Telecoms ad claims trigger clampdown

The makers of the self-regulatory rules that govern the advertising industry meet today (Wednesday). A late addition to its agenda could be an initiative to stem the vitriolic advertising battles between the telecoms companies, which erupted again last week.

The Committee on Advertising Practice (CAP) is keen to discuss new guidelines that it hopes will outlaw misleading price comparisons in the telecoms market. But it could be thwarted – the deadline for submissions to its consultation period does not end until Friday, which may delay discussion of the guidelines for a further two months.

The initiative is a response to unprecedented numbers of complaints made to, and upheld by, the Advertising Standards Authority about the telecoms industry and its pricing claims in advertising. The issue was ignited again last week by the vicious claims and counter-claims of the two biggest players in the industry – BT and Cable & Wireless Communications (CWC).

At the root of their multimillion pound dispute is money. Both claim to be cheaper than the other and last week launched ad campaigns to tell anybody who would listen. That they are two of the biggest advertisers in the UK and fought a High Court battle – effectively over who was cheaper – in December has exacerbated the situation.

In November, BT produced a brochure called “Highlighting the real cost of calling” and comparing BT prices with those of CWC for small- to medium-sized businesses. It claims that BT offers cheaper prices and uses a Deloitte & Touche report, which it commissioned, to justify the claim. CWC won a temporary High Court injunction preventing distribution of the brochure. But the injunction was overturned (MW December 4 1997), giving BT the opportunity to run its present business advertising.

Above a montage of headlines screaming price cuts the BT business ad says: “Find out why these figures simply don’t add up”. CWC responded with an ad declaring “we won’t knock the competition” and offering to double the price difference if BT was found to be cheaper. But the CWC ad is aimed at the domestic market, rather than the business one.

It illustrates perfectly the tough task facing the CAP. It must agree a code that will force the advertisers – BT, CWC and the estimated 150 other operators in the UK market – to compare like with like.

And to ban – to use an extreme example – adopting press advertisements which scream “20, 30 or 40 per cent cheaper” by comparing a local off-peak call with a peak one.

The greatest hostility has come in the business market where the field has been left to BT and CWC, rejuvenated since its launch last September.

The guidelines will be policed by the Advertising Standards Authority (ASA). Although the period of consultation on the draft guidelines does not end until Friday, the CAP hopes to have collected all the responses in time for today’s meeting so that a code can be in place within months.

Some submissions to the CAP argue that certain phrases, including “up to”, be forbidden in pricing claims and that there should be more transparency about possible start-up fees and information given on any consumers excluded from the discounts being offered.

The ASA has received 25 complaints about price comparisons in telecoms ads and upheld six in the past 12 months. BT alone has made numerous complaints on price since 1991 and had its last six price complaints against CWC upheld by the ASA. At the end of last year, the ASA forced CWC/Mercury to withdraw (it did not ban) a business press ad because of misleading price claims. The regulator also upheld two complaints made by BT in its January report against Swift call because of misleading price comparisons.

“It is an issue for BT because we have made complaints to the ASA since we first introduced discounting in 1991 and won a number of adjudications,” says Ian Price, competitive marketing manager at the telecoms company’s business division. “So it is very disappointing to then see the same claims being made in further advertising – that is why we issued the brochure which compared our prices with CWC.

“But things have started to improve. There is more pressure on advertisers to observe guidelines. The hope is that advertisers cannot go on making these claims and that we will start to see less of these destructive trends with people advertising in a slightly less negative way.”

The issue for the marketing departments at the telecoms companies is how to differentiate their services. Since the emergence of CWC last September, price has become a more contentious issue because CWC is a serious rival to BT’s dominance of the market.

Under marketing director Helen Burt, CWC has a claimed 100m marketing budget, which for the first time means that it can compete head on with BT. The two companies offer similar options, which range from basic telephone to ISDN lines and Internet access so price is a differentiator.

Head of BT marketing communications for the business division Dominic Owens says: “BT is now determined to fight back. In the past, it has not hit back and silence has been taken as an admission of guilt (that it was expensive) when it was not true.”

Some observers believe CWC has made a mistake by pitching itself against BT in every sector of the market. Whether that is the case, it is certainly having an impact on pricing.

A CWC spokesman says: “The situation that exists at the moment is the legacy of the telecoms market. BT is not allowed by the Government, or watchdog Oftel, to undercut rivals on price and so it gets around that with discounts.

“Our advertising compares the CWC base rate with that of BT and BT claims that is unfair because it has different pricing and promotions. At the moment there is a lot of choice out there for the consumer and it can prove quite an intensive job to go through all the options – but in the long term it is worth it because there are savings to be made.” The guidelines could force some telecoms companies to change their marketing direction and pricing strategies.

“In the past year there have been a lot of complaints upheld against telecoms companies and many are based on misleading price comparisons,” says ASA director of communications Caroline Crawford. “The reason is that they have such different pricing structures. We decided to bring all the telecoms companies in (to the ASA) to discuss the situation and develop a level playing field.”

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