Electric Kiwi, an independent electricity and broadband provider, has lodged a complaint with the Commerce Commission against some of New Zealand's biggest broadband retailers, alleging the use of 'sneaky notice periods' that undermine competition and disadvantage consumers.
The complaint highlights Electric Kiwi’s concerns over the standard 30-day notice periods for customers switching providers. These periods, Electric Kiwi claims, embolden incumbent providers to dissuade customers from leaving, either by offering special deals or exploiting customer uncertainty about the switching process. “These notice periods are a dirty tactic to lower competition,” states Electric Kiwi Chief Executive, Luke Blincoe.
"When customers know they exist, it acts as a prompt for customers to call their existing retailer, giving the losing retailer an opportunity to dissuade the switch...If the customer does not know they have a notice period then they can end up paying what amounts to a termination fee for a service that is out of contract. That's a scam in my view.”
An August 2022 survey conducted by Electric Kiwi, surveying over 1,500 New Zealand consumers who had switched fibre broadband providers in the last three years, revealed that a quarter of respondents (25%) said their incumbent provider offered them incentives to stay, including pricing discounts. In the case of one retailer, this figure surged to as high as 45%.
Blincoe continues, “These are concerning findings in an industry that has supposedly banned win-back offers. If these big guys want to keep their customers, we would suggest that they look after them all the time rather than just when they want to leave.”
The survey further suggests that consumers face a significant obstacle when attempting to switch to cheaper or better services. 50% of respondents said they had to provide a notice period of 30 days or longer to their old provider when they sought to switch, while 20% reported paying fees to terminate their contracts. 47% had been putting off switching due to the daunting nature of the process and/or notice periods.
To combat these challenges and to safeguard consumers, Electric Kiwi has set up a default 30-day switch period for their new customers. "To avoid our customers having this poor experience, Electric Kiwi set up a default 30-day switch period and we include advice on notice periods during our join process, to prevent customers being charged twice," Blincoe states. This is put into place despite the disadvantage it poses to Electric Kiwi, as it gives the losing retailer a 30-day window to be in direct contact with the customer who wishes to switch.
Electric Kiwi emphasises the need for fairer transitions between service providers and challenges the necessity for the 30-day notice periods. Comparing it to the electricity market, where switches are completed within seven days with no disruption to service, Blincoe stresses, “The truth is, it doesn’t take 30 days for service providers to process transfer requests, and there is no genuine cost to be recovered in most instances.”