Consumer protection and the regulator

Rohan Samarajiva

11 April 2014

This work was carried out with the aid of a grant from the International Development Research Centre, Canada.

2

Professor Stephen Littlechild on consumer protection

• “Competition is indisputably the most effective - perhaps the only effective – means of protecting consumers against monopoly power. Regulation is essentially the means of preventing the worst excesses of monopoly; it is not a substitute for competition. It is a means of ‘holding the fort until competition comes.’”

1983 Report to UK Government, Para 4.11

3

Best economist not have received a Nobel: Albert Hirschman, 1915-2012

• Economics privileges exit; Politics voice– But increasingly cross-

overs occur• Very useful framework

for thinking about quality of service in telecom

Consumer protection under monopoly

• In a monopoly environment, government has major responsibilities for consumer protection

• When there are no exit options (alternative suppliers), voice is only option (other than doing without)– Voice can be direct: consumer speaks/complains to

supplier– Voice can be directed to 3rd party (consumer protection

agency/utility regulator) who has authority over supplier

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Consumer protection under competition

• Caveat emptor (Let the buyer beware) is the starting position– Assumes homogenous products and costless exit options– Assumes perfect knowledge of competing products

• Obviously unrealistic; For all markets, but especially for markets in infrastructure services

• Government actions in absence of assumptions– Reduce information asymmetries – Regulate suppliers proportionate to deviation from

competitive market (e.g., differential treatment of fixed v mobile telephony)

Purpose of LIRNEasia’s 2012-14 study

• Extraordinary increase of customers served by mobile operators after competition introduced in South Asia– Without commensurate increase in service personnel– Not too bad a perception of service quality

• Electricity services provided by monopoly suppliers, mostly government-owned

• Could we offer suggestions on how consumers in both sectors could be better served, with emphasis on using the potential of the mobile platforms?

• Could we catalyze the offering of services useful to the poor on mobile platforms, so that their development potential can be better realized?

Research methods

• First, from supplier perspective– How are customers served? How are the relationships

managed? – Interviews with service providers + desk research

• Then, from user perspective– What services used? Problems? Satisfaction levels? – Quantitative: Sample survey of 3,180 Micro Enterprises

(MEs) in strong and weak cities in each country– Qualitative: in-depth interviews of 76 participants and 12

ethnographies at sites of service provision

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Mobiles most used by MEs for business

Landline (includ-ing CDMA)

Mobile phone Computers/laptop

Internet via computer

Internet via mobile

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bangladeshi cities Indian cities Sri Lankan cities

Mobiles used for business: Coordination with customers, suppliers & employees

BangladeshI cities Indian cities Sri Lankan cities0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

To contact or coordinate with suppliers To contact or coordinate with customers

To contact or coordinate with with employees To access a wider set of people of relevance to my business

To act or contact others in an emergency To get information relevant to my business

No particular reason

Most mobile users experience network-related problems

Call drops

Coverag

e problem

s

Billing r

elated

Activa

tion of VAS s

ervice

with

out knowled

ge of c

ustomer

Unsubscr

ibing from so

me serv

ices

SIM not w

orking

Unable

to call o

ther netw

orks0%5%

10%15%20%25%30%35%40%45%50%

BangladeshI cities Indian cities Sri Lankan cities

Most MEs do not interact with telecom service provider

Bangladeshi cities Indian cities Sri Lankan cities0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

8%

30%

10%

65%38%

50%

9%17% 20%

Can't rememberNeverMore than a few months agoFew months ago0-4 weeks

Of those with mobile-service problems, most thought it was not worth complaining

Bangladesh India Sri Lanka0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

71%

49%

83%

27%

51%

15%

It's of no use/ did not think it was worth complainingI do not know how to contact themI am scared of themOthers

Much worse in electricity . . .

Why did you not complain to the service provider? (% low income MEs who use electricity for business)

Bangladeshi cities Indian cities Sri Lankan cities0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

79%64%

80%

9%

7%

4%6%

10%

7%

It's of no use/ not worth complainingI do not know how to contact themI do not know the process to complainI do not interact or pay to the service provider but interact or pay to my landlord/third partyI am scared to complainOthers

Did not complain about any problemComplained about any problem

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Satisfaction with mobile service-provider interaction

Experience with service provider – YES (% low income MEs who have interacted with service provider)

30%

70%

Have interacted with service provider

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bangladeshi cities Indian cities Sri Lankan cities

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Telecom: Most interactions with service providers through call centers

Bangladeshi cities Indian cities Sri Lankan cities0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

56%

92%

69%

38%

7%

28%

Through the call centerWalk-in to the authorized agent / operator's storesSMSOthers

How do you normally contact your telecom service provider? (% low income MEs who have interacted with service provider)

30%

70%

Have interacted with service provider

Have not interacted or can't remember

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EXAMPLES OF POSSIBLE SOLUTIONS IN TELECOM

Supply- and demand-side studies show some overlap in problem perception

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Unsubscribing from some services

Unintended VAS activation

Unable to call other networks

Billing related

SIM not working

Network coverage

Call drops

0% 5% 10% 15% 20% 25% 30%

In LK, network coverage related issues resulted in customers leaving for a competitor without complaining

What the service providers said What the customers said

Problem: Network Coverage / Frequent Call Drops

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“There are times when there is no network

coverage because of which I lose out on my business. I

wish there was a way to resolve this instantly.”

Name: Asif AliAge: 56 yearsEducation: Grade 9Occupation: Rental company dealing with furniture, cutlery, glasswareNumber of Employees: Four (Family members)

I have been running my business for the 15 years and I need good telecom service for my business. I need to be constant touch with my customers to follow up with them about their requirements and my payments.

70% in LK use mobiles for business purposes40% in LK say connectivity issues affects their livelihood

Solution: Crowd Sourced Map of Problem Areas

19Enable customers to log problems pertaining to coverage through USSD/ SMS. Operators can use this information to optimize the network and improve network connectivity.

USSD / SMS No Coverage

<AREA>

USSD / SMS Thank you for

your feedback.

Unintended VAS activation: One of the top reasons to call contact centre

Name: Supun FernandoAge: 38 yearsEducation: Grade 9Occupation: Shoe SellerNumber of Employees: Two

I have been running my business for the past seven years and I tend to get irritated with the messages I get from my telecom company.

“I am not educated, so it is difficult for me to understand the messages I

receive and the messages are not in Sinhala. I tend to press the wrong

button which activates the VAS without my knowledge. I realized this only

when my balance was cut”

In addition, MNOs send too many SMS; Most are ignored. In LK, SMS is not in local script; Cannot be understood.

Solution: Active reconfirmation

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Kindly press 8 if you wish to confirm activation of service, press 9 if you wish to deactivate the service.

8 9

Solution: On activation of VAS, the ME receives a confirmation (automated call or SMS) requesting them to confirm their activation. ORReconfirmation request sent through SMS or IVR about VAS activated on phone at a given frequency (every 3-4 months). If VAS is not confirmed, it will get automatically deactivated.

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More data and solutions at

• http://lirneasia.net/projects/2012-2014-research-program/improving-service-delivery-for-e-inclusion/

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Is this something worth doing in the Pacific?

• Given small populations, perhaps could be done for all consumers, not just urban, poor micro enterprises

• LIRNEasia will be happy to share questionnaires, protocols, etc.