The Dispute: The Microbusiness raised concerns that their contract had been mis-sold. They said that the Provider had informed them of the need to upgrade their telephone system to a cloud-based service, and so agreed to the new contract based on this information.
The Microbusiness also complained to their Provider for not installing the services and leased equipment as agreed, incurring a loss of service as a result. They decided to transfer to another Provider to regain some service. As they were within the minimum commitment period, the Provider charged them an early termination fee for doing so which the Microbusiness disputed.
The Microbusiness requested a resolution of termination fees being cancelled along with a goodwill payment for the hassle caused.
The Provider responded that they were satisfied that it was reasonable to advise the Microbusiness that their equipment would become obsolete, as the retirement of the PTSN network had been widely reported. They also confirmed that they considered the early termination fee to have been correctly raised, as the services were transferred away within the minimum commitment period. They did however acknowledge that the installation was complex and problematic.
On reviewing this dispute, we noted that the Microbusiness had been a customer of the Provider for a number of years prior to the 2019 upgrade in question. They previously leased equipment which worked and had been paid for. The Microbusiness wanted to stay with the Provider for a further contractual period, but without the costly purchase of a new lease.
Upon reviewing the sales call recording for the new sale (disputed as being an unnecessary cost), we agreed that there was a forced urgency to upgrade to Cloud based services. Whilst the advisor was correct in highlighting that the Public Switched Telephone Network (PSTN) was being phased out, they made it sound as if this could happen with six months’ notice, rendering the current services and equipment obsolete. However, the end of the PSTN is widely reported as being phased out by December 2025.
We concluded that the Microbusiness was misled about the timescales for their equipment and services becoming obsolete. They could have continued using their existing equipment for six years (from the point the contract was entered into) before the need to upgrade. The result of this being that they entered into a new contract with more expensive equipment and inflated rental costs, sooner than they may have done had the facts been clearly presented.
The Provider removed the old equipment from the premises and upon failing to install the new equipment, also failed to restore the previous equipment. This left the Microbusiness with no service and an inability to operate, worsening the impact of the situation. The Microbusiness felt that they had no choice but to change Provider, resulting in a large early termination fee for services and equipment.
Ombudsman Services provided a resolution to the dispute based on both parties supporting information, reflecting Ofcom regulations, which was:
Issue one: We decided that the contract was mis-represented by the Provider, creating a false sense of urgency about the Microbusiness’s equipment becoming obsolete. This put pressure on them to upgrade to a more costly service when it was unnecessary for several years.
Issue two: Having removed the previously paid for equipment, the Provider failed to install the new equipment, leaving the Microbusiness with no service at all. This negatively impacted the Microbusiness’s ability to operate. Upon ceasing service with the Provider and switching to an alternative, they attracted an early termination fee of over £7,000, and an equipment lease fee in excess of £5,000. We decided that these fees were not fair.
Considering both issues, the loss of service, costs incurred and harm caused to the Microbusiness, we decided that the Provider should make a goodwill payment to them of £10,000, the maximum we can award.
If you’d benefit from discussing anything in this Service Update further, then please feel free to reach out to our Partner Support Team who are always happy to help.