O2 Problem Raises Compensation Questions

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Compensation for the O2 problem could be a legal minefield, and Patrick Clark says consolidation may make it worse

Many O2 UK users were unable to make calls, send texts or use the mobile internet for large parts of last Wednesday and Thursday 11th and 12th August. While such widescale network outages are relatively rare, similar fates have befallen customers on other mobile services over the past few months – most famously the outages suffered by the previously reliable Blackberry platform last October.

Having restored service, O2 has offered its users a ten percent discount on their July subscription, with pay-as-you-go customers getting a ten percent bonus on their first top-up in September. But does this amount to compensation, and what about users who suffer losses arising from the network problem: the O2 problem disrupted many other services, including the monitoring of some criminals by electronic tags, and London’s “Boris Bike” cycle hire scheme.

Compensation – is it in your contract?

Mobile user terms typically exclude mobile operator responsibility for a variety of network issues that are described as being beyond their control. They also usually exclude liability for any form of consequential loss and for loss of profits and other forms of economic loss.

While it may be possible for consumers to challenge such terms on legal grounds, the cost and uncertainty of legal proceedings will put off all but the most dedicated of customers. Corporate customers may be subject to some sort of SLA arrangement which could result in a form of service credit being available for outages, but again these are usually set at a very low level.

Mobile operators are however fiercely proud of both their networks and their brands, and one big outage can stick in customers’ minds for quite a long time after the event, especially when it becomes time to renew annual or rolling contracts. It is therefore possible that even if they do not accept that they owe customers anything for a breach of contract, a mobile operator may make a gesture to appease disgruntled customers and prevent further bad PR (e.g. free texts, credit to customers account, free apps, etc).

Back-Up arrangements

The fact that other networks in the same areas impacted by the O2 outage were still working calls into question the extent to which mobile operators could or should be mandated to organise short term alternative arrangements with each other to allow traffic to be carried in the event of a major outage like this. This would avoid the need to pay direct compensation to customers (as from a practical point of view the customer will have continued to receive a largely seamless service), but operators would obviously see direct financial impact of any charges they incur for traffic carried by the other network operator.

What impact will the increasing consolidation amongst mobile network operators have on this scenario? In the UK we have already seen T-Mobile and Orange merging their networks, and Vodafone and O2 have also recently reached agreement on consolidating network management assets.

While such consolidation may enable mobile operators to benefit from economies of scale (depending on how such consolidations are achieved at a technical level) there is a danger. While the chances of network outages may be reduced the number of people potentially impacted in the event of a failure are significantly increased (especially if something goes wrong in the core network or with a key central facility).

An Olympic problem?

With the start of the Olympics only a matter of days away, it also worth considering how network operators will cope with the influx of people into the UK and London, in particular during the Olympics. The faster auctioning and roll-out of LTE/4G mobile may have helped to alleviate the situation here to some degree, but given the current network saturation it will be interesting to see just how easy it will be to maintain voice and data connections over the coming month even with additional capacity put into some Olympic venues.”

Patrick Clark is a partner specialising in telecoms and technology at Taylor Wessing

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