast Speed Boost" plans across both its Telstra and Belong brands for speeds of 100/40Mbps; however, the ACCC said that limitations on some customers' fibre-to-the-node (FttN) and fibre-to-the-building (FttB) connections prevented them from being able to attain these speeds.

"Our investigation revealed many of Telstra's FttN and FttB customers could not receive the maximum speed of their plan. Even worse, many of these customers could not receive the maximum speed of a lower-speed plan," ACCC Chair Rod Sims said on Wednesday morning.

"People were paying more to get higher speeds that they just weren't able to get."

The ACCC's examination of the issue began when Telstra -- which last week announced that it would be introducing an unlimited NBN data plan over the next few weeks -- notified the consumer watchdog that around 9,000 of its 100/40Mbps and 50/20Mbps NBN customers were unable to receive those speeds or the speeds of the next lowest speed tier.

According to the ACCC's subsequent investigation, 26,497 customers, or around 56 percent of Telstra's FttN customers on the 100/40Mbps speed tier, could not receive those speeds, with 9,606 of these also not able to attain 50/20Mbps; 6,352 or 45 percent of its 50/20Mbps FttN customers could not receive those speeds; and 9,342 or 2 percent of its 25/5Mbps customers could not receive those speeds.

On its FttB plans, around 10 percent, or 375 customers, on its 100/40Mbps plan were unable to attain these speeds, with 44 of those customers also unable to reach 50/20Mbps; 1 percent, or six customers, on its 50/20Mbps plan were unable to attain these speeds, with three also not reaching 25/5Mbps; less than 1 percent, or 48 customers, on its 25/5Mbps plan were unable to reach these speeds, with 35 of these also not reaching 12/1Mbps; and 13 customers on its 12/1Mbps plans were unable to attain those speeds.

(Image: ACCC)

This amounted to misleading or deceptive conduct and making false or misleading representations, the ACCC said, with Telstra admitting to a likely contravention ofAustralian Consumer Law as a result.

"We are mindful this is not just a Telstra problem; it is an industry problem where consumers are often not getting the speeds they are paying for," Sims added.

"We will continue to investigate other retail service providers selling broadband plans over the NBN and take enforcement action where appropriate. As we've said previously, we expect RSPs to provide consumers with accurate information up front about the internet speeds they can expect to receive, and then deliver on those promises."

Telstra has set out the remedies it will offer to affected customers including refunds, change of plans, and fee-free contract exits in a court-enforceable undertaking provided to the ACCC.

Sims also took the opportunity to warn all NBN retail service providers (RSPs) to purchase enough connectivity virtual circuit (CVC) capacity in order to prevent congestion during peak periods.

"Telstra has undertaken that, where it advertises or otherwise represents to potential customers that they will receive a particular speed, it will, within four weeks of connecting a new service, check each customer's attainable speed. If it is below the advertised speed, Telstra will notify the customer and offer remedies," Sims said.

"To address this second problem of under-provisioning, the ACCC is urging all ISPs to advertise the typical speeds customers can expect in the busy evening period between 7:00pm and 11:00pm."

In a statement, Telstra -- which was also pinged by the ACCC last month for misleading advertising on its AFL Live Pass app -- responded by saying it has been using robotic testers in its network over the last 18 months to determine whether it is purchasing sufficient CVC.

"As it is not possible to accurately determine what speed the NBN can deliver to a customer prior to connection, we have been reviewing the speeds of customers who take up a speed boost on their FttN or FttB NBN services after connection," Telstra group executive for Consumer and Small Business Vicki Brady said.

"We have been undertaking this review since May 2017 and, where we identify they cannot attain the benefit of the speed boost, we have been contacting them to provide refunds. We also give these customers the option to move to a different speed tier, or to cancel their contract altogether."

Brady added that Telstra has already amended its advertising, marketing, and sales practices, and is now using the ACCC's NBN speed tier naming conventions set out in its recent guidance on how RSPs should advertise NBN speeds.

"The ACCC is conducting an industry-wide investigation, and we're pleased to be the first to reach a resolution with the ACCC," Brady added.

Shadow Minister for Communications Michelle Rowland said the actions of Telstra made a mockery of former Communications Minister cum Prime Minister Malcolm Turnbull's engineering and economic judgement.

"It's a tragedy that Turnbull is spending AU$50 billion on a second-rate NBN that cannot even deliver the speeds that consumers are willing to pay for," she said in a statement.

Citing concern over rising consumer complaints, the ACCC last week also announced that it will conduct a public inquiry into NBN's wholesale service standard levels to determine whether regulation, including resolutions for consumers when wholesale standards are not reached, is necessary in order to improve customer experience.

NBN's wholesale service standard levels are presently set out in its commercial agreements with RSPs, and include performance and operational objectives and targets for NBN's services; requirements for when service levels are not met; and the framework under which RSPs can claim rebates or compensation for their customers when NBN fails to meet its service levels.

Sims added that the ACCC is "concerned" that some of the retail-level service levels are unenforceable.

The announcement followed the ACCC publishing its Communications Sector Market Study: Draft report [PDF] last week, which said "immediate measures" are needed to address consumer complaints.

The commission's report had pointed to the Australian Communications and Media Authority (ACMA) research on NBN migration issues, and said it would be proposing to examine NBN's service standards, particularly in regards to "incentives in place along the supply chain".

Also needing investigation is the "allocation of responsibility" for faults between NBN and RSPs, the regulator said, along with whether there are incentives for repairing faults and compensation for consumers.

The ACCC said it supports recent amendments made to the Telecommunications Industry Ombudsman (TIO) terms of reference requiring NBN and RSPs to cooperate on resolving consumer complaints, and said the TIO should collate NBN complaint data according to technology type.

Migration and speed issues also "stem from failures in retail and wholesale markets that could largely be overcome through more accurate information, improved information flows, and better coordination", the ACCC said, adding that speed issues can be addressed by improved information from retailers such as abiding by its recently released speed guidance.

Speed advertising compliance should be enforced through Australian Consumer Law as of 2018, it added.

"There are a number of aspects to this issue, the most significant of which are the choice of speed tier made by a consumer when migrating to the NBN and the provisioning of CVC capacity by service providers to deliver the speed and user experience appropriate to that speed choice during the busy hours," the ACCC said in its draft report.

"A potentially significant factor contributing to these outcomes is that current average revenues per user for NBN services may not be sufficient to meet NBN Co's long-term cost-recovery requirements."

NBN is currently dealing with the wholesale pricing model through consultation with retailers on CVC, which the ACCC declined to step into, saying an industry-led decision would be preferable.

However, its draft report said it would "consider exercising our regulatory powers where this would support these market outcomes being realised sooner".

In June, the ACCC also put out the call for voluntary participants in its NBN speed monitoring program, through which it will install hardware on home connections across 4,000 premises that are connected to fixed-line NBN services.

The program will enable the ACCC to determine which provider is responsible for any speed or congestion issues -- NBN's wholesale network or retailers that have not bought sufficient CVC -- with the devices to collect real-time data on speeds being experienced by users throughout the day.

The government had announced in April that it would be providing AU$7 million in funding over four years from July 1, 2017, to ensure that the ACCC is able to implement the NBN speed-monitoring program.

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