Software a service says Telecom

Telecom, in its submissions on the Consumer Protection (Definition of Goods and Services) Bill, argues that software, as well as telecommunications signals, should be classed as "services" not as "goods'.

Telecom, in its submissions on the Consumer Protection (Definition of Goods and Services) Bill, argues that software, as well as telecommunications signals, should be classed as “services” not as “goods".

Provision of software is effectively a transfer of a right to use the software under licence, not a sale of the code itself, so less severe guarantees relating to “services” should apply.

For goods, the Consumer Guarantees Act says the supplier must provide items of “acceptable quality”, fit for the purpose for which the consumer tells the supplier they are to be used, “free from minor defects” or such defects having been brought to the consumer’s notice. (There will perhaps be some difficulty and unfairness in enforcing the “minor defects” provision with respect to software.) The goods must also be “safe” and “durable”. Software manufacturers typically do not guarantee safety in terms of presence of viruses or interaction with other software on the machine.

But the guarantees applying to services seem scarcely more applicable to software. They include that “reasonable care and skill” are taken over delivering the service; and that “guarantees as to the time of completion” are adhered to (statements such as “this installation will take approximately 40 minutes” have turned out in many users’ experience to be optimistic).

And someone experiencing a failure of a service is entitled to have that failure remedied by another party and charge the cost to the original supplier. In the case of software this would seem to imply a right of the third party to access to the code, which would certainly be controversial for the traditional software industry.

Telecom compares software use with the viewing of a television programme, where no material good or intellectual property right changes hands. Computerworld has suggested that if the comparison is with a book, Telecom’s points might be less substantial (see Telecom expands on submission thinking).

Telecom cites several common-sense reasons why telecommunications signals should not be classed as a “good”, besides pointing to the complexity of the telephone networks and the internet as reasons why the customer-facing supplier should not be held responsible to the customer for every failure.

The nature of “supply” on the telecommunications front means an effort to apply normal “quality of service” provisions would be likely to add a new dimension to interconnection agreements, already in strife.

Emerging telco UnitedNetworks has similar things to say, both on its telecommunications services and its principal activity of electricity supply.

The bill attempts to apply the provisions of the Consumer Guarantees Act, the Sale of Goods Act, the Fair Trading Act and the Commerce Act. This would hold suppliers and downstream carriers legally responsible for the quality and continuity of telephone and internet services, even though the failure was an upstream party’s fault.

Among the least “sensible” consumer rights that would be conferred by the bill if passed are those for return, repair and supply of spare parts for a failed telecommunications signal, both Telecom and TelstraClear say. Such an insubstantial entity cannot be repaired, nor returned to its maker. The possession of a signal cannot even be said to have been transferred from the manufacturer to the consumer, the first requirement of trade in goods.

“The references to goods in clauses 4(1)(b), 6(1)(b) and 11(1)(b) … achieve no additional consumer protection objective than is already achieved by the supply of such signals being deemed a 'service' and should be deleted from the bill”, Telecom says.

The “supplier” of a service should be only the person [or company] who supplies the service directly to the consumer, says Telecom. Otherwise, it becomes responsible for the quality of the service supplied to the consumer of another provider through an interconnection arrangement.

TelstraClear refers to similar problems on the upstream side. “A phone call could reach any network anywhere in the world and a given call can cross several networks,” its submission says.

“Accordingly, if the purpose of the amendment is to ensure clarity for consumers, then it will be essential to specify plainly where the network [over which service is being guaranteed] begins and ends.”

Telecom finds even more things wrong with guarantees applying to internet communication, where there is no formal interconnection agreement with the other parties who participate in transmission of the data.

Clarification of Section 33 of the Consumer Guarantees Act should be given “further consideration”, says Telecom, so that “there is no right of redress against a supplier in relation to internet services if the supplier has no control or contract or quasi-contractual arrangement with a third-party provider to that supplier.”

Consumer organisations have argued that the situation is no different from that of a manufacturer who may be constrained at short notice to seek alternative supply of a component that fails. The customer-facing supplier is still responsible for ensuring that the component is of good quality, says David Russell of the Consumers Institute (see ISPs liable like any other trader - consumer advocate).

Other internet service providers apart from those owned by the telcos, have made no written submisison.

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