We’ve finalised our cancellation charging policy related to Bitstream Products, making some important changes to address your most recent feedback. We’re giving you more time to reduce your overall cancellation rate which means a greater opportunity to avoid charging within a month altogether.

What’s happening?

You recently gave us feedback on our amendments to the cancellation charging policy.  The amendments were designed to encourage you to reduce overall cancellation rates whilst giving you more flexibility to focus on reducing those cancellation types which are a particular issue for your business.  In doing so, we were keen to take away some of your on-charging concerns and re-set the policy to better achieve its objective – overall cancellation rate reduction across the industry.

There were some clear themes across the industry feedback.  The majority of those who gave feedback said it was apparent we’d tried to address their concerns in the significant changes to the original policy, with strong support for the introduction of a threshold approach.  In addition, there were fewer significant concerns raised by industry during this round of feedback.

Having said that, a key theme to come out of the industry feedback was concern about:

• the timeframe over which the cancellation threshold reduces from 21% to 15%; and
• use of the current copper cancellation rate as an appropriate proxy for what a ‘good’ cancellation rate should look like from a fibre perspective. [Note: Some of you indicated you had insufficient information at present to assess with any degree of accuracy whether this was an appropriate proxy and sought some sort of review of the policy thresholds as a safeguard.]

Some of you continued to be concerned about evidence of appropriate categorisation of Qualifying Cancellations and issues relating to any potential pass-through of cancellation charges to end-customers.There was also a concern about the potential impact to overall cancellation rates if we did a clear out of aged orders.

Taking on board your feedback, we’ve made some final amendments to the cancellation charging policy to address concerns about the time period over which cancellation thresholds reduce and the cancellation thresholds themselves. We’ve introduced smaller reductions in cancellation thresholds over a longer period of time.

What’s the details

You can check out the final cancellation charging policy and a more detailed explanation of the methodology we’ll use to calculate cancellation charges and how we’ll report to you on these cancellation charges. We’ve fixed an incorrect cross-reference to the Cancellation Dashboard in the methodology, which should have referred to the COR Report.

In summary, we’ve made the following changes to the glide path and cancellation threshold levels under the cancellation charging policy:

We’ve introduced a review of the cancellation charging policy to coincide with each anniversary of its implementation (i.e. on a 12-month basis) to check in and ensure it remains fit for purpose in its current form. At the same time, we’ll seek your feedback on the current policy.

We expect any charges levied under the cancellation charging policy will be relatively low based on:

• the cancellation implementation plans we’ve agreed with many of you (which aim proactively to reduce overall cancellation rates); and
• the amendments to the policy itself having lowered the effective rate charged per Qualifying Cancellation due to the threshold approach.

As a result, we want to make sure any proposed validation of our calculation of the Qualifying Cancellations is proportionate in this context. We’ll monitor the reports on cancellation charging between now and 1 March 2020 to verify this baseline assumption. If our assumption isn’t right, we’ll consider introducing some sort of audit process to verify our calculation of the Qualifying Cancellations.

Based on aged order clear outs we’ve done to date, we don’t anticipate any significant impact on overall cancellation rates as a result of future aged order clear outs or that these will be frequent enough to warrant filtering at this stage. We will keep an eye on this over the first 12 months of the cancellation charging and take the opportunity at the date of the first review to address this further if it becomes apparent it is an issue. Efficient management of your aged orders will help to avoid any potential impact from this kind of exercise. We remain unconvinced by feedback which argued the copper cancellation rate is not an appropriate proxy given the fibre market is not mature yet. We acknowledge the copper market has been operating over a longer period than fibre but we don’t believe maturity of market is determined solely by reference to its duration. There is objective evidence which supports our view the market has reached a level of maturity.  For example, as at the end of September 2019 fibre uptake within UFB areas was at 55% and in October 2019 over 30% of all fibre orders were for intacts. 

Even if the copper cancellation rate is an imperfect proxy, we need an ultimate target threshold which acts as an incentive for you to reduce your overall cancellation rate.  It needs to be realistic and attainable with some effort.  We believe the ultimate target threshold of 15% achieves this balance given you now have an entire year over which to reduce to this level (and more than a year if you count the time between now and 1 March 2020).

The charging relief threshold under the policy is designed to encourage you to focus on tackling overall cancellation rate reductions rather than on charging to consumers.  As a result, we haven’t amended the policy further to address any residual pass-through concerns noted in your feedback.  We don’t plan to provide evidence to justify this charge.

We are hopeful our amendments will remove any residual concerns you have about the threshold glide-path in terms of both timing and the level of the threshold.

Next steps

Cancellation reporting from 1 November 2019

We’ll give you cancellation reporting on a monthly basis from 1 November 2019 to indicate the level of charging you would incur under our amended cancellation charging policy. The first report for the month of November 2019, is available through your Service Delivery Manager from today. This will help to give you a view of policy application and resulting potential charges in line with your current cancellation rates

Cancellation improvement plans – up and running

We’ve worked hard together to finalise cancellation improvement plans which in most cases will be implemented immediately. We’ll have a few months before 1 March 2020 over which to measure the impact of our joint initiatives on cancellations, with a view of achieving reductions and potentially meeting the initial threshold rate of 21%.

Cancellation charging from 1 March 2020

We’ll start to charge for cancellations under the final cancellation charging policy from 1 March 2020.  The first invoice for cancellation charges (if any) will show up in your April  invoice.

Contact

For any queries please contact your Account Lead or Service Delivery Manager at first instance.