.

Investigation Report: Investigation into compliance with the Telecommunications Consumer Protections Code C628:2012

File No. / ACMA2015/332
Carriage Service Provider / Exceed Connect Pty Ltd
ACN / 603 565 386
Type of Service or Product / Fixed line and mobile telephone services
Scope / Telecommunications Consumer Protections Code C628:2012, specifically clauses 7.2 and 7.4

Findings

The Australian Communications and Media Authority (ACMA) has found that Exceed Connect Pty Ltd (ACN 603 565 386) (Exceed Connect) has contravened clauses 7.2and 7.4 of the Telecommunications Consumer Protections Code C628:2012. (TCP Code 2012). Specifically, Exceed Connect failed to ensure that nine Consumers:

  • had provided consent to a Transfer between March and May 2015, as required by clause 7.2of the TCP Code 2012; and
  • received the information specified by clause 7.4 of the TCP Code 2012at the time at which a Transfer was proposed between March and May 2015.

Additionally, Exceed Connect failed to ensure that three of the nine Consumers had provided consent to further Transfers between March and May 2015, as required by clause 7.2 of the TCP Code 2012, after unsuccessfully attempting to port their services away from Exceed Connect.

Background

  1. In early April 2015, the ACMA became aware that the Customer base of Exceed Telecom Pty Ltd (ACN 132 196 877)(Exceed Telecom) had been Transferred to Exceed Connect.
  2. A search of Australian Securities and Investments Commission (ASIC) records identified that Exceed Telecom was placed under external administration on 25 February 2015.
  3. On 20 April 2015, the ACMA requested Exceed Connect provide information that demonstrated how the Transfer of the Customer base complied with Chapter 7 of the TCP Code 2012.
  4. Exceed Connect did not respond to the ACMA’srequest.
  5. Accordingly, the ACMA commenced an investigation under paragraph 510(1)(c) of the Telecommunications Act 1997 (the Act) into Exceed Connect’s compliance with the TCP Code 2012.

Scope of this investigation

  1. The TCP Code 2012 was registered under Part 6 of the Act. While a replacement to the TCP Code 2012, the Telecommunications Consumer Protection CodeC628:2015 (TCP Code 2015), was registered by the ACMA on 3 December 2015, the TCP Code 2012 was in force during the period relevant to this investigation. For that reason the investigation has focussed on Exceed Connect’s compliance with clauses 7.2 and 7.4 of the TCP Code 2012.
  2. Chapter 7 of the TCP Code 2012 places obligations on Carriage Service Providers (CSPs) when Consumers seek to change their current Supplier of a Telecommunications Service to an alternative Supplier. It also sets out a Supplier’s obligations to Customers when a Transfer of a Customer’s Telecommunications Service arises as a result of the sale of a Supplier’s business or a corporate reorganisation of the Supplier.
  3. Clause 2 of the TCP Code 2012 defines “Transfer” as “the transfer of all or part of a Consumer’s Telecommunications Service from one Supplier to the Gaining Supplier”.
  4. Exceed Connect is an Australian company which provides fixed line and mobile telephone services to residential customers. It is a CSP within the meaning of the Act and a Supplier for the purposes of the TCP Code 2012. Exceed Connect is therefore required to comply with the provisions of the TCP Code 2015[1].
  5. If a Supplier proposes to move its Customers to an alternate wholesale network provider, Clause 7.11 of the TCP Code 2012 places an obligation on the losing Supplier (in this case Exceed Telecom) to notify its Customers of the move, before the move is initiated.
  6. If the Supplier does not comply with clause 7.11, the gaining Supplier (in this case Exceed Connect) is required to comply with clause 7.2 and 7.4. Extracts of relevant TCP Code 2012 clauses can be found in Attachment A.
  7. As there is no evidence available to the ACMA that demonstrates Exceed Telecom complied with clause 7.11 of the TCP Code 2012, this investigation is focussed on Exceed Connect’s compliance with clauses 7.2 and 7.4 of the TCP Code 2012.

The investigation

  1. The ACMA notes that Exceed Connect joined theTelecommunications Industry Ombudsman (TIO) on 19 March 2015.
  2. With TIO consent, the ACMA obtained various Customer records from the TIO and interviewed nine Customers for the purposes of this investigation.
  3. A summary of these interviews is set out in Attachment B.
  4. On 10 September 2015, the ACMA gavea notice under subsection 521(1) of the Act (the Notice) to Exceed Connect as a part of its investigation.
  5. On 2 October 2015, the ACMA received Exceed Connect’sfirst response to the Notice. Relevant to this investigation, Exceed Connect advised:

a)Exceed Connect was established in January 2015, but did not start billing until March 2015.

b)it acquired the entire Customer base of Exceed Telecom along with key personnel and processes.

c)Exceed Telecom had used an external company called ‘Tele-Solutions’ to conduct its sales. This arrangement was terminated in March 2015 and no active sales channel had been used since.

d)a“full company audit” highlighted a number of areas “below the standard of what is required to operate a compliant, effective and sound business”and action had been taken to address any concerns.

e)sales scripts wouldbe finalised by 9 October 2015, and forwarded to the ACMA for perusal once complete[2].

f)in regard to the Transfer of the Customer base from Exceed Telecom to Exceed Connect, “the service and customer Transfers were completed with the communications and guidance of ACMA at that time.”

g)two attachments were included with the 2 October 2015 correspondence from Exceed Connect:

  1. A generic ‘mail merge’ template letter dated 29 January 2015 from Exceed Telecom advising Customers that Exceed Telecom is moving to an alternative wholesale network (Attachment C); and
  2. A generic ‘mail merge’ template letter dated 17 March 2015 from Exceed Connect advising Customers that Exceed Connect has acquired Exceed Telecom’s active Customer base and that invoices from 1 April 2015 onwardswould come from Exceed Connect (Attachment D).
  1. Following correspondence from the ACMA, Exceed Connect provided a secondresponse to the Notice and this was received by the ACMA on16 November 2015. Relevant to this investigation, Exceed Connect advised:

a)the client base of Exceed Telecom was used as security for a loan from a Director of Exceed Connect.

b)Exceed Telecom changed its wholesale provider to More Telecom in January 2015. More Telecom continues to supply Exceed Connect with wholesale services.

c)Exceed Connect does not have access to Exceed Telecom’s file notes. The nine Customers interviewed by the ACMA (see Attachment B) were sent a letter on 17 March 2015, notifying them of the Transfer of services from Exceed Telecom to Exceed Connect (see Attachment D).

d)all of the complaints relate to “the transfer of accounts transferred to Exceed Telecom when they changed wholesale providers”.

e)Telisolutions (sic) has not been able to provide scripts or recordings or any specific reports prior to the arrangement with Exceed Telecom being terminated.

  1. On 28 January 2016, the ACMA provided Exceed Connect with its preliminary findings. Exceed Connect provided a response to the ACMA dated 12 February 2016 and received on 17 February 2016. In that response Exceed Connect stated that the concerns of the nine customers interviewed by the ACMA were with service provisioning by Exceed Telecom and not with the transfer from Exceed Telecom to Exceed Connect.

Findings and reasoning

Clause 7.11: Transfer in Sale of Supplier’s Business or Supplier Reorganisation

  1. If a Supplier proposes to Transferits Customer’s Telecommunications Service as the result of a sale of the Supplier’s business or a Corporate Reorganisation, Clause 7.11of the TCP Code 2012 places an obligation on the losing Supplier (in this case Exceed Telecom) to notify its Customers in writing prior to that Transfer being initiated and undertake the actions set out in clause 7.11.1.One practical effect of clause 7.11.2 is that if clause 7.11 is not complied with by the Supplier (in this case, Exceed Telecom), the Gaining Supplier (in this case, Exceed Connect) is required to comply with clauses 7.2 and 7.4.
  2. The ACMA’s Notice asked Exceed Connect to advise how it complied with the requirements of clause 7.11 and, if correspondence had been sent to affected consumers, to supply a copy of that correspondence.
  3. On the basis of Exceed Connect’s submissions, interviews with Customers and the TIO joining date for Exceed Connect, the ACMA considers that the Transfer of Exceed Telecom’s Customers to Exceed Connect occurred as a result of a transfer of Exceed Telecom’s operations to Exceed Connect during March 2015 with billing commencing on 1 April 2015.
  4. There is no information available to the ACMA that indicates that Exceed Telecom complied with clause 7.11 of the TCP Code 2012.Exceed Connect claimed that the “service and customer transfers were completed with the communications and guidance of ACMA at that time”. These claims have not been substantiated as Exceed Connecthas not provided any evidence of relevant correspondence or communications with the ACMA.The ACMA notes that a discussion was held with an ACMA staff member prior to the transfer of customers from Exceed Telecom to Exceed Connect, but this related to a change of wholesale provider letter sent by Exceed Telecom to itscustomers on 29 January 2015. This letter is immaterial to the compliance of Exceed Telecom with clause 7.11 of the TCP Code 2012 or the compliance of Exceed Connect with clauses 7.2 and 7.4 of the TCP Code 2012.
  5. Accordingly, as the requirements under section 7.11.1 have not been satisfied, the transfer of customers should have been completed in accordance with clauses 7.2 and 7.4 of the TCP Code 2012.

Clause 7.2: Obtaining Consent

  1. Clause 7.2of the TCP Code 2012 requires a Gaining Supplier to use reasonable endeavours to ensure that a consumer is only the subject of a Transfer by a Gaining Provider if the Consumer has provided their consent to such a Transfer.
  2. The ACMA notes that there are a number of discrepancies between information provided by Exceed Connectand information obtained by the ACMA in interviews with nine Customers.Each of the nine Customers interviewed by the ACMA stated that they did not know that their services with Exceed Telecom would be Transferred to Exceed Connect. One customer (Customer 6) appears to have only ever been billed by Exceed Connect as she appears to have become an Exceed Telecom Customer immediately prior to being transferred from Exceed Telecom to Exceed Connect during March 2015.
  3. The ACMA asked each of the nine Customers interviewed about correspondence received prior to their Transfer from Exceed Telecom to Exceed Connect. Eight customers stated that no notification was received by them prior to their services being Transferred from Exceed Telecom to Exceed Connect, with the only indication being a change of company name on their April 2015 bills. One further customer stated she was “unsure”.
  4. Three Customers (customers 4, 7 and 8) subsequently had their services Transferred to Exceed Connect after each trying to Transfer away to another (separate) Supplier during March and April 2015 (detailed below). These Customers indicated they did not want Exceed Connect to take back their number after porting away.
  5. One Customer (Customer 4) has supplied the ACMA with all correspondence she claims to have been sent from Exceed Telecom and Exceed Connect in 2015, including emails detailing her difficulties with Transferring her service away from Exceed Connect. Exceed Connect has provided a screenshot of what appears to be a Customer management system which notes that the “customer moved her services to Telstra on 5 March 2015”.
  6. Exceed Connect has claimed that the “service and customer transfers were completed with the communications and guidance of ACMA at that time”. Exceed Connect also indicates in its submission dated 9 November 2015, that it had not received any complaints about the Transfer of Customers from Exceed Telecom to Exceed Connect.
  7. Neitherclaim hasbeen substantiated. The ACMA has a file note detailing a conversation with an Exceed Telecom staff member (DR)whichoccurred on 26 February 2015, related to wholesale provider arrangementsand not to Customer Transfer obligations. No other correspondence or record of communication between the ACMA and either Exceed Telecom or Exceed Connect has been provided by Exceed Connect, although the ACMA notes a conversation with an ACMA staff member did take place as per paragraph 23 above. This discussion is not material to this investigation as it relates to events that occurred prior to any transfer of customers.
  8. In its letter of 16 November 2015, Exceed Connect, in discussing the two services Customer 4 had with Exceed Connect notes:

“These services were churned over to Exceed Telecom in error when services were transferred to new wholesale provider. Exceed Telecom IT error, IT manager since terminated. Although she continually called to check services. Customer was credited and services were churned.”

  1. These statements do not appear to address the full scope of Customer 4’s issues with Exceed Connect, specifically having her services Transferred back to Exceed Connect multiple times without her consent.
  2. Customer 4 notes, and provides evidence of two occasions where Exceed Connect Transferred her services back to Exceed Connect from Telstra (after initially trying to port away from Exceed Telecom):

a)3 April 2015: Exceed Connect Transfers the Customer’s services back from Telstra to Exceed Connect against her wishes, Telstra charges a fee for breaking her contract.

b)4 April 2015: Customer Transfers her services back to Telstra.

c)9 April 2015: Exceed Connect Transfers her services back to Exceed Connect.

d)13 April 2015: Customer Transfers her service back to Telstra.

  1. Customer 4’s complaint with the TIO was closed in April 2015 as his transfer to Telstra remains in effect.
  2. Customer 7 notes in her interview with the ACMA that her attempts to Transfer services away from Exceed Connect to another Supplier were made difficult, with these services Transferred back to Exceed Connect “four or five times”, including at least one instance after a TIO complaint was raised against Exceed Connect in April 2015.
  3. Exceed Connect only notes in its 16 November 2015 submission that this was an “Exceed Telecom IT error, IT manager since terminated”. Customer 7 notes that Exceed Connect “later” (April 2015) contacted her to “make arrangements” to finalise the issue as Exceed Connect continued to bill her. As a way to avoid further unauthorised Transfers in the future, Telstra eventually put this service on a priority assistance line. This customer’s TIO complaint was closed in April 2015.
  4. Customer 8 Transferred his service away from Exceed Connect to Telstra on 10 May 2015. Exceed Connect took this service back after the customer discovered he was being billed by both service providers. Customer 8 claims he called Exceed Connect to complain and Exceed Connect stated that he requested the service be Transferred back to Exceed Connect (the customer denies this). No comments relating to this Transfer have been made by Exceed Connect in the 16 November 2015 letter to the ACMA. This is despite Exceed Connect providing a payment summary for Customer 8 that shows the May 2015 payment was made on 11 May 2015, with all other months having payments processed later in the relevant month. This possibly indicates that Customer 8’s Transfer of service on 10 May 2015 had a final pro rata payment applied prior to Exceed Connect taking this service back from Telstra. Customer 8’s complaint with the TIO was closed during June 2015 once his service remained with Telstra.
  5. Customer records obtained from the TIO indicate allnine Consumers interviewed by the ACMA had made complaints to the TIO regarding the Transfer practices of Exceed Connect.Each of the nine Customers stated that they did not provide any form of consent prior to receiving a bill from Exceed Connect. The ACMA has not been provided any evidence by Exceed Connect that contradicts the claims made by these Customers.
  6. On the basis of the above, the ACMA has formed the view that the nine Customers were Transferred from Exceed Telecom to Exceed Connect without consent. Additionally, three of these Customers were again Transferred to Exceed Connect without consent after Transferring their services to a different Supplier between March and May 2015. Accordingly the ACMA’s view is that Exceed Connect has contravened clause 7.2.1 of the TCP Code 2012.

Clause 7.4: Information to be provided regarding a Transfer

  1. Clause 7.4 requires a Gaining Supplier to ensure that a Consumer receives information about the Gaining Supplier, the Transfer process, and lodging a Complaint about the Transfer process, at the time a Transfer is proposed by the Gaining Supplier or is requested by the Consumer.
  2. The ACMA’s request for information on 9 November 2016, asked Exceed Connect to advise how it complied with the requirements of clause 7.4 and, if correspondence had been sent to affected Customers, to supply a copy of that correspondence.
  3. Exceed Connect has supplied generic mail merge letters which it claims weresent customers on 29 January 2015 and 17 March 2015. In its submissions Exceed Connect advised that letters to clients were sent via Australia Post. However, no evidence has been provided to the ACMA demonstrating that any letters were sent to Customers between March and May 2015.
  4. In each of the nine cases examined by the ACMA, the interviews with Customers indicated that information relating to the proposed Transfer of services from Exceed Telecom to Exceed Connect wasnot received by the Customers prior to the initiation of the Transfer.
  5. Given the number of Customers interviewed by the ACMA who stated they received no notification of the Transfer of services from Exceed Telecom to Exceed Connect, and the lack of evidence provided by Exceed Connect of actual notification to Customers, the ACMA is satisfied that nine Customers were not notified of the Transfer as required under clause 7.4.1 of the TCP Code 2012.
  6. The ACMA has therefore formed the view that on nine occasions during March 2015, Exceed Connect contravened clause 7.4 of the TCP Code 2012.

Attachment A

2012 TCP Code Clauses upon which the investigation has proceeded

1.1Obtaining Consent

A Gaining Supplier must use reasonable endeavours to ensure that a Consumer is only the subject of a Transfer by a Gaining Supplier if the Consumer has provided their consent to such Transfer.