NMHH: Telekom’s service restrictions continue to be unlawful

Published: 1 October 2018

On 10 September, the National Media and Infocommunications Authority (NMHH) once again fined Magyar Telekom and its CEO, this time for a sum of HUF 61.5 million, as the service provider did not fully comply with the Infocommunications Authority’s 2015 resolution. In approximately one out of seven cases, the service provider still fails to meet their legal obligations to notify customers in arrears of their overdue payments. The company’s practice of restricting their service in such cases also does not comply with the provisions in force.

NMHH uses follow-up inspections to verify whether individual service providers are complying with the Authority’s decisions relevant to them. This year, the Authority investigated Magyar Telekom’s level of compliance with the Authority’s 2015 resolution, which was made in response to the company’s unlawful service restriction practices for subscribers with overdue payments on telecommunications services (landline telephony, cable internet access, analogue and digital cable television, IPTV and satellite television). According to a follow-up inspection concluded on 10 September, the service provider only partially complied with the previous resolution, which included a total of HUF 162 million in fines. The customer notification process remains noncompliant, and the required waiting period before restricting services is not always met.

What is meant by service restrictions?

The law allows service providers to force subscribers committing a material breach of their subscriber agreements and/or failing to pay their bills for more than 30 days into contractual 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. Service providers must provide subscribers with advance notice of any service restrictions, and must allow sufficient time for subscribers to settle their outstanding debts. These requirements are described in more detail in the service provider’s General Terms and Conditions. While service restrictions are in effect, only a limited range of services may be used: for phone calls, this includes the blocking of all non-emergency outgoing calls. For television service, only a select number of channels remain available and, for Internet browsing, only certain a designated pages of the service provider’s website may be accessed.

The reason for such strict statutory conditions on service restrictions is because they aim to restrict the most fundamental of customer rights: the right to use the service. Therefore, the Authority seeks to use every tool at its disposal to ensure that providers do not violate this basic customer right.

Details of the service provider’s infringing conduct

In 2015, Magyar Telekom reviewed its processes for handling non-paying subscribers, and—for customers providing a mobile phone contact number—proceeded to switch to a traceable, SMS-based notification process regarding payments due and service restriction notifications. This process was in compliance with statutory requirements. For all other customers, however—customers comprising one-seventh of the affected subscriber base—the service provider continues to send the first notification by regular, non-certified post, adhering to the same non-compliant process for which it was sanctioned by NMHH in its 2015 resolution. Magyar Telekom remains unable to verify whether and when these subscribers have received the payment due notifications. The date of receipt is important because the law mandates a grace period of 30 days for paying the subscriber fees, as calculated from the date of receipt of the payment due notice. However, the service provider calculates this grace period from the date of posting, which can result in a difference of up to almost a week, at the expense of the subscriber. It is likewise unlawful for the service provider to use such an unacceptably shortened deadline for restricting their services. In addition, Magyar Telekom also failed to prepare the action plan mandated in the 2015 resolution, and did not otherwise employ any such action plan.

Principles and content of the Authority’s resolution

NMHH considered the impact of the infringements on the market to be particularly significant, as the service provider is one of the largest players in the Hungarian electronic communications market, meaning that its conduct and infringements are relevant to more than just the directly affected subscriber base, also influencing the practices of competitors. When determining the amount of the fine, the Authority also took into account the fact that after settlement of the debt, a separate request was required for waiving the reconnection fee. That said, by largely switching to an electronic notification process, the number of Magyar Telekom’s infringements was significantly lowered compared to 2015.

The Infocommunications Authority called on Magyar Telekom to improve the compliance of its conduct and to submit an action plan for resolving its non-compliances. In addition, it levied a fine of HUF 60 million on the company, and a fine of HUF 1.5 million on its head executive. This is a first instance resolution, with the service provider having the right of appeal. The Authority’s resolutions are intended to encourage compliant conduct on the part of service providers. The type and extent of all legal consequences are determined according to the principles of graduation and proportionality, taking all the circumstances of the case into account.