Small ISP's and the TIO

When the government passed legislation to require all ISPs to become members of the TIO scheme, there was no consultation with the ISPs or any industry schemes as to the impact, funding, support or function of such a scheme. It was imposed on us. Don't get me wrong, the scheme itself is not necessarily a bad thing. There are quite a few ISPs and CSPs who need something like the TIO to protect consumers. But not all ISPs are bad!

When the whole TIO membership business became an issue, the major problems that ISPs raised was that there was little or no appeals mechanism in place for those inevitable cases where things went wrong. As most Australian ISPs are forced to use Telstra for the provision of major sections of their own infrastructure (like our indial lines, ISDN lines, Frame Relay and DDS etc) we rely on Telstra to provide these facilities in a timely manner, and to ensure they are maintained in working order. However, as Telstra is already a member of the TIO scheme, and the TIO membership specifically prevents inter-member disputes, as soon as an ISP becomes a TIO member, we have NO useful mechanism of complaint against Telstra when things go wrong.

From an Industry point of view, Telstra have a REAL problem with their billing department, and rarely manage to provision and install new services on time. This results in significant problems for ISPs in many ways. Let me tell you just some of the things that's happened here with our own service:

• In 5 years, we have NOT ONCE had an accurate, correct phone bill. In one case, we had a bill for $76,200 which included over $19,000 in over-charging due to billing errors.
• We have had instances of additional phone lines being ordered well within time, but where the lines have been delayed by over a month, in one case up to 3 months. While we attempt to provide little or no congestion on our lines so our users don't experience BUSY tones, it is very hard to do when we cannot get new lines installed in a timely manner.
• Where changes to exchanges have rendered services unusable for days, this has happened for instance when the change from "060" to "02-60" came into play, and some of the outlying exchanges were not updated for several days, despite repeated calls to Telstra faults.
• Where a technician working on a fault has locked out ALL our lines at an exchange, then gone home for the weekend. Telstra have then demanded a MINIMUM callout fee of $400 just to get someone in to fix the problem THEY created.
• Recently during an "exchange upgrade" Telstra have introduced a fault into the Lavington exchange. Several times now, the exchange has DISCONNECTED EVERY CALL IN PROGRESS throughout the entire exchange. Bad enough that all our customers were disconnected at that time, but worse still is that the problem also took out our helpdesk line so nobody could even call to find out what was wrong!
• Telstra have installed "Pairgain" devices on many subscribers lines, particularly in rural areas where they don't have enough copper cable in the ground. While this doesn't directly affect us, the subscribers on those lines have gone from a working (although substandard) line to one that simply is unusable for data - including faxes!

Our telstra "complaints" file is huge, and growing. Membership to the TIO means we cannot complain about their service or billing, and that we will be charged for complaints that are not under our control, without any mechanism for appeal.

Many ISPs raised these issues with the TIO, (ombudsman) John Pinnock, only to be assured that these things would not happen. "The TIO staff members are professionals who work in this industry and can tell when a complaint is unrealistic." That was ok, but he ABSOLUTELY REFUSED (and still refuses) to put his assurances in writing. While the law requires we join the TIO SCHEME (note that term SCHEME), the application forms sent by the TIO, which state on the cover "Application for membership to the TIO scheme", are actually application forms to join "TIO Limited". TIO Limited, at that time, would not make their M&A available, yet required acceptance of their terms which amongst other things agreed that we, as members, pay a percentage of WHATEVER the TIO happened to cost during the year. NO LIMIT WHATSOEVER. The TIO SCHEME however, is free membership. So, here we have the interesting situation where the law requires membership to the scheme, but the person who allows such membership requires us to join his COMPANY and to pay unspecified and basically indeterminate fees in order to join the SCHEME.

Given the current economic and political climate and cost cutting measures, support from politicians for review or reform in this area is unlikely - it might mean trying to find alternative "funding". Despite the recent publicity of our concern over this issue, we (ALI) have not heard a thing from the office of our local member - "two minute Tim". Looks like small business operators are again on their own against a bureaucracy that's lost the plot. Ed.

There was an interesting article recently made available to me by another ISP who was covered recently in some of the national papers. He has kindly allowed me to reproduce his release here:

On July 1 1997, the Federal Government enacted legislation that required all Carriers, Internet Service Providers (ISP's) and Telephone Service Providers (SP's) to join the Telecommunications Industry Ombudsman (TIO) Scheme. This legislation went ahead with no consultation of the Industries that it affected. It was purely a knee-jerk reaction to something we have not been able to determine yet.

Currently, ISP's form 86.0% of the TIO Scheme members. ISP's and SP's form 97.2% of the membership, yet this huge membership base has only two (2) seats on the Board in total. Telstra has 3 seats, Optus has 4 seats and Vodafone has 2 seats. Three Carrier members have 9 seats, 520 Service Provider members have 2 seats. This represents a grossly mismatched Board of Directors.

The TIO funds itself by imposing fees on members for complaint resolution services. The breakdown is as follows: - (from the 1997/98 TIO Annual Report)

Case Level	Response from member	Cost to TIO member
Enquiry	Usually not required	$15
Consultation	Within 2 weeks	$140
Complaint	Within 4 weeks	$292
Dispute	Indefinite period	$ 1130

These amounts are accumulative and are imposed upon the member, regardless of whether the member is in the right or not. In addition, the $2.394 million the TIO cost to run last year is divided up amongst the members who received complaints based on their percentage of complaints. A single Enquiry costs $15.00 plus another $45.90 in operating costs. ($2.394 million by 52,138 complaints).

"As an office of last resort, the TIO ensures that TIO members are given the opportunity to resolve problems directly with complainants before the TIO becomes involved. In every case, both sides of the dispute are heard before a settlement is facilitated." (p.16, 1997/98 TIO Annual Report)

From incidents I have been privy to, the TIO has contacted ISP's about complaints, but refused to supply any information about the complainant. How can you investigate a complaint if you have absolutely no information about the complaint or who made it? You cannot investigate your records to see what resolutions have been performed, you cannot find if a refund has been given, you cannot even find out if the complainant is a client!

"Because case costs increase and accumulate in accordance with the resolution timeframe, there is a strong incentive for TIO members to settle cases as quickly as possible." (p.16 1997/98 TIO Annual Report)

It could be argued that there is an incentive for the member to simply take the hit and pay the $60.90 fee (plus investigating and testing if necessary) even if they are in the right, so that the fee isn't escalated to $200.90 because they contest the claim.

"Whilst the majority of Internet service cases were also settled at the Enquiry stage, more than 5% were escalated to Consultation level. This possibly reflects the lack of routine and precedent for Internet cases given their recent addition to the TIO's jurisdiction." (p.17 1997/98 TIO Annual Report)

John Pinnock personally stated that "staff are trained to deal with these sorts of issues" when queried about taking on 500+ new members yet their own report clearly shows this not to be true. New members are wearing the costs of the TIO's inabilities.

John Pinnock (the Ombudsman) has stated to me that although the membership will grow, he does not expect costs to rise. This is a business impossibility, unless the TIO was grossly overfunded in the first place. A 2800% percent increase in membership, but no rise in costs.

Page 24 of the 1997/98 TIO Annual Report cites a case where a person lodged a complaint against a TIO Scheme member because of a large amount of 1900 Information service calls. The staff member raised the issue to Complaint level. The complainant later withdrew after it was found that someone in her household was making the calls. This cost the member $492.90 plus the cost of the tests to confirm the member was in fact in the right. This is not complaint resolution, it is highway robbery. Members are basically required to write a signed blank cheque and let the TIO fill in the numbers. No industry should have to abide by that.

Pages 34 through 36 also contain more examples of unjust billings to members as well as inaccurate information about transmission speeds that Telstra are required to supply.

About the Ombudsman himself. I have met John Pinnock several times in person and we have conversed in letters also. Almost every question ever asked was evaded with "I'll have to look in to that", "I don't know" or similar. No answers have been forthcoming. The few times I did actually get an answer, he refused to put it in writing. Others have related the same experience and this has left us with very little faith (ie, none at all) in the abilities of the TIO to be a fair and equitable complaints body.

Cases I have been privy to have shown that John Pinnock has clearly stated "that wouldn't happen" and then it subsequently has. This is occurring all over the country. He is breaking his word. How can we trust an Ombudsman who refuses to put direct answers to direct questions in writing?

Under the legislation, the TIO does not have the power to force a company to join the Scheme. This task is given to the Australian Communications Authority (ACA) who has the power under law to force a company for join the TIO Scheme. It does not require us to join TIO Ltd and they are very different things. However, the TIO Scheme application form mis-represents itself and is in fact an application form to join TIO Ltd, even though the cover states "TIO Scheme Membership Form".

"The ACA is empowered to direct a company to join the TIO [Scheme] and is able to take further action if a company breaches a direction. More than 200 companies were referred to the ACA during the last financial year and the TIO has asked the Authority to exercise its formal power of direction." (p.11 1997/98 TIO Annual Report)

This shows a complete lack of faith by a major portion of the industry in the TIO's ability to be a fair complaints resolution body. A handful of companies may show mere rebelliousness, but 200 companies shows a defiant stand against unfair legislation and an unfair complaints body.

TIO Limited has 23 staff, each averaging salary in excess of $51,000 per year. This is well above the national average income. Last financial year TIO Limited spent $203,000 on renting premises ($16,900 a month? Come on!), $163,000 on phone and fax calls, $105,000 on travel and accommodation (personally, I'd like to see the receipts), $98,000 on advertising and $60,000 on recruitment fees (that's around $12,000 per new staff member!!).

Due to this total lack of confidence in the TIO and the TIO Scheme, Healey Communications decided it would not voluntarily join the Scheme and asked the ACA to issue a Directive to join. In the letter I also stated that I thought an industry complaints body to be a good thing for the industry and that I would join upon receiving a Directive. The ACA ignored this and issued another request to join. Healey Communications again requested a Directive to join and again we received a request to join. A request to join is not a Directive. A third time I asked for a Directive to join and on October 2 1998 I received a Directive to join the TIO Scheme. Within 30 minutes a signed Application form had been posted to the TIO.

That same day, the ACA issued a press release world wide naming me personally and Healey Communications for failing to join the TIO Scheme. This was subsequently published in numerous places. Their press release completely ignored the fact that I had asked for the Directive to be issued (3 times!) and failed to address my concerns about TIO Scheme membership. Upon querying Dr Rosyln Kelleher on October 6 1998 I was told that the ACA Board had decided to "make an example" of the Directive to join. A person, who ASKED for the Directive, following the legislation was made an example of.

One thing that is little known is that Telstra pushed very hard to have this legislation enacted. Why? Because the TIO refuses to deal with disputes between members. Many Internet Service Providers were in this industry well before Telstra. At that time, ISP's were "end users" of Telstra Corporation (Telecom) and its services. They had a legitimate right to lodge complaints for service faults, delayed and failed installations etc. Now we cannot complain. We are members as ISP's, Telstra is a member as a Carrier. Different classes (different industries), yet we cannot complain.

The Australian Communications Industry Forum (ACIF) was the place to go we were told by the TIO. ACIF washed their hands of it saying they had no procedures in place to handle dispute resolution of this kind. That leaves us with the ACCC. Do you know how hard it is to prove anti-competitiveness? Given Telstra's track record of bungled installations and billing errors, it is almost impossible.

This whole situation is hardly just.

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Antony Healey	ISOC-AU Founding Member	Ph: +61 2 9834 6055
General Manager		Fax: +61 2 9834 6249
Healey Communications Australia -- Giving you the world...

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Many ISPs have already indicated that when they get a difficult customer with repeated unresolved problems, the ISP simply TERMINATES the account and refunds the user a proportion of their prepaid subscription. This moves the "problem" from the ISP, and thus avoids further charges to the ISP, whilst leaving the customer without access.

The reason ALI have made a stand is that this is simply wrong!

The Legislation says we must join the TIO SCHEME. However, the Telecommunications Industry Ombudsman, John Pinnock, has determined that in order for someone to become a member of the TIO Scheme, they must join his COMPANY, "TIO Limited". Indeed, even the application form which says on it "Application to join the TIO Scheme" refers inside, everywhere, that you are applying to join "TIO Limited" and agree to their M&A which allows the TIO to charge whatever they wish. The M&A do indicate that charges will be at a percentage of the total operating costs, but there is no limit as to the operating costs and therefore on the ISPs costs!

Now, I must state here, that I do not object to the TIO SCHEME itself, but that I refuse to sign a blank cheque to someone who I do not know or trust. I don't believe any intelligent business person would.

In the days since the media interviews about the TIO, I conducted a small survey of my own amongst Internet Service Providers. The results were quite surprising.

The following results are from the survey carried out in November 1998. The survey was NOT compulsory. Responding was purely voluntary. 96 responses were received from a potential maximum of 560 - at least a 17% response rate (possibly higher as the number of ISP's actually subscribed to the aussie-isp list, and their "participation" levels are uncertain).

There are still a significant number of ISPs who have NOT yet joined the TIO scheme OR TIO limited. There are also a number who HAVE joined, but wish they had not, or were tricked into joining, or forced to against their will.

Percentages are quoted as a percentage of responses to each question, not as a percentage of total respondents. (eg, the "Joining Reason" question was only answered by about half the respondents. Of those, 93% answered "Because they had to" or they were threatened)

So, without further interpretation, here are the results.

Q. Are you a member of the TIO Scheme:	58% Yes	41% No
Q. Are you a member of TIO Limited:	56% Yes	43% No
Q. Do you know the difference:	37% Yes	62% No
Q. Have you (to your knowledge) had any 'enquiries' against you yet:	16% Yes	83% No
Q. Were any charges what you expected:	27% Yes	72% No
Q. Do you want me to summarise the results to the list when completed:	95% Yes	4% No
Q.If you have joined, what was the reason?
1. I had to; were forced to; were tricked/mislead into signing:	93%
2. I wanted to:	6%
3. Other:	-
Q.Approximate size of your business:
1. Under 500 subscribers:	33%
2. 500 to 2K subscribers:	41%
3. 2K to 5K subscribers:	20%
4. 5K to 20K subscribers:	4%
5. Over 20K subscribers:	-
Q.Do you have any complaints resolution policies in-house? (This one was difficult, as only the first answer was used. Several respondents quoted more than one answer)
1. None	?
2. Case-by-case	87%
3. Just Refund it if it's under $50 or so	12%
4. Quote the T&C and tell them tough luck	?
5. Other	-

ISP Opinions Surveyed
(Agree)	5	4	3	2	1	(Disagree)
Q. The AFIA and ACCC provide a suitable complaints mechanism for inter-member complaints?
(Agree)	25%	8%	12%	16%	37%	(Disagree)
Q. ISP representation of two members on the TIO board is enough (2 of 11)?
(Agree)	4%	4%	8%	16%	66%	(Disagree)
Q. The scheme can be improved?
(Agree)	79%	12%	4%	-	4%	(Disagree)
Q. I'd approve more if members COULD complain against carriers
(Agree)	79%	8%	-	4%	8%	(Disagree)
Q. I'd approve more if the charges were more reasonable and the TIO took more care in checking 'enquiries'
(Agree)	66%	16%	4%	-	12%	(Disagree)
Q. I think the TIO scheme is fair
(Agree)	-	-	20%	25%	54%	(Disagree)
Q. I support the TIO Scheme
(Agree)	4%	25%	29%	8%	33%	(Disagree)
Q. I trust the TIO Scheme
(Agree)	-	8%	16%	29%	45%	(Disagree)
Q. I support TIO Limited
(Agree)	-	-	33%	8%	58%	(Disagree)
Q. I trust TIO Limited
(Agree)	-	-	20%	16%	62%	(Disagree)
Q. I support John Pinnock
(Agree)	-	8%	16%	20%	54%	(Disagree)
Q. I trust John Pinnock
(Agree)	-	8%	8%	29%	54%	(Disagree)
Q. Non-membership will cost me clients
(Agree)	12%	8%	16%	20%	41%	(Disagree)
Q. Membership will cost me $$$
(Agree)	37%	20%	12%	20%	8%	(Disagree)