Should there be automatic compensation for broadband outages?

As consumers, a broadband outage is a rare but frustrating occurrence.

Yet for businesses, it can be disastrous.

Many companies rely almost exclusively on online custom and/or payment gateways, so the loss of connectivity may drive away potential customers and render them unable to receive income.

A series of high-profile internet outages this year has given a renewed focus to the risks of adopting an online-only business model, payment gateway or stock system.

Indeed, a recent survey suggested that 51 per cent of business customers had experienced at least one internet outage over the last year. Yet less than half received any compensation.

In response, some of Britain’s leading business groups recently wrote a letter to Ofcom, the broadband industry regulator, demanding redress on behalf of their clients.

Signatories included the Institute of Directors, the British Chambers of Commerce and the Federation of Small Businesses, while the Mayor of London’s office also supported it.

The letter proposed an automatic compensation scheme for companies impacted by broadband outages, to mitigate the inevitable loss of trade, income and profitability that may ensue.

The UK economy lost over £17 billion in the last year due to connectivity outages, and London’s figure of £5.7 billion represents more than one per cent of its total GDP.

Getting down to business

Ofcom is under no legal obligation to accede to the letter’s requests, though its mere existence signifies the business community’s growing dissatisfaction with internet reliability.

But should there be automatic compensation for broadband outages experienced by businesses, and how would such a policy work?

At the moment, compensation in response to corporate loss of connectivity is determined on an ad-hoc basis by individual ISPs.

This is the policy of Vodafone and Three UK among others, while Virgin Media O2 has contractual provisions in place which encompass “remedies and recourse”.

Other ISPs are less generous, chiefly because they have no legal obligation to be, which is why the business community would like to see a standardised system of compulsory recourse.

There’s clearly an issue when two companies could experience identical loss as a result of internet outages, with one being compensated and the other simply left to absorb the costs.

An automatic redress scheme could take various forms – flat rates paid for each hour of disruption, a percentage of the broadband contract being refunded, and so on.

At present, the only compensation offered is to small business using the same sort of residential services used by consumers.

That’s because private households are already entitled to compensation when their connection goes down…

The bigger picture

While companies struggle to obtain compensation when their internet fails, private individuals don’t even have to raise a complaint to be refunded.

Ofcom runs an automatic compensation scheme which adds credit to customer accounts in the event of broadband issues beyond the consumer’s control.

(As we’ve previously explained, many connectivity issues are actually issues within the home rather than across an ISP network).

With home working now the norm rather than the exception and over four million self-employed people in the UK, connectivity is arguably just as important to them as it is to businesses.

Yet a sudden loss of connectivity at home is rarely an existential issue – even if it feels that way at the time.

Being unable to stream the latest series of Brassic or watch a Twitch stream hardly compares to an ecommerce business losing trade, or a café being unable to accept card payments.

Private consumers can harness local café or town centre WiFi, use their mobile devices for 4G/5G coverage or tether them to a laptop.

Companies with fixed locations and POS terminals don’t have this flexibility, while online-only enterprises could be effectively offline until their ISP restores connectivity.

It seems reasonable that companies should also receive some type of automatic redress following an outage, but it’s up to Ofcom to decide whether – and how – such a scheme might work.