Cracking the Code: Ongoing Obligations

Topic #3: Ongoing Obligations: Contract Duration and Termination, Contract Change and Right of Exit, Prolongation Rules and Best Tariff Advice / Information

This third instalment of our ‘Cracking the Code’ series on the European Electronic Communications Code (the “EECC”) outlines the key ongoing contractual obligations of electronic communication services (“ECS”) providers under the EECC.

This Insight focuses on Articles 105 of the EECC and the post-contractual obligations of ECS providers.

Who is Covered by Article 105 of the EECC?

• The contract termination and duration rights in Article 105(1) of the EECC have been extended to consumers and to end-users that are microenterprises, SMEs and not-for-profit organisations (ie, excludes business customers) unless they have explicitly agreed to waive those rights;
• The right to terminate a contract for performance related issues in Article 105(5) of the EECC will only apply to consumer contracts;
• The contract change and right of exit rights in Article 105(4) and compensation rights in Article 105(6) of the EECC apply to all-end users, unless the ECS in question is for M2M services (as defined below); and
• The contract prolongation and BTA / BTI (as defined below) rules in Article 105(3) of the EECC apply to all end-users (ie, consumers, microenterprises, SMEs, not-for-profit organisations and business customers).

1. Contract Duration and Termination – Article 105(1), (2), (5) and (6) of the EECC

Information requirements

As outlined in our previous Insight on Cracking the Code: New Customer Contract Obligations, information on duration, renewal and termination must be included in the contract summary information (the “Contract Summary”) and in the contract.

Maximum duration – Article 105(1) of the EECC

The maximum contract duration between a consumer and an ECS provider (other than number-independent interpersonal communication services (“NI-ICS”) providers and transmission services providers for M2M services (“M2M”)) should be no more than 24 months, which is the current position also. 

Most importantly, the conditions and procedures for contract termination must not act as a disincentive to change service providers.  ComReg has taken previous enforcement actions in respect of disincentives to switching[1].  For instance, with reference to notice periods, providers are advised against giving the impression that it is not possible for the switching and cancellation process to be entirely gaining-provider-led.  ComReg has also noted the current delays in providers complying with requests to unlock handsets when consumers wish to switch.  In that regard, providers should also note the contents of Article 105(6) of the EECC, which require providers to lift any condition on the use of terminal equipment on other networks, free of charge, upon payment of compensation due, so that subscribers are not disincentivised from switching.

New performance basis for termination – Article 105(5) of the EECC

The EECC provides for a right to terminate a contract where there is significant continued or frequently recurring discrepancy between the actual performance of the ECS (other than an internet access service (“IAS”) or a NI-ICS) and the performance indicated in the contract.  This will be considered to be a basis for triggering the remedies available to the consumer, including the right to terminate the contract free of cost.

No compensation payable – Article 105(6) of the EECC

Where an end-user has the right to terminate a contract with an ECS provider (other than a NI-ICS) before the end of the agreed period pursuant to the EECC, or other Union or national law, no compensation will be due by the end-user other than for retained subsidised termination equipment (pro-rated value / remaining part of service fee due if end-user wishes to keep same).

2. Contract Change and Right of Exit – Article 105(4) of the EECC

ECS providers (other than NI-ICS) must notify its customers of changes to contractual conditions at least one month in advance of any change in the contractual conditions and, where the changes are not to the benefit of the end-user, provide the ‘right of exit’ should they not accept such changes (the “Contract Change Notification”).  The Contract Change Notification must be on a durable medium and provided in a clear and comprehensive manner.  End-users will have the right to terminate their contract within one month after receiving the Contract Change Notification without incurring further costs. 

The EECC introduced exceptions to the end-users right to terminate the contract upon receiving the Contract Change Notification.  The right of termination will not apply where all proposed contract changes are:

1. Exclusively to the benefit of the end-user;
2. Purely administrative in nature and have no negative effect on the end-user (such as the provider’s address); or
3. Directly imposed by EU or national law (such as new contract information requirements imposed by Union or national law).

Where a contract change falls within one of the above listed exceptions, ECS providers must still issue a Contract Change Notification to affected end-users, however they will not be required to give the end-users a right of exit.  This ensures the end-user is informed and is able to record the sequence of changes to their contract, and thereby to know the full extent of contractual terms and conditions governing their contract.

This represents a change to the existing legal position in relation to contract changes, as the current regime provides no exceptions such as those outlined in the EECC.  Currently, providers must notify customers at least one month in advance of any proposed contract change and provide a right to exit the contract, without penalty, where the customer is not happy to accept the proposed changes.

3. Prolongation Rules, Best Tariff Advice and Best Tariff Information – Article 105(3) of the EECC

ECS providers may implement automatic prolongation of a fixed-term contract for ECS (other than NI-ICS and M2M) as long as they notify end-users “in a prominent and timely manner” and on a durable medium of their right to exit such contracts, with a maximum one month’s notice without incurring any costs except the costs of receiving the service during the notice period.  For bundle contracts, the rules will apply to all elements of a bundle, so long as the bundle includes one service that is an IAS or a number-based ICS (“NB-ICS”).

According to ComReg [2], Article 105 (3) of the EECC applies to a contract with a fixed duration, irrespective of the length of the initial fixed-term, where at the expiry of the fixed-term the contract does not terminate but is instead “automatically” prolonged / continued.  Of particular note is European Commission’s view that a contract could be considered to be “prolonged”, irrespective of the length of the prolongation (ie, it could be rolled-over for another fixed-term or an unspecified period) [3].  Therefore, all such contracts are subject to the notification requirements outlined below and, may be terminated by the end-user with a maximum of one month’s notice after the automatic prolongation.

Notification requirements

Before the contract is automatically prolonged, ECS providers are required to inform an end-user of the following: (i) end date of the fixed-term contract and the means by which to terminate the contract (the “End of Contract Notice”); and (ii) best tariff advice (“BTA”) relating to their services.  Additionally, after the contract has been prolonged and during the prolonged period of the contract, ECS providers are required to provide end-users with best tariff information (“BTI”) at least annually.  ComReg considers that the same type of information should be provided in each case.  The difference between BTA and BTI relates to the timing of when the information is given to end-users (ie. pre-expiry of the fixed-term / annually thereafter).

To summarise, where a fixed-term contract has been prolonged, ECS providers must send end-users the following:

1. End of Contract Notice and Best Tariff Advice before the end of the fixed-term; and
2. Best Tariff Information at least annually after the fixed-term contract has been automatically prolonged.

This also appears to be the approach Ofcom, UK’s regulator for the communications services, has taken in its interpretation of Article 105(3) of the EECC.  However, a key difference is that these rules do not apply to business customers in the UK.  You can read more on UK’s Ofcom Fairness for Consumers programme in our Insight on the New UK Regime for Telecoms Contract Changes and What To Expect in Ireland. 

Best Tariff Advice / Best Tariff Information

The scope of BTA and BTI is not defined in the EECC.  In ComReg’s view, it would not be sufficient to prompt end-users to contact their ECS provider for relevant information prior to prolongation of their fixed-term contract.  ComReg recommends providing information that is tailored to the end-users needs and typical usage pattern.  In practice, it is difficult to estimate how frequently an end-user’s needs would change and how frequent the review of their services should be.  An individual review may also be costly and time consuming, particularly for bundle contracts.  In our view, the ‘usage’ based approach may be more suitable for mobile type operators, however it would not seem appropriate for fixed operators (or those who do not bill on a usage type basis).  Lastly, while ComReg has engaged with the Data Protection Commission to allay industry concerns regarding potential GDPR issues relating to End of Contract Notices, BTA and BTI notices, ECS providers should refrain from using their notices as marketing messages to ensure that their communications do not give rise to direct marketing activity. 

The ongoing contract obligations provided in Article 105 of the EECC do not present a substantial change in the current regime for ECS providers in Ireland.  In particular, NI-ICS may be relieved to be excluded from these obligations, as they adapt to the new reporting and pre-contractual information requirements that will apply to consumers as well as microenterprises, SMEs and not-for-profit organisations (unless the latter three explicitly agree to waive their rights).