Beneficial technological change but unlawful customer information procedure infringing on consumers’ rights

Published: 19 December 2018

In April this year, Magyar Telekom Nyrt. switched its fixed-location broadcasting services from analogue to digital technology. When informing subscribers on this issue, however, the company failed to comply with the rules on notification periods, and unilaterally amended fixed-term contracts. Due to the infringements committed during the switchover, on 10 December the National Media and Infocommunications Authority (NMHH) imposed a fine of HUF 51.5 million on the operator and its CEO.

In the last phase of its network development project launched in 2013, the operator discontinued its analogue broadcasting service as of 10 April 2018, replacing it with digital technology, and in some places introduced IPTV instead of digital cable television services. The change of technology affected a total of 14,194 subscribers, who were unlawfully informed by the operator, even though the modernisation of the technology also improved the quality of television services. On 12 March 2018, i.e. before the technological switchover, NMHH launched an official investigation to examine Telekom’s compliance with its relevant statutory obligations when the new services were introduced; and when the investigation concluded that non-compliance was probable, the Authority launched its official supervisory procedure on 14 June 2018.

Types of infringement

During the switchover, Telekom sent contract termination letters with a fixed notice period to 8,698 subscribers. Although the relevant legislation permits the operator to do so, the termination should have been provided with a notice period of at least 60 days, which, as the investigation concluded, did not happen with most of the subscribers. In other words, the operator failed to provide a number of subscribers with the option to find a new service within a reasonable time if they did not wish to accept Telekom’s offer and thereby avoid being left without any service.

In the course of the procedure, the Authority also discovered that, in the case of subscribers where circumstances permitted, the operator switched from analogue to digital cable television service, and this change of technology involved amendments to the subscriber contracts in a total of 5,496 cases. However, the operator failed to comply with the thirty-day notification deadline required in these cases and with the statutory requirements for the mandatory content elements of the notification such as information on the amended provisions and availability of the general terms and conditions, or the rights of the subscriber in the case of a unilateral amendment to the subscriber contract. In the case of service packages and loyalty-period contracts, the termination of the cable television service also affected the basic contract terms and fees of the remaining services by reducing subscriber discounts, thereby resulting in increased service charges. According to the relevant legislation, fixed-term subscriber contracts may be unilaterally amended by the operator only if the amendment is required by a legislative change or a regulatory decision, or if it benefitted subscribers. However, the Authority concluded that the amendments did not fall within the scope of any of those exceptions, that is, Telekom unlawfully amended the subscriber contracts concerned.

Based on the infringements discovered, the Authority called on Telekom to comply with the relevant regulations. In addition, it levied a fine of HUF 50 million on the company and a fine of HUF 1.5 million on its chief executive officer. This is a first instance resolution, with the operator having the right of appeal.

The aspects of the Authority's decision

NMHH considered the impact of the infringements on the market to be particularly significant, as the operator 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 its competitors. When imposing the fine, the Authority also took into account that the technological switchover was the last phase of a long-term, planned process under no external coercive pressure, that is, the operator had sufficient time to prepare for the lawful implementation of the plan while respecting consumer rights. However, Telekom cooperated with the Authority during the procedure and provided the requested data and information to NMHH.