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Banned Anti-competitive Win-back Strategies Still Commonplace In The Broadband Industry

Independent electricity and broadband provider, Electric Kiwi has laid a complaint with the Commerce Commission regarding the “sneaky notice periods” that are being used by some of the country's largest broadband retailers.

The complaint outlines Electric Kiwi’s significant concerns about the practice of 30-day notice periods for customers, saying that they act in the detriment of customers, and make it harder for those looking to switch providers.

“These notice periods are a dirty tactic to lower competition,” says Electric Kiwi Chief Executive, Luke Blincoe. “When customers know they exist it acts as a prompt for customers to call their existing retailer, giving the losing retailer an opportunity to dissuade the switch by creating anxiety and doubt or by discussing special offers. If the customer does not know they have a notice period then they can end up paying what amounts to a termination fee for a service that is out of contract. That's a scam in my view”.

Electric Kiwi’s survey, in August 2022, of more than 1,500 New Zealand consumers who had switched fibre broadband providers in the last three years, revealed that one in four respondents (25%) said their incumbent provider made an offer for them to stay, including reduced pricing.

For one retailer this number was as high as 45%.

“These are concerning findings in an industry that has supposedly banned win-back offers. If these big guys want to keep their customers, we would suggest that they look after them all the time rather than just when they want to leave,” continues Blincoe.

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Electric Kiwi believes the number of cancelled transfer requests in broadband suggests the process does not favour Kiwi consumers who show an interest in switching to cheaper deals and/or better service.

“What we’re seeing from these win-back tactics is an industry acting in service of the large retailers, and not the everyday consumer who is already grappling with the cost of living. We believe that this tactic is also in place to stop people considering a new provider when they move house. Who thinks of their new broadband service 30 days before they move?” says Blincoe.

In many cases notice periods can leave customers paying twice for the same service. Electric Kiwi’s survey indicates that 25% of customers were charged more than they expected when they switched.

“To avoid our customers having this poor experience, Electric Kiwi set up a default 30-day switch period and we include advice on notice periods during our join process, to prevent customers being charged twice,” says Blincoe.

“This is at a disadvantage to us, and an advantage to the losing retailer, who then has a 30-day window of opportunity to be in direct contact with the customer who wishes to transfer away.”

“We do this to remove crappy experiences for our customers.”

The electricity market sets a precedent for a fairer transition from one provider to another, where switches are completed within seven days and there is no worry about disruption of supply.

The new (gaining) retailer sends a Notification of Transfer to the current (losing) retailer to arrange the switch, so there is no need for the customer to be in further contact with their old retailer and only one electricity provider is ever charging for a single property at a time.

“The truth is, it doesn’t take 30 days for service providers to process transfer requests, and there is no genuine cost to be recovered in most instances,” continues Blincoe.

What is the switching process really like for consumers?

  • 50% had to provide a notice period of 30 days or longer to their old provider when they wanted to switch.
  • 20% had to pay exit fees/contract termination fees to their old provider when they switched.
  • 47% had been putting off switching for some time because the process and/or notice periods make the process seem too daunting.
  • 66% had to contact their old provider to notify them about their intention to switch, or to help progress the transfer to another provider. This figure was as high as 75% for one provider.
  • 25% had to contact their old provider more than once after the transfer had stalled. This percentage jumped to 40% in the case of one provider.
  • Despite everything, 90% of respondents said they are pleased they went ahead with switching.
  • Of almost 1,000 respondents who hadn’t switched fibre broadband providers in the last 3 years, 21% said it’s because the process and/or notice periods make switching seem daunting.

This research was commissioned by Electric Kiwi and run by PureProfile in August 2022.

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