British telecom firms, frequently criticised for subpar customer service and complex operations, are preparing for the launch of the ‘One Touch Switch’ (OTS) regulation this Thursday, following several delays. Ofcom has introduced OTS to simplify the convoluted task of switching broadband and home phone providers. With the new system, customers will only need to contact their prospective provider, who will then coordinate the switch, eliminating the need for customers to manage communications with both their old and new suppliers.
However, concerns about the industry’s readiness are surfacing. Last week, the watchdog acknowledged its lack of ‘sufficient confidence that all customer switches will be able to follow the OTS process’ before the 12 September 2024 cut-off. Sky Broadband and Mobile’s Managing Director Amber Pine disclosed that at the tail end of testing, Sky’s transitions through the new OTS mechanism stood at approximately 60 per cent, with ambitions to increase this figure in time for the full-scale implementation.
‘We see about a million customers a quarter switch across different internet providers,’ reported Pine, emphasising that a more telling figure is the two-thirds of patrons who choose not to switch providers. ‘So we really want a one-touch switch to help us get those customers to switch,’ she articulated. The ‘big four’ broadband providers, BT Group, Sky, Virgin Media, and Talktalk, serve over 85 per cent of UK customers. Sky, with its 6.7m customers, is the second-largest provider, following BT’s lead of 9.3m. Virgin Media comes next, serving approximately 5.7m customers, as per Uswitch data.
Pine believes that making the process simpler will combat the ‘apathy’ many customers feel towards changing providers. However, Deloitte research indicates that 42 per cent of households are unaware of their broadband speed, suggesting that many consumers are satisfied with their current service. Paul Lee, global head of TMT research at Deloitte, suggested that the telecoms industry might be reaching a critical juncture. ‘After decades of supply (as measured by speed) struggling to keep up with demand, the industry is now facing the converse, with speeds, for both fixed and mobile, overshooting demand,’ he stated. The study highlighted that faster speeds may no longer be necessary, as household sizes across the UK are decreasing, leading to more single and dual-occupancy homes. ‘Consumers now have the bandwidth they need, and speed is no longer a differentiator,’ Lee clarified.
There may be little promise that the OTS process will generate a significant increase in consumer switching rates, even with assurances of a quick and hassle-free transition. Stagnation in broadband provider switching has been evident since 2020, as only about 10 percent of customers change their providers each year.
In related developments, Sky is poised to migrate approximately 80 per cent of its clientele to full-fibre by 2028 through a partnership with Cityfibre, a competitor to BT’s Openreach. Speaking about the motivation for the alliance, Pine highlighted Sky’s strategic lean towards intellectual property via its offerings such as new TVs and streaming services, stating: ‘Both those products rely on broadband,’ and adding that full fibre services would enhance these products. ‘So we wanted to get into more homes and the way to get into more homes is the biggest alternative network that there is out there, and that is, at the moment, Cityfibre.’ Cityfibre’s current coverage spans 3.8 million homes, but with an aim to extend this reach to eight million by 2025, this expansion could significantly bolster Sky’s own growth strategies. In explaining the synergy, Pine noted: ‘It acts as a real complement to the network we already have with Openreach and their full fibre network as well. So we see it as a community to get into more homes, more homes with full fibre as fast as possible.’
The introduction of the One Touch Switch regulation aims to streamline the process of changing broadband and home phone providers. However, there are concerns about the industry’s readiness and the potential impact on consumer switching rates. Despite these challenges, the move towards full-fibre partnerships reflects a strategic direction to enhance service offerings and improve customer satisfaction.