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Ofcom looks into 'personalised pricing' in telecoms industry

by Mark Tyson on 7 August 2020, 14:21

Tags: Ofcom

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Ofcom has started to ponder over matters arising from the 'personalised pricing' of broadband ISP, phone, and mobile services in the UK. As the telecoms watchdog, Ofcom wants to make sure any introduction of automated personalised pricing, powered by AI/ML technology, will be fair and beneficial to customers.

Technological advances in the digital world mean that data about our behaviour, interests and preferences can be combined and analysed in more sophisticated ways, says Ofcom. "These developments could give communications providers the ability to set different prices for different customers, based on individual characteristics and a prediction of how much someone is prepared to pay," it postulates, in a recent discussion paper. Ofcom expects 'personalised pricing' to evolve in the comms industry and thus is looking into the possible benefits and pitfalls for consumers.

At the moment some degree of personalised pricing is quite commonplace in the UK. If you phone your provider at/towards the end of your mobile phone contract, for example, you will likely have indulged in some haggling about renewing or cancelling your contract. In the process the sales advisors might have passed you to the elusive retentions department who would pore over your usage and put various offers to you. The idea of 'personalised pricing' as sketched out by Ofcom is somewhat like that but AI-automated.

As you can see above, Ofcom has already put some thought into the pros and cons of personalised pricing algorithms. In talks with consumers it found that most people "felt personalised pricing was ‘unfair’, with a lack of transparency about how the price would be calculated and uncertainty about whether they had a good deal." Another issue with personalised pricing is that it could lead to trust issues with your service provider.

Click to zoom image

Obviously telecoms service providers would only be interested in making use of AI for personalised pricing if it puts more money in their coffers without providing any higher service level.

Source: Ofcom, via ISP Review.

Broadband customers to save millions following Ofcom review

In another recent piece of Ofcom news, the watchdog patted its own back for making service providers send out out-of-contract notifications to customers. It says that notification changes since its review could save out-of-contract customers over £270m per year.



HEXUS Forums :: 13 Comments

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I can't think of a single possible upside to the consumer here. Companies won't be putting money into developing this if they think it's going to lower average prices so it's an attempt to gouge IMO.
This will horrifically unbalance the accessibility of the internet, are ISPs really that strained that something like this needs to occur?
There's no reason they can't offer transparent products based on needs. Those who have very specific, high bandwidth needs are likely to be able to search for services suitable. Those with lower needs can look for services with bandwidth limits or data limits. Adding this kind of pricing means that a company surely has to analyse your use.

Also, I'm sorry but my financial or credit history make NO DIFFERENCE to the price of the service. Adding this in means that they could offer poor pricing to those with a poor credit history, knowing they're less likely to be financially adept.

Also, what happens if someone who isn't technologically adept gets this service, get offered a price and terms of use, and then get Netflix? Then, they get told their use has gone up and the price is doubling. They have no way of predicting this. My parents are not daft but they have no comprehension about how this stuff works. If you want to rewire and replumb a house, ask my Dad. If you want to know how some complex financial thing works, ask my Mum. As for tech, they got the cheapest internet connection they could, which makes sense for email, family history research, etc. They did not understand how this interacted with and would limit their new smart TV with streaming services. 4K telly which looks like a 1980s broadcast? Vey confused parents. This kind of problem would not necessarily be anticipated as the service would be provided and then the price adjusted accordingly.

You could argue this is similar to electricity or water use, but those are long established with few nuances and obvious use. You KNOW if you're spewing water all over the garden from an industrial sprinkler system. You KNOW if you're using the oven a lot and you can't miss a Tesla coil. You may have no understanding how your new TV gets its picture, or that Windows will happily use gigabytes of data in the background. WE know this. I don't think it's fair to expect non techy people to get how this all works.
My first gut reaction to this was - ~@#* that! I can only see one way that this could go, and it would certainly not favour the end user. How are you supposed to know if you're getting a good deal? The tech unsavvy would get, as philehidiot says, a right reaming, more so if their usage changed and suddenly their bill would skyrocket.
Yeah there doesn't seem to be a single upside to this for customers. There are far simpler and less sinister ways of supporting vulnerable customers or those on lower incomes e.g. help with switching, discounts or even vouchers.

However, unless I'm mistaken, this appears to be Ofcom preempting any such move by industry and seeing whether they may need to protect customers against it - that is their purpose at the end of the day, to represent the interests of citizens and consumers, not to help businesses to maximise profits as customers' expense.

philehidiot
You could argue this is similar to electricity or water use, but…
And there are a few more ‘buts’ on top of those you mentioned. To start with, metered use isn't really comparable for data given that's not what affects the wholesale pricing. It's more complicated than that, with wholesale tending to be sold by things like provisioned capacity or 95th percentile rate if on a shared medium. Neither of those really make any sense for consumer connections. Plus at least in this country, competition has thankfully kept ridiculous data caps at bay for the majority of fixed-line connections.

TBH I don't really see much of an incentive for companies in this country to try this anyway (again, uncapped data is pretty standard now) - there's already plenty of choice out there for packages, and often a fair bit of room for pricing flexibility if you haggle or use comparison sites.