Does size matter? And how does a communications provider know how big you are?
There are just a few more days to run on Ofcom's consulation on revised proposals for definitions of a few key terms in the UK's implementation of the European Electronic Communications Code (EECC).
And, judging by industry responses which led to these revised proposals, size really does matter.
What's this about?
The EECC requires implementing states to impose obligations in respect of three categories of service recipient which are not currently defined in UK communications law:
- microenterprise customers
- small enterprise customers
- not for profit organisations
In essence, different rights attract to difference customers, and so scoping these our clearly and precisely is important.
Ofcom proposed some definitions for these in December 2019, and was met with quite a lot of pushback. It's now consulting — for another few days, anyway — on some revised proposals.
There was also concern (not new) about how a communications provider would possibly know what size a customer was. Ofcom has re-stated its view from previous guidance that using "reasonable proxies" for determining the size of a customer is acceptable.
Proposals for revised definitions
In December 2019, Ofcom proposed that the definition of "microenterprise" customers should be:
'Microenterprise' means a Small Enterprise Customer who carries on an undertaking for which fewer than 10 individuals work (whether as employees or volunteers or otherwise) and whose annual turnover and/or annual balance sheet total does not exceed [£1.7m].
In its current consultation document, Ofcom notes that:
The EU Recommendation makes it clear that the main criterion for setting the microenterprise and small enterprise customer definitions is staff headcount, rather than any financial criteria
and so, as a result, it is going to drop the financial element of the definition.
For what little it is worth, I am still surprised that an organisation with 9 members of staff, procuring communictions services for business use, needs to be treated the same way as a consumer, but, oh well, that is not going to change.
Small enterprise customers
In December 2019, Ofcom proposed that the definition of "Small Enterprise" customers should be:
‘Small Enterprise Customer’, in relation to a Communications Provider which provides services to the public, means a Customer of that provider who carries on an undertaking for which fewer than 50 individuals work (whether as employees or volunteers or otherwise) and whose annual turnover and/or annual balance sheet total does not exceed [£8.8m49], but who is not himself a Communications Provider.
That a company with 50 employees should be seen as "small" enterprise was surprising to me — especially in the context of needing additional rights vis a vis a telco or ISP which could be much, much smaller — and, clearly, it was surprising to others too.
As above, Ofcom noted that the financial criteria it was proposing went beyond the approach taken by the EU Recommendation on the definition of micro, small and medium-sized enterprises, and so it is proposing to drop that from the definition here too.
Ofcom is consulting on whether the headcount element of the definition should stay as-is, reduced down to 10, or be somewhere between 10 and 49. Currently, it is leaning towards "10 or fewer", merging it with the definition of microenterprise customers, and also merging the definition of "Domestic and Small Business Customer" from the current General Conditions.
Not For Profit Customers
In December 2019, Ofcom proposed that the definition of "Not for profit" customers should be:
‘Not For Profit Customer’, in relation to a Communications Provider which provides services to the public, means a Customer which, otherwise than as a Communications Provider, is a Customer of that provider and which by virtue of its constitution or any enactment:
(a) is required (after payment of outgoings) to apply the whole of its income, and any capital which it expends, for charitable or public purposes; and
(b) is prohibited from directly or indirectly distributing among its members any part of its assets (otherwise than for charitable or public purposes).
This would undoubtedly capture lots of small charities, but it would also include massive charities, with significant and sophisticated purchasing power, as well as non-charitable not-for-profit organisations such as central and local government, and possibly many if not all public authorities.
Now, Ofcom has noted that:
The EECC makes clear that the rationale for extending certain customer protections to not for profit organisations applies where they are in a “comparable situation” to residential customers in terms of their bargaining position
Ofcom is planning to impose a headcount restriction on the definition, linked to whatever it decides for small enterprise customers. If current plans are followed, this means a cap of 10 members of staff / volunteers or fewer.
Assessing a customer's size
Size-based definitions for customers are not new in the world of telecoms regulation. Today, for example, in the General Conditions of Entitlement, the definition of "Domestic and Small Business Customer" is someone who is neither a communications provider themselves nor
a person who is [a customer of a service provider] in respect of an undertaking carried on by him for which more than ten individuals work (whether as employees or volunteers or otherwise)
Other than asking the customer, how on earth was a communications provider supposed to know how many staff members a customer has?
In guidance from December 2019, Ofcom proposed some proxies for knowing actual numbers of staff:
We will take a pragmatic and flexible approach to compliance monitoring and enforcement. In assessing compliance we will consider whether providers have taken reasonable steps to identify the different categories of customers to which the requirements apply. For example, factors they may use (but not be limited to) to identify the size of business customer might include the annual communications spend of the customer and/or the number of lines taken by the customer.
Ofcom intends to continue the position that providers can use "reasonable proxies" in lieu of knowing actual numbers, and intends to amend the guidance to apply also to not for profit customers.