What we can learn from Vodafone’s £4.6m Ofcom run-in

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Last week, Ofcom dished out the largest ever fine to a telecoms operator in the United Kingdom: a gargantuan £4.6m, dwarfing the £1.4m total they served-up in fines in 2015-16.

With associated damages, Vodafone’s total costs would have easily surpassed the £5m mark; a figure only surpassed by ITV’s infamous premium rate phone scandal in 2008. Ofcom rarely flexes their muscles when it comes to issuing fines, but when it comes to “serious” consumer regulation breaches, it’s a totally different story.

The telecoms watchdog was called in to investigate Vodafone in April 2015. The 18-month long investigation revealed that over 10,000 customers that had topped up their PAYG phones had not received the credit they had paid for.

Ofcom issued a record fine for “serious and sustained breaches of consumer protection regulations”. But how does one of the biggest companies in UK telecoms fall foul of these Ofcom regulations?

What happened?

In 2013, Vodafone began implementing a billing system overhaul that had been 3 years in the making; involving the migration of a mere 28.5 million customer records stored across 3 billing systems, into one single platform.

During migration, a bug emerged where “dormant” phone numbers - ones Vodafone had disconnected for over 9 months of inactivity - could not be topped up, despite the funds being debited from the customer’s account and a confirmatory text message being sent to confirm the balance had been added.

Unsurprisingly, this led to a spike in customer complaints. Vodafone’s next failing was their customer complaint procedure, a second Ofcom investigation found that complaints were failing to be escalated, and the consumer’s right to take their unsolved complaint to a third-party was not being communicated.

Vodafone’s senior managers cleared their hands of any responsibility fairly early into their press release, following the official Ofcom announcement, insinuating the root causes of the issue were ineffective communication within customer service, and poor project management surrounding the new system migration.

What can we learn from this?

It’s not often that Ofcom issues fines of this nature, but when consumer protection is “seriously” breached, history shows that they tend to find hard. Legally, Ofcom can issues fines of up to 10% of a company’s annual turnover - enough to send a shiver down any manager’s spine.

This breach was blamed on ineffective communication, poor customer service agent procedure for escalating technical issues, and oversights made in their migration project. It highlights the need for care in any customer system.

Migraines and migrations can seem much the same - even with common telecoms system upgrades. When the FCA and Ofcom are breathing down the neck of companies, you really need to pay close attention to customer records and data protection. For more information about staying compliant, download our quick guide here.

Could your business get fined?

Ofcom issue these heavy fines as a statement to firms like yours just as much as they do it to punish offenders. We haven’t ever seen Ofcom use their full power to issue fines on the higher end of their legal limits, but the fines they have issued have been costly enough to wreak havoc in businesses of all sizes.

Failure to comply with any of Ofcom’s wide-ranging legislation - that’s anything from the Communications Act (2003) to the Consumer Contract Regulations (2013) - could land yourself in a world of trouble when Ofcom knock on your door and start investigating. This covers everything from protecting your customer’s data to the charges you place on your inbound phone system.

Managing any kind of system migration can be difficult without the right planning and management methodologies. The Immervox methodology is clear: listen, consult, advise, deliver. Listening to Ofcom, FCA and other regulators could save you from the sledgehammer of the FCA and Ofcom.

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