NMHH Fines Magyar Telekom as a Reminder to Legal Compliance

Published: 13 February 2015

The National Media and Infocommunications Authority (NMHH) has imposed a monetary penalty on Magyar Telekom as the operator’s service restriction practices were found to be in line neither with its own General Terms and Conditions nor with applicable legislation. Launched ex officio, the administrative supervisory proceeding was concluded on 5 February 2015, with the NMHH imposing a fine of HUF 160 million for a breach of regulations on electronic communication pertaining to the restriction of service and a violation of the operator’s General Terms and Conditions.

About the Supervisory Proceeding

In the context of a supervisory proceeding, the NMHH assessed Magyar Telekom’s service restriction practices in the period between 1 October and 31 December 2013, with regards to fixed communications services (fixed-line telephone, fixed broadband, analogue and digital cable television, IPTV and satellite television). Conducted based on data provided by the operator, the proceeding was concluded on 5 February 2015 with the passing of a Resolution. Applicable legislation on electronic communication clearly stipulate that service restrictions are subject to prior notice and may only be permitted if affected subscribers fail to settle their overdue balances within 30 days of receipt of said notice.

According to the events and facts unveiled throughout the proceeding, the operator had repeatedly violated both applicable law and its own General Terms and Provisions. It imposed service restrictions even on subscribers in the case of whom there was no evidence that the legal obligation of prior notice had been observed. Given that prior notices had been sent out via standard post, the dates of neither postage nor receipt can be established. Magyar Telekom’s failure to provide the 30-day payment deadline specified by law constituted another infringement, as it applied the 30-day window starting with the date of notice and not from the date of receipt, even though applicable legislation calls for the latter. The operator further violated the law by introducing service restrictions to subscribers who, despite having settled their original bill, had on their accounts an overdue amount that was accrued at a later date.

Compliance Is Essential

Inspections have revealed that the above conduct was not limited to individual cases but represented a long-lasting practice, with the operator being Hungary’s largest fixed-access electronic communications service provider, serving millions of subscribers nationwide. During the period under review, the operator had, on account of balances past due, restricted its fixed-line telephone, fixed broadband, as well as fixed-access, satellite and IP-based broadcasting services in a total of 72,300 instances, while also charging a reinstatement fee to 32,087 subscribers.

Prior to the current proceeding, Magyar Telekom’s service restriction practices had already been subject to review by the NMHH 23 times. In 12 of these cases, the operator was notified and mandated to bring its services in line both with applicable legislation on electronic communications and its General Terms and Conditions, and was fined in another 11 instances for a total of HUF 23 million.

Penalty and Action Plan for the Restoration of Legality

The NMHH has fined the operator HUF 160 million for a breach of regulations on electronic communication pertaining to the restriction of service and a violation of its own General Terms and Conditions. As this was not the first instance these infringements were established, the operator’s CEO, who is to be held accountable for ensuring legal compliance, was fined another HUF 2 million. The combined total of these fines is less than 20 percent of the maximum amount that can be imposed.
In addition, the NMHH ordered the operator to cease these infringements, and to prepare and implement an action plan aimed at restoring legality. Magyar Telekom was cooperative throughout the proceeding and sought to arrive at a solution to the issues identified even before the Resolution was passed. This solution was elaborated in an Action Plan, the implementation of which will be monitored by the NMHH ex officio. As a result, significant improvements can be expected in the process under review, and the number of complaints can be reduced.

As is known, the Authority supervises the enforcement of and compliance with regulations on electronic communication, oversees the fulfilment of the General Terms and Conditions and follows up on whether decisions are duly executed. The type of sanctions to be applied and the extent of fines to be imposed are subject to a list of considerations, which includes the magnitude of a case and the number of subscribers affected, the continuity or repetition of an infringement, as well as the violation of interests caused and material advantage secured as a result. The first-instance Resolution is not final. Appeals may be lodged with the NMHH’s President, thereby deferring payment of the fine.

What is a restriction of service? It refers to a service provider’s right to coerce subscribers committing a material breach of their subscriber agreements and/or failing to pay their bills into compliance and payment without the need to terminate their agreements, while also providing affected subscribers with an opportunity to settle their overdue balances and eliminate the breach. When service restrictions are in effect, only a limited range of services may be used: for telephone service, this includes the blocking of all non-emergency outgoing calls. For television service, only a select number of channels remain available and, for Internet service, only a designated page of the service provider’s website may be accessed. For the lifting of the restriction a service provider may charge a reinstatement fee; therefore, the circumstances under which such measures can be resorted to and a list of applicable prior action are precisely set forth by law.