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Ofcom to let SMEs ditch broadband contracts due to slow speeds

Ofcom announces protections and rights for SMEs buying standard broadband products

Seven business internet service providers (ISPs) – BT Business, Daisy, KCOM, TalkTalk Business, Virgin Media, XLN and Zen – have signed up to an Ofcom code of practice designed to bring more clarity around broadband products to small and medium-sized enterprises (SMEs).

The latest measures will force ISPs to provide more accurate and reliable information on the broadband speeds that business customers should receive. The code will also give SMEs new rights to walk away from their broadband contracts without penalty should speeds fall below a minimum guaranteed level – similar to rights that already exist for consumers.

With much of Ofcom’s work centred on helping individual residential customers surmount the well-known hurdles to getting online, SMEs – which often buy broadly similar products to consumers and are regularly subject to poor connectivity, especially in rural areas – have been somewhat neglected until recently.

The seven ISPs signed up are thought to serve around two-thirds of UK SMEs with standard broadband contracts, meaning asymmetric digital subscriber lines (ADSL), fibre-to-the-cabinet or premises (FTTC and FTTP), cable, wireless and satellite.

However, SMEs with services where speeds are guaranteed or that have dedicated connections – such as Ethernet first mile, Ethernet over fibre-to-the-cabinet (EoFTTC) or leased lines – will not be able to cancel their contracts; nor will SMEs with FTTP or cable connections, due to the less variable nature of speeds on such services.

Speed gap

Ofcom said it was increasingly concerned about a speed gap among SMEs – referring to a mismatch between what customers think they are getting, and what they actually are getting. Many SME owners, it said, were confused about actual speeds versus headline speeds.

Although it did not name names, it accused some providers of failing to give personalised speed estimates to businesses during the sales process, in essence selling on the maximum possible speed rather than the likely speed.

Ofcom chief executive Sharon White said too many SMEs were buying unsuitable products, either due to their own confusion or due to to what amounted to mis-selling by ISPs.

“Where broadband companies fail to provide the speeds they promise, we’ve made it easier for businesses to walk away from their contracts without penalty. Providers have also agreed to give clear and reliable speeds information upfront so business customers can make more informed decisions,” said White.

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The regulator also warned ISPs that it would be going mystery shopping after the code comes into effect at the end of September 2016.

Mike Cherry, policy director for the Federation of Small Businesses, added: “A dependable broadband connection is essential for almost every aspect of modern business life. Everything from driving online sales, customer relations and accessing data held in the cloud relies on a stable broadband connection. Yet small business dissatisfaction with broadband providers appears to be widespread and deeply felt.

“To plan effectively, firms need accurate information on what speeds they can expect, and how much this will vary. Business owners should be able to easily compare suppliers and exit a contract early if their communications provider does not deliver the speeds promised.”

Businesses in the digital age

TalkTalk Business head of product Jon Nowell said he had no hesitation in signing up to the code of conduct.

“We are always working to make it easier and cheaper for businesses to make the most of our digital age, and this is just another sign of our commitment to making British businesses better off,” he said.

Peter Kelly, managing director of Virgin Media Business – which has just made a 300Mbps cable service available to businesses – also welcomed the code.

“We’re committed to helping SMEs achieve their full digital potential by offering the UK’s fastest widely available business broadband speeds,” he said.

Virgin recently conducted research, in conjunction with pollsters YouGov, that suggested slow internet was the biggest time waster at work for SMEs, with the average employee losing 15 minutes a day to slow broadband connections, and a good number complaining that this was affecting their personal lives.

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