Complaints about Transmission Speeds of i-cable s Internet Services

Transcription

1 Complaints about Transmission Speeds of i-cable s Internet Services Complaint against: Issue: Relevant Instruments: i-cable WebServe Limited ( i-cable ) (1) The complainants alleged that the uploading and downloading speeds had been reduced without notice after their cable modems were replaced by i-cable. (2) The complainants further alleged that an advertisement claiming i-cable's upload speed is "30 times faster than others" is misleading. Section 7M of the Telecommunications Ordinance (the Ordinance ) Case Opened: February 2003 Case Closed: August 2003 Decision: Outcome: Breach of section 7M of the Ordinance Written warning was issued Case Reference: T25/03 THE COMPLAINTS 1. The Office of the Telecommunications Authority ( OFTA ) received 15 complaints in late January and early February 2003 from consumers and the press concerning the deterioration in the transmission speeds of i-cable s broadband internet services. 8 Mbps Transmission Speed 2. According to the complainants, there had been significant deterioration in the transmission speeds of i-cable s broadband internet services. From December 2002 to January 2003, i-cable replaced the cable modems of a number of customers, allegedly for the reason of improving service quality ( 提 升 服 務 質 素 ). After the replacement of the modems, the uploading and downloading speeds were reduced to about 30 KB/s (meaning 30 kilobytes per second which is equivalent to about 240 kilobits per second, or 240 kbps) and KB/s (meaning kilobytes per second or about Megabits per second, or Mbps) respectively. According to some of the complainants, the new cable modems were Motorola SB4220 1

2 SURFboard Cable Modems. A number of complainants complained that the transmission speeds were locked (that is, restricted) to no more than those mentioned above. 3. The transmission speed of i-cable s broadband service of up to 8 Mbps on a shared basis was a theme of i-cable s advertising campaigns. In particular: (1) A number of i-cable s advertisements expressly stated that the uploading and downloading speed was 8 Mbps, with or without stipulating that the 8 Mbps speed was on a shared basis. A copy of a flash-up advertisement appeared on i-cable s website in early 2002 in which the speed of 8 Mbps was being advertised without the shared basis qualifier. In a newspaper advertisement from Oriental Daily on 12 March 2002 that advertised the 8 Mbps speed, a * sign was inserted next to 8 Mbps which referred to a note in small prints qualifying that the speed was on a shared basis. (2) The representation of offering a maximum transmission speed of 8 Mbps was originally incorporated as a term of i-cable s General Terms and Condition ( T&C ). 上 載 快 人 三 十 倍 ( 30 times faster statement) 4. Apart from the 8 Mbps transmission speed, the statement 上 載 快 人 三 十 倍 (in English translation: upload 30 times faster than others ) (the 30 times faster statement) was also the subject of complaints. The complainants stated that as a result of the speed restriction, the uploading and downloading speeds were reduced to about 30 KB/s (about 240 kbps) and KB/s (about Mbps) respectively. The reduced speed was one of the slowest broadband speeds offered in the market and accordingly, the 30 times faster statement was not sustainable. The Telecommunications Authority ( TA ) noted that a TV commercial entitled Home Wireless in English version and 無 線 上 網 無 束 縛 in Chinese version that appeared on i-cable s website ( from at least February 2003 when this investigation started and was still appearing as of 9 May 2003, contained the 30 times faster statement. Unilateral variation of contract terms 5. One of the complaints was that there had been a number of instances where i-cable unilaterally altered the terms of the contract. Insofar as the transmission speed was concerned, a number of complainants pointed out that at one stage, it was expressly written in i-cable s T&C of service that the transmission speed was 10 Mbps shared. In or about February 2002, the clause was amended to read 8 Mbps shared and in or about November 2002, the specification of transmission speed was deleted altogether from the T&C. 6. The complainants stated that i-cable failed to give advance notice to customers before making alterations to the T&C and as a result of such alterations, the altered T&C no longer represented the terms and conditions to which they had agreed at 2

3 the time of subscribing to the service. In the view of the complainants, such alterations had rendered the original contract void and meaningless. Early termination of contract 7. As a result of the reduction in transmission speed, the complainants sought to terminate the contract. However, they were informed by i-cable that early termination of a fixed term contract would be considered as a breach of contract and a termination fee would be charged to the relevant customers. Further or in the alternative, i-cable refused to refund the deposit and/or the service fees that customers had paid in advance. 8. Since it was not possible to terminate i-cable s service without paying a termination fee and forfeiting the advance payment of deposit/service fee, the complainants complained that they had no choice but to accept the unsatisfactory service provided by i-cable until the end of the contract term. TA s INVESTIGATION 9. Upon receipt of the complaints, the TA conducted an investigation into whether there was any possible breach by i-cable of section 7M of the Ordinance which provides for the following: A licensee shall not engage in conduct which, in the opinion of the Authority, is misleading or deceptive in providing or acquiring telecommunications networks, systems, installations, customer equipment or services including (but not limited to) promoting, marketing or advertising the network, system, installation, customer equipment or service. 10. As part of the investigation, i-cable was asked to provide information and make representations on the complaints. i-cable s RESPONSE 11. In its representations, i-cable submitted that: (1) Bandwidth restriction had been imposed on 8.75% of all of its subscribers (including existing and new subscribers). Some of this group of customers were so restricted as they were served by a new cable modem system under trial. The sites served by the new system were those having the most acute network capacity issue. In addition, another group of customers were subject to bandwidth restriction because of their abusive usage behaviour. (2) For individual users on whom i-cable has imposed bandwidth restriction, the maximum uploading speed was set at 256 kbps when the bandwidth restriction was first imposed. According to i-cable, the restriction will be gradually 3

4 relaxed and the maximum uploading speed may vary from 512 kbps to 1.5 Mbps depending on site conditions, network condition, usage behaviour of users, noise level or signal quality of the coaxial network. The maximum downloading speed was set at 1.5 Mbps. (3) For individual users who had been subject to bandwidth restriction as a result of their abusive usage behaviour, the uploading speed was set at 128 kbps. (4) While restriction notices would be issued to subscribers with abusive usage behaviour, other subscribers subject to bandwidth restriction were not informed of the reduction of the maximum upstream and downstream bandwidth prior to its imposition because of the following factors: (a) the terms and nature of i-cable s services; (b) its rights expressly reserved under the terms; (c) the deployment was still in the testing stage and the upstream and/or downstream bandwidth restrictions were subject to change; (d) it believed that the restriction did not cause any significant impediment to the enjoyment of its service. That the number of complaints received represented only a small percentage (0.12%) of the total number of subscribers subject to the bandwidth restriction confirmed such belief; and (e) hence, the issue of any notification might only cause misunderstanding and confusion to the affected subscribers. (5) Bandwidth restriction was imposed as part of i-cable s resource management in order to solve the network overloading and site congestion problems. (6) Bandwidth restriction had been implemented since December 2002 and at present, the deployment of the new system (which involves bandwidth restriction) was still in the testing stage. (7) Bandwidth restriction was implemented by applying bandwidth allocation parameters on the Cable Modem Termination System ( CMTS ) and/or Cable Modem ( CM ). 12. i-cable emphasised that the bandwidth restriction policy was imposed pursuant to its rights expressly reserved under its T&C of service and Operating Policy ( 客 戶 守 則 ). i-cable stated that the subscribers were well informed, at the time of entering into the contract, of the fact that i-cable has a right to impose bandwidth restriction. i-cable alleged that the bandwidth restriction was imposed in good faith for the purpose of better management of the service with an aim to solve the network overloading and site congestion problems particularly in areas having the most acute network capacity issue. 13. To support the allegation that it has the contractual right to impose bandwidth restriction, i-cable relied on the following terms which are contained in the subscription forms: 4

5 12...no performance or reliability warranty We may change or withdraw any of our Services or any Content at any time We therefore reserve the right to manage our system resources for the greatest benefit of the greatest number of our subscribers. As part of resource management and allocation, we may limit, restrict or prioritize access to system resources, including CPU time, bandwidth, memory, disk space, session length, and the number of sessions.... You expressly acknowledge and accept that such action on our part may affect the performance of the Services Unless otherwise agreed in writing, we do not warrant or guarantee the upstream or downstream bandwidth available to individual subscriber, whether expressed or implied.... i-cable pointed out that the clauses 12, 27 and 28 were printed in bold characters in its subscription form 1. Further, clauses of almost identical terms to those in clauses 27 and 28 were contained in its Operating Policy. 14. i-cable maintained that while 8.75% of its subscribers who were subject to bandwidth restriction were unable to enjoy the maximum upstream and downstream speeds of 8 Mbps, the remaining 91.25% customers were still provided with maximum upstream and downstream speeds at 8 Mbps on a shared basis. 15. In relation to the criteria of selecting subscribers for the bandwidth restriction trial, i-cable stated that the sites served by the new system were those having the most acute network capacity issue. In relation to the duration of the trial, i- CABLE stated that it was still testing and collecting data on the capability and network performance of the new system and it was too early to formulate any plan for its official launch. Further trials might be conducted in other congested sites. 16. According to i-cable, as a result of the deployment of the new bandwidth restriction system, the number of inquiries and complaints relating to network problems had significantly reduced by more than 50%. In relation to how the complaints in relation to the bandwidth restriction were handled, i-cable replied that when complaints were received, its staff would explain the circumstances to the subscribers concerned and would, on a case by case basis, allow early termination of their subscription if, notwithstanding its explanation, the subscribers were not satisfied with its service and requested service termination. i-cable claimed that it would normally waive the levy for early termination fee and only charge the prorated service fee at promotional price, if applicable. 17. In relation to the 30 times faster statement in its promotional materials, i-cable replied that the statement 30 times faster was derived from a simple mathematical comparison of the uploading speed of i-cable and that of other Internet Services Providers ( ISPs ) deploying Asymmetric Digital Subscriber Line ( ADSL ) technology (8 Mbps/256 kbps = 31.25). i-cable stated that the comparison, as it appeared in its advertising materials, was qualified by the following statements: 1 Not so on a subscription form printed by OFTA on line from i-cable s website. 5

6 (a) The maximum downstream speed and upstream speed of i-cable Broadband Service is 8 Mbps shared, which may vary due to external factors. (b) Use of our services is subject to Our Operating Policy, which is available on i-cable Web site at i-cable argued that a reasonable customer would understand or ought reasonably to understand the nature and meaning of this comparison ratio. TA s FINDINGS 8 Mbps transmission speed 18. From the customer s perspective, the major performance characteristics distinguishing a broadband service from a narrowband service, and differentiating the broadband service offered by one operator from another, is the transmission speed of the service. 19. This is supported by the general phenomenon that the advertisements and promotional materials of broadband internet service providers focus inevitably on the transmission speed and the price. Although the transmission speed is only the speed of transmission over the customer access circuits between the customer s premises and the ISPs facilities, this is normally the only parameter concerning transmission speed that is made known to the customers and the basis on which a typical customer performs comparison between the speed performance of different services. The speed of a broadband service is no doubt a significant and fundamental characteristic of the broadband internet service which the customers purchase. 20. In other words, for those customers who decided to subscribe to i-cable services after receiving i-cable s representation that the speed of its broadband service was 8 Mbps (on a shared basis), the service to which customers subscribed was a broadband service with a maximum transmission speed 2 of 8 Mbps (on a shared basis), as opposed to a mere broadband service of any speed level. i-cable s advertising campaigns with emphasis on 8 Mbps (on a shared basis) is illustrated in paragraph 3 above. In a previous investigation conducted by the TA into complaints from customers about the reduction of the speed of i-cable s service from 10 Mbps (shared) to 8 Mbps (shared), i-cable admitted that [the customers in questions in that investigation] had express knowledge of i-cable s maximum download speed of 8 megabits and from the sample newspaper advertisements provided by i-cable for that investigation, the TA found that i-cable promoted their bandwidth service as 8 megabits from 18 February As a result of the bandwidth restriction, the maximum speed had been 2 transmission speed in this case report is interchangeable with uploading and downloading speed. 3 Paragraphs 9 and 15 of TA s summary report on Complaint concerning i-cable s Alleged Change of Promotional Materials published on OFTA s website (Consumer Interest Section) in October

7 significantly reduced from up to 8 Mbps to, according to i-cable s representation, the range of 256 kbps to 1.5 Mbps for uploading and 1.5 Mbps for downloading. This would represent a significant degradation in the transmission speed from the customer s point of view. i-cable s representation at the time of entry into contract was that the transmission speed was up to 8 Mbps and even if this was clearly understood by the customer to be on a shared basis, the customer would expect the maximum speed of 8 Mbps to be attainable at least when the traffic was light. If for any technical reason, the maximum speed of 8 Mbps were not attainable even when the traffic was light before the change of the cable modem, such information had not been disclosed to the customers. This expectation could also be derived from the fact that in illustrating the maximum speed offered by i-cable, i-cable, in the advertisements in paragraph 3(1) and 4 and in explaining the alleged mathematical calculation for 30 times faster as shown in paragraph 17, used 8Mbps as the basis for illustration or calculation. With the deployment of the new system, the transmission speed of individual customers had been restricted to 256 kbps to 1.5Mbps for uploading and 1.5 Mbps for downloading. These were ceilings imposed on the transmission speed of the service provided to the customers and these ceilings would not be exceeded even if the traffic was light. 22. As stated above, from a customer s perspective, the transmission speed of the broadband internet service is a significant and fundamental characteristic of a broadband service. Customers induced by i-cable s promotional and advertising materials, which overwhelmingly packaged the broadband service as a broadband service with a maximum transmission speed of 8 Mbps (on a shared basis) as opposed to any broadband service, to enter into a contract with i-cable had a reasonable expectation that the significant and fundamental characteristics of the service will remain unchanged, or substantially unchanged, throughout the duration of the service, particularly when the customers were subject to a fixed-term contract under which they could not terminate early without paying a termination fee and forfeiting the advance payment of deposit/service fee. With respect to the 8.75% of customers who were subject to bandwidth restriction, however, the maximum uploading speed, as submitted by i- CABLE, had been restricted to the level of 256 kbps to 1.5 Mbps for uploading and 1.5 Mbps for downloading as opposed to the maximum upstream and downstream bandwidths of 8Mbps (on a shared basis). These customers were no longer supplied with the broadband service with the characteristics offered to them at the time of subscribing to the service. At present, the broadband internet services commonly available on the market to residential customers provide maximum transmission speeds of 1.5 Mbps, 3 Mbps, 6 Mbps and 10 Mbps for downloading, and 256 kbps, 512 kbps, 640 kbps and 10 Mbps for uploading, on a shared or dedicated (customer access circuit from customer s premises to ISP s facilities) basis. Therefore apart from whether the parameter of whether the customer access circuit is shared or dedicated, the changes from 8 Mbps to 1.5 Mbps for downloading, and from 8 Mbps to 256 kbps Mbps for uploading, are significant and fundamental and might well have affected the customers decision had they known about the changes to be implemented during the term of the contract. 23. In response, i-cable argued it is at liberty to impose bandwidth restriction and to amend the relevant clause in the T&C (including the reference to a maximum transmission speed of 8 Mbps). i-cable argued that its T&C contains the following clauses: 7

8 (1) The right to revise the terms and conditions of the T&C from time to time without notice by posting a new version of the T&C on i-cable s website. (2) The right to impose resource management and allocation measures to the system, and bandwidth restriction is imposed as part of its resource management policy. (3) i-cable does not warrant or guarantee the upstream or downstream bandwidth available to individual customers or any performance or reliability warranty. (4) The customer agrees that the resource management exercised by i-cable may affect the performance of the service. (5) i-cable reserves the right to withdraw any of its services or any content at any time. (these clauses are collectively referred to as the Reserved Rights ) 24. It is outside the purview of the TA to examine whether i-cable has the contractual rights, or has breached the terms and conditions of its contract with customers in exercising the Reserved Rights, to restrict the transmission speed of the service. Nevertheless, as the regulator responsible for administering the Ordinance, the TA has the statutory duty to ensure i-cable s compliance with the Ordinance, including section 7M, in operating its telecommunications installation and providing its service. Therefore, even if there is technical justification for implementation of bandwidth restriction, the restriction must be administered in a manner that complies with the Ordinance. Any influence by i-cable s advertising campaigns on consumer s choice and the subsequent administration of its contractual rights or discretion to implement technical measures must necessarily be circumscribed by statute. 25. In the context of this case, it is inconceivable that section 7M would allow a telecommunications operator an unrestricted freedom of unilaterally altering the significant and fundamental characteristic of a service represented by an operator to the detriment of its customers. In the TA s opinion, the spirit of section 7M is to protect consumer interests especially taking into account the emphasis of the telecommunications industry put on advertising campaigns to influence consumer choice, the bargaining position of consumers in negotiating significant terms of standard form contracts and the lack of intelligibility of contracts or their technical jargons. Section 7M is distinguishable from unconscionable contract terms governed by the Unconscionable Contracts Ordinance (Cap. 458). In contrast with the Unconscionable Contracts Ordinance, section 7M does not per se prohibit a telecommunications operator from incorporating clauses into their contracts, which clauses would otherwise be considered unconscionable under the Unconscionable Contracts Ordinance. However, if i- CABLE s intention or interpretation is that the Reserved Rights could be exploited to vary the significant and fundamental characteristics of the service as represented in its advertising campaigns, it should not have used the maximum transmission speed of 8 Mbps (on a shared basis) as the focus of its advertising campaigns. For example, the 8

9 focus of its advertising campaigns could be just on the offer of a broadband service without emphasizing on the maximum speed over which it had reserved the right of not delivering throughout the duration of the contract. Without giving comparable prominence of its Reserved Rights in the advertising campaigns to diminish the overwhelming impression that the maximum transmission speed would be 8Mbps (on a shared basis), customers would be misled and induced to enter into contracts with penalty for early termination in the reasonable belief that the significant and fundamental performance characteristics of the service as represented by i-cable would be delivered, or substantially delivered by i-cable, throughout the duration of the contract. 上 載 快 人 三 十 倍 (30 times faster statement) 26. The 30 times faster statement was displayed prominently in a newspaper advertisement published on 12 March The focus of i-cable s advertising campaigns was at least once on 30 times faster. As of 9 May 2003, the TA found that the 30 times faster statement still appeared in i-cable s website without the qualifier stated in paragraph According to i-cable, the 30 times faster claim was derived from a simple mathematical comparison of the uploading speed of i-cable and that of other ISPs deploying Asymmetric Digital Subscriber Line ( ADSL ) technology (8 Mbps/256 kbps = 31.25). i-cable alleged that the comparison, as it appeared in advertising materials, contained the following qualifier: (a) The maximum downstream speed and upstream speed of i-cable Broadband Service is 8Mbps shared, which may vary due to external factors. (b) Use of our services is subject to our Operating Policy, which is available on i-cable Web site at As i-cable s advertising materials stood, the TA considers that they gave an impression to the average audience that the uploading speed of i-cable internet service was 30 times faster than that of other broadband ISPs. However, i-cable admitted that new customers might also be subject to the bandwidth restriction. From the perspective of those i-cable customers who were subject to bandwidth restriction, the 30 times faster statement was not true because their maximum uploading speed was only 256 kbps to 1.5 Mbps, as opposed to 8Mbps. According to i-cable, customers with bandwidth restriction had a maximum uploading speed of 256 kbps, which speed is the same as other ISPs using ADSL. For customer whose speed level was restricted at 1.5 Mbps, their speed was at most 5.9 times faster (1.5 Mbps/ 256 kbps = 5.859). In view of the fact that the 8 Mbps transmission speed was not of universal application, i.e. was not applicable to all customers, the TA forms the view that the 30 times faster statement was not substantiated. Disclosure of the Bandwidth Restriction 29. On 14 February 2003, the TA noted from the Announcement (Latest News) (Chinese version: 公 佈 事 項 最 新 情 報 ) column of i-cable s website that the 9

10 following sentence was deleted from Clause 28 of i-cable s General Terms and Conditions for the Supply of Cable Multimedia Services ( T&C ) and Operating Policy as from 1 November The maximum upstream and downstream bandwidth that can be used by subscribers (served by the same Cable Modem Termination System (CMTS) of the Cable Broadband Service is, on a shared basis, 8 Mbps. The TA noted that the above deletion took place before i-cable implemented the bandwidth restriction in December With respect to subscribers subject to bandwidth restriction, i-cable submitted that save for subscribers of abusive usage behaviour (who would be issued restriction notices), other subscribers were not informed of the reduction of the maximum upstream and downstream bandwidth prior to its imposition for reasons as stated in paragraph 11(4) above. 31. For subscribers who entered into contracts before 1 November 2002, customers consent or co-operation might be required if new cable modems needed to be installed on the customers premises. Even accepting it was the dominant intention of i- CABLE to effect resource management, the consequence that bandwidth would be restricted is a piece of material information for customers to make a conscious decision as whether to replace their cable modems or whether to continue using i-cable s service. i-cable admitted that these customers were not informed of the speed restriction for reasons stated in paragraph 11(4). 32. As explained, from the customers perspective, transmission speed is a significant and fundamental characteristic of a broadband internet service. Operators must not mislead by half-truths or remain silent in a situation where consumers have a reasonable expectation that the licensee will provide them with specific information for replacing their cable modems. Merely stating the purpose was to improve service quality without at the same time disclosing the reduction of transmission speed amounts to misleading or deceptive conduct as it is necessary to reveal such relevant fact in the context of this case to prevent consumers from being misled. As a result of such conduct on the part of i-cable, customers are misled or deceived into thinking that the maximum transmission speed is at all times, maintained at the 8 Mbps level. 33. Moreover, the TA does not consider that the mere deletion of the reference to transmission speed from the T&C published on the i-cable s website constituted sufficient notice. With respect to customers who subscribed to i-cable s service before 1 November 2002, they relied on i-cable s promotional materials and the T&C at the time of subscription to the service which referred to the maximum uploading and downloading speeds of 8Mbps (on a shared basis). It is not reasonable to expect the customers to check the i-cable s website regularly to find out if there has been any changes to the T&C. The TA also notes that the T&C and Operating Policy published on i-cable s website, and the deletion in question, are in the English language only while other service information and technical instructions to the customers are given in Chinese and English. i-cable should have expressly informed these customers, before the bandwidth restriction, of the actual transmission speeds after the bandwidth restriction so 10

11 as to enable them to make an informed decision as to whether to continue with the service or to churn to other suppliers. In the absence of any notice on the exact change and/or the new maximum bandwidth, customers who were subject to bandwidth restriction would still be under the impression that the maximum service speeds remained at 8Mbps. 34. For customers who entered into the contract after the deletion of the reference to speed from the T&C, they would have been induced into the contract by other advertisements, including the 30 times faster statement. These customers were entitled to expect that the transmission speed of i-cable s service was 30 times faster than the service offered by other ISPs using ADSL technology, which was more or less 8 Mbps. The T&C, as it stood at the time of this investigation being conducted, however, contained no reference to the precise transmission speed, and there was no mention of the bandwidth restriction trial. The focus of the promotional materials, at the time of the investigation being conducted on the present case, was on the 30 times faster statement, also without reference to the bandwidth restriction trial or the precise speed level. These advertisements misled customers into believing that they would be able to get a service of a speed level which was 30 times faster than other ISPs, i.e. around 8 Mbps. However, the fact was that these new customers (i.e. those who entered into the contract after the deletion of the reference to speed from the T&C) were also potential subjects of the bandwidth restriction trial. In the circumstances, the continuous advertisement along the lines of the 30 times faster statement without informing the customers expressly of the exact level of the transmission speed had the effect of misleading or deceiving customers into believing that they would be able to enjoy a service of more or less 8 Mbps transmission speed. Early termination of contract 35. As a result of the reduction in transmission speed, the complainants sought to terminate the contract. However, they were informed by i-cable that early termination of a fixed term contract would be considered as breach of contract and a termination fee would be charged on the relevant customers. Further or in the alternative, i-cable refused to refund the deposit and/or the portion of service fees that customers had paid in advance. In a typical fixed term contract, the customer is committed to a contract term of 12 months and is required to pay the service fee for 12 months in full upon contract, or in four equal instalments, one each of the first four months of the contract term. A termination fee equal to the initial installation fee (waived) is payable for early termination. 36. In this respect, i-cable replied that when complaints were received, its staff would explain the circumstances to the subscribers concerned and would, on a case by case basis, allow early termination of their subscription if, notwithstanding its explanation, the subscribers were not satisfied with its service and requested for service termination. i-cable alleged that it would normally waive the levy for early termination and only charge the prorated service fee at promotional price, if applicable (emphasis added). Exercising flexibility in early termination arrangements is a normal means deployed by operators for handling consumer complaints. The TA notes that such flexibility was exercised at the absolute discretion of i-cable on a case-by-case basis. From the complaints, the TA notes that the waiver of termination fee and refund of 11

12 advance payment were not made available to the complainants. The TA does not consider such measures to be adequate to deal with aggrieved customers who received services materially different from what i-cable offered or what the customers contemplated when they subscribed to the services. Such behaviour of i-cable should be taken into account in assessing whether the overall course of conduct of i-cable was in breach of section 7M. Conclusion 37. In the above paragraphs, the TA has considered in detail the following course of conduct of i-cable: (a) (b) (c) (d) (e) (f) i-cable had, prior to 1 November 2002, used the maximum transmission speed of 8 Mbps (on a shared basis) in its advertising campaigns to induce customers to subscribe to its services (paragraphs 3 and 20); i-cable had subsequently exploited the Reserved Rights to change a significant and fundamental characteristic of the service so that the service after the change is materially different from what i-cable offered or what the customers contemplated when they subscribed to the services (paragraphs 21-25); Other than the customers subject to bandwidth restriction as a result of their abusive usage behaviour, i-cable had, through a conscious decision, failed to notify the customers, before and after the change, about the change to a significant and fundamental characteristic of the service (paragraphs 30-31); i-cable had deleted and thereafter failed to include, on its website and in publicity materials, registration form, T&C or Operating Policy, the specification of a significant and fundamental characteristic of the service after the change (paragraph 29, 33 and 34); i-cable had published the 30 times faster statement before the change, and maintained this statement after the change, which was untrue with respect to subscribers who were subject to i-cable s bandwidth restriction trial (paragraphs 26-28); i-cable had failed to offer customers the right of early termination of the contracts without the requirement to pay a termination fee and forfeiture of advance payment of deposit/service fee as a result of the change of transmission speed (paragraphs 35 and 36). 38. The TA considers that those existing customers who subscribed to i- CABLE s service before 1 November 2002 relied (or are entitled to rely) on the promotional materials and T&C which stated that the maximum uploading and downloading speeds were 8 Mbps, on a shared basis, at that time when they subscribed to the service. These customers had a reasonable expectation that i-cable would continue to supply (at least substantially) what was initially offered to him (her). If i-cable was 12

13 minded to exercise its contractual right to make a significant and fundamental change to the characteristics of the service such that the service no longer corresponded to what was originally offered for which the customers had chosen to subscribe to, then the customers should have at least be informed of the change and be given the opportunity to terminate the subscription without the payment of termination fee and/or forfeiture of advance payment of deposit/service fee already made. i-cable had deliberately chosen to withhold information on the significant and fundamental change of the service, by failing to notify the customers of the change before and after the change and taking deliberate steps to omit the specification of transmission speed on its advertising materials on the website or in the printed form. In the absence of any notice sent to each of the customers imposed with the bandwidth restriction on the exact change and/or the new maximum bandwidth provided by i-cable, these customers might still have the impression that they should have been provided with maximum service speeds at 8 Mbps, on a shared basis. Taking into account the influence of advertising campaigns on consumer s choice, the unequal bargaining position of consumers in negotiating significant terms of standard form contracts and the lack of intelligibility of contracts or their technical jargons, the TA forms the opinion the course of conduct of i-cable, viewed as a whole, is misleading or deceptive in providing telecommunications services and constitutes a breach of section 7M of the Ordinance. 39. After 1 November 2002, i-cable no longer included the maximum service speeds and/or bandwidths provided by its broadband internet services in the relevant service registration form and T&C. The TV commercial as mentioned in paragraph 4 above (which focuses on the 30 times faster statement) provided information concerning service speeds and/or bandwidth which did not reflect the truth. Such advertisement would mislead potential customers into believing that all of them could get an uploading speed 30 times faster than other ISPs. However, the fact was that some of the new i-cable customers were also subject to the bandwidth restriction. Therefore, the TA forms the opinion that i-cable s failure to inform potential customers of the exact service speeds provided before and at the time they subscribed to its broadband internet services is misleading or deceptive in the provision of telecommunications service and constitutes a breach of section 7M of the Ordinance. i-cable's ACTIONS UPON RECEIPT OF TA's PRELIMINARY FINDINGS Transmission Speed 40. i-cable claims that the maximum transmisssion speed allowed for an individual user was changed to 10Mbps for download and 1.5Mbps for upload (the "new bandwidth settings") on or about 16 May i-cable confirmed that the new bandwidth settings replaced the bandwidth restriction in question and applied to all subscribers who were previously subject to bandwidth restriction. According to i- CABLE, about 20% of subscribers are subject to the new bandwidth settings and all of them have been informed of the new settings. Moreover, all the subscribers affected by the new settings would have been informed of the new settings before the changeover takes place. i-cable explained that the previous bandwidth restriction was only temporarily implemented during the initial trial of the new cable system when its capabilities and performance were uncertain. 13

14 Notice to Customers 41. i-cable claims that after a few months trial, the performance of the new system has been stabilised and the maximum transmission speed allowed for individual subscriber is fixed at 1.5Mbps for uploading and 10Mbps for downloading. These new bandwidth settings would not be subject to further change in the near future. In view of the implementation of the new bandwidth settings and the TA's concern, i- CABLE considered it is a suitable time to notify its subscribers of the capabilities of the new system and the bandwidth limits. With effect from 5 June 2003, i-cable started to inform subscribers already served or to be served by the new system by means of edm giving the required details. For those to-be-affected subscribers, electronic Direct Mail ("edm") will be issued 3 days prior to the changeover to the new system. Alongside the issue of these notices, its existing early termination policy will continue. Advertisements 42. i-cable submitted that all advertisements containing the "30 times faster" statement were withdrawn in November According to i-cable, the "30 times faster" statement was once the advertising focus when i-cable was still providing 8Mbps uploading and downloading transmission capacity to subscribers (on a shared basis) without bandwidth restriction. The advertisement referred to by the TA was only kept in i-cable's web site for archival purpose with minimal traffic. It has now been removed from i-cable's web site in view of the TA's concern. TA's DECISION 43. Upon consideration of the information and/or comments furnished by i- CABLE, the TA concluded that: (a) (b) the course of conduct, viewed as a whole, in relation to the imposition of bandwidth restriction is misleading or deceptive in providing telecommunications services and this constitutes a breach of section 7M of the Ordinance; and the "30 times faster" statement included in the advertisement which appeared in i-cable's web site after the imposition of bandwidth restriction in December 2002 was untrue with respect to subscribers who were subject to i-cable's bandwidth restriction trial and therefore constitutes a breach of section 7M of the Ordinance. TA's ACTION 44. In considering the appropriate regulatory actions to be taken against i- CABLE for the above breaches, the TA takes into account the remedial actions 14

15 undertaken by i-cable including: (a) (b) as from 16 May 2003, i-cable has improved the maximum transmission speed allowed for individual subscribers who were previously subject to bandwidth restriction. The new bandwidth settings allow a downloading speed of 10Mbps and an uploading speed of 1.5Mbps; and as from 5 June 2003, the affected subscribers were informed of the new bandwidth settings by edm and future subscribers to be affected would be informed by edm of the change 3 days prior to the changeover. 45. Taking into account all the circumstances of the case, including the remedial actions taken by i-cable in addressing the TA s concerns and the fact that the Guidelines on Misleading or Deceptive Conduct under section 7M of the Ordinance had not been issued when the investigation of the complaint was conducted, the TA considers that a warning is sufficient to address each of the breaches. The TA has issued a warning to i-cable on each of the breaches in paragraph 44(a) and 44(b) that i-cable should comply with section 7M of the Ordinance. For future breaches, the TA will consider the appropriate penalty, including financial penalty, on a case-by-case basis. 15