National ISP iiNet has today announced the acquisition of competitor Internode in a $105 million deal.

The acquisition will see iiNet add a further 190,000 broadband DSL subscribers and 260,000 active services. Internode has forecast FY12 earnings of $180 million.

Internode founder and MD Simon Hackett will remain as part of the executive team at Internode.

The acquisition by iiNet will solidify its position as the second largest Australian ISP in the residential broadband DSL market.

The acquisition is due to be completed on 29 February 2012.

Yesterday saw the Prime Minister reshuffle her cabinet, but in amongst the reshuffle was a one line comment which carried great significance, that is, Cyber Security Policy is now the responsibility of the Prime Minister and no longer that of the Attorney General’s Department.

In her speech the Prime Minister said: ‘Responsibility for cyber security policy will move from the Attorney-General’s portfolio to my portfolio.‘.

This marks an escalation in the importance of cyber security, especially in light of the compromise of the parliamentary email system in March this year.

While responsibility for the area has moved, it is not clear what impact this will have on Cyber Security Policy and whether a shift in focus is planned.

The Telecommunications Industry Ombudsman today released its annual report, which highlighted a spike in the number of complaints received, with mobile phone services leading the rise in complaints.

Of particular note there was a 26 per cent increase in disputes about internet charges on a mobile service.

According to the Report:

The TIO received a record number of new complaints in 2010-11, 197,682 or a substantial 17.8 per cent increase compared to the previous year, reversing the 4.6 per cent decrease in new complaints we reported in 2009-10.

The issue with the largest increase in mobile phone complaints was faults, with 56,475 issues raised or a 180.7 per cent increase from the previous year. The two most common complaints in this area include poor coverage (28,634 issues or a 609.6 per cent increase) and dropouts
(6,941 issues or a 482.8 per cent increase).

The TIO figures have been controversial in the past, with critics claiming that the TIO double and triple counts complaints, which results in the high headline number of complaints.

The TIO data will not doubt be seized on my the ACMA, who is looking at reform of the Telco industry following the release of its Reconnecting the Customer report.

Retail internet and voice service providers are about to see the next wave of regulation from the Australian Government. This time, it is the Australian Communications and Media Authority (‘ACMA’) that is driving the changes.

ACMA is demanding a series of major changes to advertising and sales practices, as well as billing and complaint handling.

It is allowing the industry a short time to adopt the changes ‘voluntarily’ via an updated Telecommunications Consumer Protections Code.  If that does not happen, it will enforce its requirements using its own powers.

Quoting ACMA:

The ACMA is giving industry five months in which to develop a revised code dealing with the matters that it considers must be changed. If those changes cannot be made within that time, the ACMA will intervene directly to implement its proposals by way of a standard.

Unless the industry adopts the ‘proposals’ in its Telecommunications Consumer Protection Code (‘TCP Code’) , ACMA will mandate them.  Chris Chapman has now been reported as saying:

“The industry [is] ‘formally on notice’ to reflect the proposed changes in the new TCP code.  If the industry doesn’t develop a code that addresses ACMA’s concerns, the ACMA will mandate changes through direct regulation.”

ACMA’s new ‘proposed’ rules

1. Make telco advertising ‘clear, accurate and honest’
2. Ban certain ‘confusing’ terms, eg ‘cap’ (where it in fact means ‘minimum spend’)
3. Require that network coverage claims can be substantiated
4. Require that broadband speed claims can be substantiated
5. For post-paid plans with minimum monthly spend, all text-based advertising and bills to include ‘unit pricing’ (like supermarkets do)
6. Give prospects a standard form ‘critical information summary’
7. Require providers to report customer service performance using a new standard industry metric, for publication
8. Require providers to report complaint handling performance using a new standard industry metric, for publication
9. Optional:   Providers to adopt ‘Customer Service Charters’
10. Unless service hard-capped or shaped, notify customer at certain usage points
11. Until spend management tools in place, cap total cost at 150% of minimum spend
12. All bills to show service usage (eg as graph) broken into components
13. Providers to comply with AS ISO 10002-2006 re definition of ‘complaint’
14. Providers to comply with AS ISO 10002-2006 re complaint-handling visibility, accessibility, responsiveness, objectivity, charging, confidentiality, being customer-focused, accountability and continuous improvement
15. Providers to adopt benchmarks re timeliness in handling complaints; documenting procedures; and collecting, analysing and reporting complaints information

Comment

Initially, it will be up to the industry (through Communications Alliance) to redesign its TCP Code to satisfy ACMA.  If that fails, a mandatory new industry standard is inevitable.

What should service providers be doing now?

First, it is important to realise that the main points are all locked in – as far as ACMA is concerned.  Consultation on the changes is finished. There is room to refine the details, but the headline elements listed above are not negotiable for ACMA.

Second, you should consider whether you want to engage with Communications Alliance about any changes to the TCP Code.  These changes will affect you and your sales and delivery processes.  If you want to influence the TCP Code process, you’ll need to be prepared.  There are only five months left for Communications Alliance to produce a document that satisfies ACMA.

Third, you should start to think about how your business will comply with requirements along the lines of those outlined above.  What will your marketing / sales / delivery / complaints handling look like in 2012?  Will you be well positioned to prosper in the new environment?  How?

Optus has been hit with a $5.26m penalty in the Federal Court, for falsely advertising  broadband download quotas.  The decision heralds a new level of risk in communications advertising in Australia.

The clear rule is that high-powered headlines plus small print equals advertising danger.

This bulletin explains:

• what Optus advertised
• how the advertised plans really worked
• how Optus defended the plans
• why ACCC took action
• what the court said and did in 2010
• what the court did on 7 July 2011
• why a $5.26m penalty is now possible
• other provisions that can attract penalties.

What Optus advertised

(a)            In April 2010, Optus campaigned for a new range of ‘Think Bigger’ broadband plans.

(b)            Each plan included a large data allowance (120/150/170GB) divided into ‘peak’ and ‘off-peak’ entitlements eg the 120GB plan was advertised with 50GB peak usage and 70GB off-peak usage allowance.

(c)             The disclaimers stated:  ‘Speed limited once peak data exceeded’.

How the advertised plans really worked

(a)            When peak allowance was used, entire service was shaped to 64kbps for rest of month.

(b)            Shaping applied to remaining off-peak allowance as well.

(c)             So, for instance, if customer used whole 50GB peak allowance first, then entire 70GB off-peak allowance shaped to 64kbps.

(d)            But if off-peak was exhausted first, further off-peak MBs were deducted from peak allowance, and shaping applied when that was exhausted.

How Optus defended the plans

Optus said that ‘Speed limited once peak data exceeded’ was a sufficient explanation:  Once your peak allowance is reached, speed is limited.

Why ACCC took action

ACCC disagreed that the disclaimer was a clear and proper explanation.  It argued:

(a)            Public would assume that peak and off-peak entitlements were independent.

(b)            Public would not understand that exhausting peak use would result in off-peak speed shaping to non-broadband speed.

What the court said and did in 2010

(a)            The court agreed with ACCC.

(b)            Court said that ordinary people simply wouldn’t understand the full rules of the plans, based on the advertising.

(c)             Court particularly attacked ‘headline advertising’ where a powerful headline told one story and small print told a different story.

(d)            Said there was:

(i)              misleading and deceptive behaviour generally, and

(ii)            likely specific misleading about ‘the quantity of services’.

(e)            29 October 2010:  Court ruled that advertising was deceptive.

(f)              2 November 2010:  Court banned Optus from repeating that kind of advertising for 3 years[1].

(g)             19 November 2010:  Court ordered Optus to write to all affected customers offering remedies.

(h)            8 December 2010:  Court held a penalty hearing.

What the court did on 7 July 2011

Announcing the result of the penalty hearing, the court ruled that Optus must pay the Commonwealth a pecuniary penalty of $5.26m.

Why a $5.26m penalty is now possible

(a)            Before 2010, no financial penalty was possible under the law in a case like this.

(b)            In 2010, the Competition and Consumer Act[2] (‘CCA’) was amended to allow the court to impose penalties on a company of up to $1.1m per breach of certain sections of the CCA.  That includes breaches of the law against misleading about ‘the quantity of services’.

Other provisions that can attract penalties

The new penalties are available for a wide range of breaches that communications providers should keep in mind.  Here’s a non-exhaustive list:

(a)            misrepresentations that goods are of a particular standard, quality, value, grade, composition, style or model

(b)            misrepresentations that services are of a particular standard, quality, value or grade

(c)             misrepresentations that a particular person has agreed to acquire goods or services

(d)            misrepresentations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits

(e)            misrepresentation that the person making the representation has a sponsorship, approval or affiliation

(f)              misrepresentation with respect to the price of goods or services

(g)             misrepresentation concerning the availability of facilities for the repair of goods or of spare parts for goods

(h)            misrepresentation concerning the need for any goods or services.

Summary

Obviously, communications advertising has just become more challenging.  It’s a strong argument for having every advertisement checked by an expert in the area.

The Australian Communications and Media Authority foreshadows changes to telemarketing rules contained in the Telecommunications (Do Not Call Register) (Telemarketing and Research Calls) Industry Standard 2007.

Some of the proposed changes include:

1. Revising Saturday calling times;
2. Information provision;
3. Additional CLI Information;

For more detail on the proposed changes, you can download the Cooper Mills Bulletin here.

The Australian Communications and Media Authority today foreshadowed six telco / ISP action areas it intends to address. While the six areas are described as ‘proposals’, ACMA is making it very clear that they will become law.

ACMA Chairman Chris Chapman is reported in today’s Age Online as follows:
Telcos will be given time to implement ACMA’s recommendations in their own self-regulatory industry codes but if they do not do so in a satisfactory way ACMA said it would force them to do so with new regulations.
“The outcomes that we are seeking … are non-negotiable,” Mr Chapman said. There will be a six-week consultation period after which ACMA expects the industry to begin implementing its recommendations.
“The die is cast, we’ve put it all out there in the report, the ‘guidance’ has been provided … the clock is ticking,” he said.

You can read more about in the Cooper Mills Telecommunications Law Bulletin.

National Cyber Security Awareness Week starts today and runs to 3 June. It is an initiative of the Australian Government, with a number of government agencies and business becoming involved in partnership.

This year it has added significance with internet security breaches increasing, including high profile security breaches involving Sony and Vodafone customers.

The aim of  National Cyber Security Awareness Week is to protect online security and online privacy. The Office of the Australian Information Commissioner has published a summary of some simple things that everyone can do to improve online security:

• Install and renew your security software and set it to scan regularly .

• Turn on automatic updates on all your software, including your operating system and other applications.

• Think carefully before you click on links and attachments, particularly in emails and on social networking sites.

• Regularly adjust your privacy settings on social networking sites.

• Report or talk to someone about anything online that makes you uncomfortable or threatened – download the government’s Cybersafety Help Button.

• Stop and think before you post any photos or financial or personal information about yourself, your friends or family.

• Use strong passwords and change them at least twice a year.

• Talk within your family about good online safety.

The ACCC has fined Singtel Optus Pty Ltd $178,000 for misleading conduct arising out of its ‘Max Cap’ marketing campaign.

The ACCC’s view is that the Optus’ Max Cap advertisements:

“….gave the impression that a consumer could purchase these cap plans and expect to pay a maximum specified amount per month, when in fact the specified amount was the minimum the consumer would pay each month.“

The advertisements at issue contained the Max Cap $49, which wasn’t a cap, but rather the minimum a customer would need to spend.

In commenting on the conduct of concern to the ACCC, acting ACCC Chairman Mr Peter Kell said:

“If you advertise a service as a ‘$49 Max Cap’ when $49 is the minimum that consumers have to pay, then you risk breaching the law by misleading consumers about the cost of the service,” and “Claims that a service allows consumers to call ‘anyone’ are likely to be misleading if the reality is that some types of calls are excluded“.

All ISPs and Telcos should have a process in place to review advertisements, not only to ensure compliance with the Competition and Consumer Act 2010 but also the Telecommunications Consumer Protections Code.

In one of the largest acquisitions in recent history Microsoft is set to acquire Skype for $8.5 billion.

Microsoft hopes to use the acquisition to bolster its real time communications strategy to supplement Lync, Outlook, Messenger, Hotmail and Xbox LIVE

In 2010 Skype was reported to have ’170 million connected users and over 207 billion minutes of voice and video conversations’.

According to Microsoft, ‘Skype will support Microsoft devices like Xbox and Kinect, Windows Phone and a wide array of Windows devices, and Microsoft will connect Skype users with Lync, Outlook, Xbox Live and other communities. Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms‘.

While Microsoft has pledged to continue supporting non Microsoft platforms, critics have claimed that the acquisition could eventually lead to Skype only being supported on Microsoft platforms.