Ofcom has issued a discussion paper about personalised pricing for communications. Personalised pricing is a sophisticated form of price discrimination – the practice of charging different customers different prices for products that cost the same to provide. The prices are based on what different customers are willing to pay. Personalised pricing does not imply that every individual must be offered a different price. Rather, based on their individual characteristics, people can also be categorised into different groups, with each group offered a different price.
The discussion paper:
- explains how data and algorithms are giving firms the ability to personalise prices in more sophisticated ways. Greater personalised pricing can have benefits and risks for consumers.
- describes ways in which providers in the communications sector could use data to personalise their interactions with customers and how this might develop in the future.
- sets out the results of Ofcom’s qualitative research on consumer perceptions of personalised pricing of communications services. Although some participants recognised the potential benefits, overall the discussions focused overwhelmingly on their concerns. Participants felt personalised pricing was ‘unfair’, with a lack of transparency about how the price would be calculated and uncertainty about whether they had a good deal.
- explores a range of issues that personalised pricing could create relating to customer fairness. Ofcom expects that giving people the ability to compare prices effectively and some transparency of the process will be particularly important. Greater personalisation could also have implications for pricing outcomes and ensuring trust in the market overall.
The key laws that Ofcom consider apply to personalised pricing are data protection laws, consumer protection laws such as the Consumer Protection from Unfair Practices Regulations 2008 and the Consumer Rights Act 2015, the Competition Act 1998 and the Equality Act 2010. It points out that algorithms and AI are being considered by a wide range of sectors and organisations in different contexts.
Ofcom says that it is publishing the discussion paper now as personalised pricing is an emerging practice and it wants to stay at the forefront of how the sector is evolving. It will closely monitor how pricing practices develop as technology evolves and track the distribution of pricing outcomes for communications services over time.
It is inviting views from a wide range of people and organisations to help it better understand the implications of personalised pricing for the sector it regulates.
