Inquiry follows claims company mis-sold phone service and switched some internet users to its service without their consent

The UK’s second-largest broadband provider, TalkTalk, is facing a fresh investigation by Ofcom into claims it switched internet users to its service without their consent.

Ofcom launched the investigation, its second into TalkTalk this year, after complaints from the public. Earlier this month Ofcom ruled that the internet service provider breached telecoms regulations when it charged customers for cancelled services.

The media regulator’s investigation, announced late on Monday, follows claims that TalkTalk mis-sold its fixed-line telephone services and switched some internet users to its service without their consent.

TalkTalk could face a financial penalty of up to 10% of relevant turnover if it is judged to have breached telecoms regulations.

The company said it was fully co-operating with the Ofcom and that it will continue to “review [its] sales processes and take any potential issues of mis-selling extremely seriously”.

More than 1,000 complaints have been received by Ofcom about TalkTalk this year, with most understood to be from customers wrongly charged for cancelled services.

Earlier this month Ofcom ordered TalkTalk and Tiscali, both part of TalkTalk Group, to comply with regulations by 2 December or face further enforcement action, including a possible financial penalty.

The internet service providers, which have a combined UK market share for fixed-line broadband of 22.8%, were found to have been charging customers hundreds of pounds for cancelled services. In some cases the companies issued warnings over unpaid bills years after customers’ accounts were closed.

Ofcom ordered the two firms to pay back customers’ legal costs where proceedings had begun. They must also repair credit ratings of affected customers.

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• Average speed 46% below that promised by ISPs
• Mandatory code and clear penalties vital, experts say

Millions of broadband users are being sold short by providers that are delivering speeds far below those advertised, according to research published today.

Data released by Ofcom, the communications regulator, shows that the gap between the headline broadband speeds customers sign up for and the connection they actually receive has widened sharply in the last 12 months. The average actual speed is now just 46% of what was promised, down from 56% a year ago.

Internet service providers are even advertising maximum speeds which in practice no customers receive, according to Ofcom, which is now pushing for tighter controls on selling broadband in the UK.

“There is a very big difference between the headline services that are advertised and the actual speeds that are delivered,” said Ed Richards, Ofcom’s chief executive.

Consumer groups said the research showed that many ISPs were letting their customers down.

“If consumers pay for a Ferrari-style internet service, they should not get pushbike speeds. Broadband users should get what they pay for,” said Robert Hammond, head of post and digital communications at Consumer Focus.

Peter Vicary-Smith, chief executive of Which?, demanded an end to “misleading claims” about broadband.

“Some internet service providers continue to advertise ever-increasing speeds that bear little resemblance to what most people can achieve in reality,” he said.

There is growing demand for faster broadband packages as more computer users watch television and play games online, or share their connection between several PCs. This has led ISPs to offer faster services – promising “up to” 20Mbps, for example, rather than the standard maximum speed of 8Mbps. However, the UK’s communications infrastructure appears incapable of supporting such services.

Ofcom reported that nearly a quarter of broadband users said they received a slower service than expected, and this was the most common complaint to ISPs.

The only ISP delivering close to the maximum speed advertised, according to Ofcom, was Virgin Media, with the advantage of a relatively new cable network in many urban areas. There was a stark difference between the performance of Virgin and the various ISPs such as AOL, BT, O2, Orange and Sky which all rely on BT’s ageing “last mile” local network.

While the average speed of an “up to 20Mbps” cable service is 15.7Mbps, this fell to just 6.5Mbps for a typical “20Mbps” DSL package, which uses copper phone lines.

Ofcom said that copper lines that connect homes and small firms to the local BT telephone exchange were being “stretched to the very edge of their capability” to support high-speed internet access. Longer phone lines can only support slower speeds.

An Orange spokesperson said Ofcom’s findings were “disappointing”, and questioned their accuracy as only a small fraction of its customers were tested.

Another issue is that many homes will effectively share a large broadband “pipe” in the local exchange, so average speeds fall at busy times.

John Petter, managing director of BT’s consumer division, insisted that the company “continues to invest heavily in our network, bringing speed improvements to customers nationwide”.

“Rip-offs must end”

ISPs typically offer broadband services promising speeds of “up to” 8Mbps, 20Mbps or 50Mbps. In a damning indictment of the current situation, Ofcom wants these advertising rules tightened up so that an ISP can only promise a maximum speed if “at least some” people can receive it.

“Our beef is that people were being offered up to 8mbps, and nobody actually got 8Mbps,” said Richards. He also wants broadband services to be advertised with a “typical speed range”, to give people a better idea of what they will get in practice.

Jon James, executive director of broadband at Virgin Media, agreed it was important that the way broadband is sold should be tightened up quickly.

“We need to ensure people are not being ripped off, as the lack of transparency in broadband advertising risks damaging consumer confidence in superfast broadband. The Advertising Standards Authority has announced a review into the way broadband is advertised and the need for change is now urgent,” he said.

Ofcom has also put together a new code of conduct for the industry. This would allow consumers to cancel their broadband service with no penalty within the first three months if the speed was significantly below what was promised. Richards said this would encourage ISPs to improve their service. Some experts argued a voluntary code was not enough.

“Simply strengthening it does not cut the mustard – we need a mandatory code with clear penalties for those that breach it,” said Matthew Wheeler, communications expert at uSwitch.com. Ofcom’s data also showed that Britain still suffers a significant Broadband Divide, ten years after the first high-speed services went on sale. Average download speeds of 5.8Mbps were recorded in urban areas, versus just 2.7Mbps in rural areas – where average line lengths are greater.

Richards warned that this gap was “likely to extend further before it narrows”, as BT starts to build a next-generation fibre-optic network in towns and cities that will offer speeds of up to 100Mbps in some locations.

BT plans to spend £2.5bn installing fibre-based broadband in two-thirds of the country by 2015. Richards said today’s data showed the importance of investment to bring fibre to as much of the country as possible.

The coalition government has said it expects the market to take the lead in delivering fibre across the UK, but BT has warned it cannot extend coverage further without some form of government support.

• This article was amended on 27 July 2010. We originally referred to “Virgin Mobile” in paragraph 11 – this has been changed to “Virgin Media”

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