Flexing the government’s police power, the Department of Justice (DOJ) has issued a second advisory on the telecommunications sector which warned telcos “not to mislead or deceive subscribers with unlimited Internet packages that are eventually throttled upon reaching a certain volume of data.”
The Justice Department has noted that telcos have been keen on enticing subscribers with various promotional campaigns especially with unlimited deals that impose certain restrictions on these offers.
“While there is nothing wrong with advertisements and promotions, what is promised must be delivered,” said DOJ Secretary Leila M. De Lima.
“Our laws require not only truth in advertising but also fairness in packaging and consistency in the provision of the service,” she added.
In a nine-page advisory dated December 9, 2014, the DOJ said the imposition of fair usage policy on unlimited Internet service is inconsistent with the provisions of the Consumer Act, particularly on fair packaging as well as misleading trade practice and advertisements.
Assistant Secretary Geronimo L. Sy, head of the DOJ-Office for Competition (OFC), said that “unlimited data is like unlimited rice or buffet concept — restaurants cannot offer an ‘eat all you can’ promo and when a customer eats more than the average person, to actually stop him or not to honor the commitment.”
The advisory ordered on the Department of Trade and Industry (DTI) and National Telecommunications Commission (NTC) to monitor and penalize non-compliant telcos.
The DOJ, through the Office for Competition (OFC), issued the advisory in the fulfillment of its mandate to protect consumers from unfair business practices and to advance consumer welfare.
Below is the DOJ Advisory:
OFFICE FOR COMPETITION
ADVISORY OPINION NO. 02 (Series of 2014)
“UNLIMITED” INTERNET OFFERS
This Advisory is issued for the benefit of the Internet users, especially those who subscribe to unlimited Internet connection, as well as for the guidance of the network providers in their practice of setting a cap on data services. This Advisory is also for the guidance of the regulatory agencies in their efficient supervision of the market and for the continued advancement of consumer welfare.
The use of unlimited Internet service gained popularity with the growth of the digital community. Internet service-providers (ISPs) offer unlimited data promos that cater to the needs of consumers for internet connection. Millions of Filipinos use the Internet for communication, business, and entertainment.
Unlimited data is offered both on fixed and mobile broadband connection. Usually, a consumer can subscribe to an “unlimited” data service for about P999.00 per month. Under this, customers are supposedly given an unlimited access to the Internet within the prescribed subscription period. However, end users report low satisfaction on the quality of the service.
Recently, telecommunication companies began imposing fair usage policy (FUP) on all their Internet packages including unlimited Internet promos. In effect, the Internet connection is throttled when usage reaches a certain volume of data bits.
It is the goal of the State to protect consumers from trade malpractices as well as from substandard or hazardous products and services. In a situation where a subscriber is at the mercy of the network providers, it becomes imperative for the State to ensure that their power in setting the price and speed of their network services will not be subject to abuse.
Republic Act No. 7394, series of 1992, known as the Consumer Act of the Philippines (“Consumer Act”), advances the “protection against deceptive, unfair and unconscionable sales acts and practices” as well as promotes the “provision of information and education to facilitate sound choice and the proper exercise of rights by the consumer.”
Article 50 considers an act or practice deceptive “whenever the producer, manufacturer, supplier or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter into a sales or lease transaction of any consumer product or service.”
More particularly, a trade practice by a seller or supplier shall be deemed deceptive when it represents that:
a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients, accessories, uses, or benefits it does not have;
b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;
c) a consumer product or service is available to the consumer for a reason that is different from the fact;
d) a consumer product or service can he supplied in a quantity greater than the supplier intends.
This means that an internet service promoted as unlimited at a certain speed should be delivered uninterrupted at the stated speed. Take for instance a consumer who subscribes to a HomeBRO 2Mbps unlimited Internet promo at P999.00 per month. The telco PLDT should provide said subscriber with a consistent 2 Mbps internet access for 30 days. However. FUP renders the unlimited promo deceptive or misleading since with throttled data access, the service fails to deliver performance, quality, and value.
Article 74 of the Consumer Act obliges compulsory labeling and fair packaging among suppliers and producers. Fair packaging is when a product or service is promoted in a way that enables consumers to obtain accurate information about the nature, quality and quantity of its contents. With data throttling, ‘unli’ (short for unlimited) data promo becomes inconsistent with their presentations of its packaging, hence, unfair and misleading. Capping of an unlimited data subscription becomes more problematic if the service is a shared amenity. This is uncontrollable especially since broadband routers and devices are designed for Internet sharing.
A household, for instance, subscribes to only one data plan which is intended for sharing by the family members. This implies that if a household simultaneously connects five (5) gadgets to the Internet, the data connection will be apportioned to each of the device. It follows that the data cap will also be shared measly by the household members. More so, because many share the connection, the data cap is possibly reached faster during the subscription period. In such case, FUP takes effect and the internet connection will be throttled for the rest of the subscription period. As a result, subscribers complain because the data throttling period is even longer than the extent the unlimited service is enjoyed.
By way of illustration, consider Globe Communications, Inc.’s FUP. Said service provider sets a data cap of 1GB daily or accumulated usage of 3GB per month, whichever comes first. Upon reaching the cap, the subscriber’s Internet connection is slowed down to a 2G speed-about 90 percent reduction from the promised speed. Such policy would be logical if the subscriber limits his data consumption to only 99MB per day. Since the usage is within the daily and monthly data limit, said subscriber will be enjoying good connection for the entire subscription period.
However, problem arises if the subscriber’s daily data consumption is, say, 500MB. Although the daily usage does not exceed the 1GB data cap per day, good Internet connection speed is expected to last for only six (6) days since by then the accumulated data consumption will be 3000MB or 3GB. Consequently, the subscriber will have to deal with a throttled data connection for 24 remaining days. Explicitly, customer expectations are not met.
This case is an effective break of promise, a form of misrepresentation; the internet promo is packaged as unlimited in the first place. It is only logical for subscribers to assume that telecommunication companies deliver a connection that is consistent with the promoted speed and reliability for the entire duration of the subscription period. Likewise, it is understood that the consumers subscribed to an unlimited Internet service and not for a certain volume of data usage only. If it will only be constrained to a certain limit or cap, the service should have been promoted as a consumable package and not as an unlimited plan. This way, subscribers are not led to think they will enjoy an unrestricted limitless service.
It is also important to point out that customers subscribe to an unlimited Internet service presumably because their need for Internet access is larger than just 99MB per day. Unlimited internet package prompts unlimited use, hence, customers are encouraged to access the net more. This naturally leads to higher bandwidth consumption.
Intuitively, FUP creates a misnomer out of unlimited Internet service, thereby a misleading or deceptive conduct. This kind of deceptive business practice is punishable with a fine amounting to at least five hundred pesos (P500.00) but not more than ten thousand pesos (P10,000.00) or imprisonment of at least five (5) months to at most one (1) year or both.
Non-compliance with the requisites of fair packaging is likewise subject to criminal penalties which may be a fine of not less than five hundred pesos (P500.00) but not more than twenty thousand pesos (P20,ooo.oo) or imprisonment of not less than three (3) months but not more than two (2) years or both.
“The imposition of data throttling on unlimited Internet could also be regarded as a violation of the provisions prohibiting false, misleading or deceptive advertisements, hence, deemed punishable in accordance with law.”
All violations concerning the Consumer Act are subject to administrative charges including but not limited to “the imposition of administrative fines in such amount as deemed reasonable by the Secretary, which shall in no case be less than Five Hundred Pesos (P500.00) nor more than Three Hundred Thousand Pesos (P300,000.00) depending on the gravity of the offense, and an additional fine of not more than One Thousand Pesos (P1,000.00) for each day of continuing violation.”
Article 164.c of the Consumer Act further provides that act of restitution may be imposed upon the non-compliant service provider. In such case, the public telecommunications entity (PTE) shall be ordered to refund or compensate their subscribers. From the foregoing, the following points are stated:
From the foregoing, the following points are stated:
1. ISPs MUST NOT ADVERTISE UNLIMITED lNTERNET PROMOS BUT SUBJECT THE SERVICE TO A FAIR USAGE POLICY. AS ADVERTISED, THE PLAN IS EITHER UNLIMITED OR NOT.
The contention here is simple: ‘unlimited’ means unlimited. The same argument was raised by the United States Federal Trade Commission (US-FTC) when it filed a federal court complaint against AT&T Mobility, LLC, accusing the company of deceiving millions of its subscribers by charging them for unlimited data plans while throttling their data speeds, to some extent by nearly 90 percent. Further, US-FTC asserted that the company failed to deliver on its promise of ‘unlimited’ data.
Following the same reasoning, the imposition of FUP on unlimited Internet service by the local ISPs can be regarded as a form of misleading or unfair business practice. In the first place, these service providers should not have offered a service that they cannot support. Essentially, it is expected that an unlimited Internet promo must deliver a service that is consistent with the representations of the package – that is, unlimited access with the promised speed and service reliability. Capping of unlimited Internet subscription is tantamount to charging subscribers with an unlimited data service for a consumable package.
2. THE ISPs SHOULD UTILIZE NETWORK MANAGEMENT TECHNIQUES THAT OPTIMIZE DATA USAGE RATHER THAN RESTRICT IT.
Not all Internet subscribers are heavy Internet users. As a matter of fact, Globe claims that only about three (3) percent of their total subscribers are categorized as heavy users. The operator argues that FUP is its way to regulate the heavy usage of these users. Still, if these top 3% paid for an unlimited data service, it is not fair to deny them of the service they paid for.
While capping of data usage is not strictly disallowed, the principle of Net neutrality operates to promote open access and transparency. It is understood that ISPs, due to traffic engineering, necessitate overseeing and managing the facility. Nonetheless, operators should use a network management scheme that advances optimal utilization of the Internet.
Verizon Wireless, for instance, employs network optimization practice instead of data throttling. Under this mechanism, the connection speed of the top 5% data users with 3G devices on unlimited plan is reduced but only when connected to a cell site that is experiencing high network traffic. By the time the subscriber is no longer connected to such site, data speed returns back to normal.
The local operators, in the same way, can adopt such practice. In so doing, users do not have to suffer with very slow data connection for the rest of the billing cycle. To make this work, ISPs must be clear on the sites/areas with high data traffic, at what times, for how long, as well as the data and speed limit. By disclosing these relevant information, consumers are properly guided with their data consumption.
3. ISPs HAVE TO OFFER INTERNET PACKAGES BASED ON DATA USAGE, SUBSCRIPTION PERIOD, AND/OR SOFTWARE APPLICATION USAGE.
If the objective is to manage the network, ISPs can focus on the usage on these applications instead of the general bandwidth consumption of subscribers. As such, ISPs may offer internet packages specific for a certain or combination of software applications. For instance, a promo may be designed for unlimited YouTube browsing, twitter and/or Facebook. Consumable packages may also be offered specific for applications that consume large bandwidth such as torrent or online gaming.
If consumers have the option to pick an Internet package that is tailored to their lifestyle and needs, the utilization of Internet service will be optimized for the benefit of all including the telcos.
4. INTERNET USERS MUST BE RESPONSIBLE AND LIMIT LARGE DATA TRANSFERS DURING PEAK HOURS.
A responsible Internet user is one who respects the rights and privileges of other end-users. During peak hours, it must be expected that a significant percentage of subscribers are using the network, hence, data speeds are relatively slower. Thus, to avoid congesting the network further, subscribers must be conscious to limit their Internet usage to priority or important purposes. All other heavy, unnecessary, and leisurely usage of the Internet such as torrent downloading must be done during off-peak hours.
When not in use, broadband devices or gadgets must be switched off to ease up the network. A running broadband device or gadget remains connected to the network and, at some point, continues to consume data bandwidth. Turning off data access of devices or gadgets will not only offload the network but will also reduce energy consumption.
5. REGULATORY AGENCIES MUST REVIEW DILIGENTLY THE PROMOTIONS AND CONDITIONS SET BY THE LECOMMUNICATION COMPANIES.
The Department of Trade and Industry (DTI) must carefully check the approval of sales and promotions of telecommunication companies. The terms and conditions proposed must not be in conflict with the labeling and packaging of the consumer product or service.
The National Telecommunications Commission (NTC) must see to it that the conditions or policies being imposed by the service providers must conform to the prescribed service performance standards and are not abusive.
In case of non-compliance with the provisions of the Consumer Act and other relevant laws, the regulators should dutifully enforce penalties as prescribed.
Consumers must also remain vigilant and proactive in protecting their welfare and rights. In the event of inconsistency or inconformity with the provisions of the Consumer Act and other issuances, the subscribers and the public are encouraged to provide their feedback or file their complaints to the respective service provider as well as the appropriate government agencies such as the NTC through its Consumer Welfare and Protection Desk at (02) 924-3771 or DTI through its Consumer Welfare Desk at 811-8231 (Metro Manila) or (02) 751-3330 (outside Metro Manila).
This Advisory is issued by the DOJ-OFC in line with its mandate to protect consumers from abusive, fraudulent, or harmful corrupt business practices as well as to promote transparency and accountability in markets. All are hereby enjoined to disseminate and faithfully observe this Advisory.
(Sgd) LEILA M. DE LIMA