Open Agentic AI And True Personalisation

Sixteen years on from my own initial posts on the subject of a personal assistant that can privately find and buy stuff for you on the web, and we have 'open agentic AI'. But are you really any closer to the automated selection and purchase of your own personalised products without needlessly surrendering your privacy or otherwise becoming the victim? Should this latest iteration of open generative AI be autonomously making and executing decisions on your behalf? 

What is Agentic AI?

An 'agentic' AI is an evolution of generative AI beyond a chatbot. It receives your data and relies on pattern matching to generate, select and execute one of a number of potential pre-programmed actions without human guidance, then 'learns' from the result (as NVIDIA, the leading AI chip maker, explains). 

A 'virtual assistant' that can find, buy and play music, for example, is a form of agentic AI (since it uses AI in its processes), but the ambition involves a wider range of tasks and more process automation and autonomy (if not end-to-end). 

You'll see a sleight-of-hand in the marketing language (like NVIDA's) as developers start projecting 'perception', 'understanding' and 'reasoning' on their agentic AIs, but computers don't actually do any of those human things. 

It's certainly a compelling idea to apply this to automating various highly complex, tedious consumer 'workflows' that have lots of different parameters - like buying a car, perhaps (or booking a bloody rail ticket in the UK!). 

Wearing my legal hat, I also see myriad interesting challenges (which I'd be delighted to discuss, of course!), some of which are mentioned here, but not all...

Some challenges

The main problem with using an 'agentic AI' in a consumer context is the involvement of a large language model and generative AI where there is a significant (e.g. economic, medical and/or legal) consequence for the user (as opposed to a chatbot or information-only scenario (though that can also be problematic). Currently, the household or device based virtual assistants are carrying out fairly mundane tasks, and you could probably get a refund if it bought you the wrong song, for example, if that really bothered you. Buying the wrong car would likely be a different matter.

There may also be confusion about the concept of 'agency' here. The word 'agentic' is used to mean that the AI has 'agency' in the sense it can operate without human guidance. That AI is not necessarily anyone's legal 'agent' (more below) and is trained on generic training data (subject to privacy, copyright consents/licensing), which these days is itself synthetic - generated by an AI. So, agentic AIs are not hosted exclusively by or on behalf of the specific consumer and do not specifically cater to a single end-customer's personalised needs in terms of the data it holds/processes and how it deals with suppliers. It does not 'know' you or 'understand' anyone, let alone you.  

Of course, that is consistent with how consumer markets work: products have generally been developed to suit the supplier's requirements in terms of profitability and so on, rather than any individual customer's needs. Having assembled what the supplier believes to be a profitable product by reference to an ideal customer profile in a given context, the supplier's systems and marketing/advertising arrangements seek out customers for the product who are 'scored' on the extent to which they fit that 'profile' and context. This also preserves 'information asymmetry' in favour of the supplier, who knows far more about its product and customers than you know about the supplier or the product. In an insurance context, for example, that will mean an ideal customer will pay a high premium but find it unnecessary, too hard or impossible to make a claim on the policy. For a loan, the lender will be looking for a higher risk customer who will end up paying more in additional interest and default fees than lower risk customers. But all this is only probabilistic, since human physiology may be 'normally distributed' but human behaviour is not.

So using an agentic AI in this context would not improve your position or relationship with your suppliers, particularly if the supplier is the owner/operator of the agentic AI. The fact that Open AI has offered its 'Operator' agentic AI to its pro-customers (who already pay a subscription of $200 a month!) begs the question whether Open AI really intends rocking this boat, or whether it's really a platform for suppliers like Facebook or Google search in the online advertising world. 

It's also an open question - and a matter for contract or regulation - as to whether the AI is anyone's legal 'agent' (which it could be if the AI were deployed by an actual agent or fiduciary of the customer, such as a consumer credit broker). 

Generative AI also has a set of inherent risks. Not only do they fail to 'understand' data, but to a greater or lesser degree they are also inaccurate, biased and randomly hallucinate rubbish (not to mention the enormous costs in energy/water, capital and computing; the opportunity cost of diverting such resources from other service/infrastructure requirements; and other the 'externalities' or socioeconomic consequences that are being ignored and not factored into soaring Big Tech stock prices - a bubble likely to burst soon). It may also not be possible to explain how the AI arrives at its conclusions (or, in the case of an agentic AI, why it selected a particular product, or executed a specific task, rather than another). Simply overlaying a right to human intervention by either customer or supplier would not guarantee a better outcome on theses issues (due to lack of explainability, in particular). A human should be able to explain why and how the AI's decision was reached and be able to re-take the decision. And, unfortunately, we are seeing less and less improvement in each of these inherent risk areas with each version of generative AIs.

All this means that agentic AI should not be used to fully automate decisions or choices that have any significant impact on an individual consumer (such as buying a car or obtaining a loan or a pension product).  

An Alternative... Your Own Personal Agent

What feels like a century ago, in 2009, I wondered whether the 'semantic web' would spell the end of price comparison websites. I was tired of seeing their expensive TV ads - paid for out of the intermediary's huge share of the gross price of the product. I thought: "If suppliers would only publish their product data in semantic format, a 'widget' on my own computer could scan their datafeeds and identify the product that's right for me, based on my personal profile and other parameters I specify". 

By 2013, I was calling that 'widget' an Open Data Spider and attempted to explain it further in an article for SCL on the wider tech themes of Midata, Open Data and Big Data tools (and elsewhere with the concept of 'monetising you'). I thought then - and still think now - that: 

"a combination of Midata, Open Data and Big Data tools seems likely to liberate us from the tyranny of the 'customer profile' and reputational 'scores', and allow us instead to establish direct connections with trusted products and suppliers based on much deeper knowledge of our own circumstances."

Personalised assistants are evolving to some degree, in the form of 'personal [online] data stores' (like MyDex or Solid); as well as 'digital wallets' or payment apps that sit on smartphones and other digital devices and can be used to store transaction data, tickets, boarding passes and other evidence of actual purchases. The former are being integrated in specific scenarios like recruitment and healthcare; while the latter tend to be usable only within checkout processes. None seems to be playing a more extensive role in pre-evaluating your personal requirements, then seeking, selecting and purchasing a suitable product for you from a range of potential suppliers (as opposed to a product that a supplier has created for its version of an 'ideal' customer that you seem to fit to some degree). 

Whether the providers of existing personal data stores and digital wallets will be prepared to extend their functionality to include more process automation for consumers may also depend on the willingness of suppliers to surrender some of their information advantage and adapt their systems (or AIs) to respond to and adapt products according to actual consumer requests/demand.

Equally, the digital 'gatekeepers' such as search providers and social media platforms will want to protect their own advertising revenue and other fees currently paid by suppliers who rely on them for targeting 'ideal' customers. Whether they can 'switch sides' to act for consumers and preserve/grow this revenue flow remains to be seen.

Overall, if I were a betting man, I'd wager that open agentic AI won't really change the fundamental relationship between suppliers, intermediaries and consumers, and that consumers will remain the targets (victims) for whatever suppliers and intermediaries dream up for them next...

I'd love to be corrected!

Has The Initial Term Of Your #Mobile Contract Expired?

Are you a cash cow?

Today I contacted Vodafone to cancel the 3G contract I took out as part of an iPad offer a few years back. It's included as an extra number on my mobile bill, so it was easy to kind of forget it in the total. Turns out I'd diarised the wrong cancellation date, and could've cancelled last October, when I was first 'out of contract'. Okay, so I'm a bit of a mug (worse, I'd long ago switched the iPad to 'airplane' mode, so wasn't even using the 3G option), but I do tend to have a lot more important things on my mind. The decent thing would have been to remind me at the time the intial term expired to give me a chance to consider if I wanted to extend, switch or cancel. But that's not part of the service...

The first customer service person I spoke to wasn't allowed to process my cancellation request. She had to put me through to another person who could. I protested, but to no avail. Needless to say, the next person began putting me through the whole process again, presumably so I'd lose the will to cancel and consider an upgrade.

I toughed it out and insisted on cancellation. The representative agreed to put that through, but said it would only take effect in 30 days' time. Hang on, I said. If it was true that I was "out of contract", as they kept saying I was, then how could Vodafone still be entitled to 30 days of my money - not to mention the extra 6 months they'd already enjoyed through my diary error? I knew the answer, but I wanted to hear the explanation.

You see, they didn't really mean that I was 'out of contract' in the sense that the contract had somehow expired. That would be misleading. If the contract had really ended, Vodafone wouldn't have been entitled to be paid for the extra 6 months, never mind the 30 days. Instead, they only meant that the minimum term of the contract had expired. That meant the contract had actually continued subject to termination on 30 days' notice - so it could have gone on for 30 years if I hadn't called to cancel it. 

When I asked if Vodafone has a process for notifying customers when they are 'out of contract' (i.e. when their initial term has expired), the representative said they did not.

Of course, Vodafone does have a process of calling you about upgrade opportunities a long time in advance of when the initial term expires. But that's just marketing. They then go quiet around the time the initial term expires, so you bear the risk of beoming a rolling 30-day cash cow.

I wonder how many customers paid for an iPad or other device through a 3G contract and forget it's still appearing in their bill even though the initial term had ended? And how many get a new mobile and don't realise they're still paying for an old one they thought was 'out of contract'? Are they to be treated as stupid people, or people with a hell of a lot of other stuff on their mind who could do with a reminder? Would they be prepared to pay a small admin charge for a reminder at the right time, or should such a reminder be a part of any decent service?

It's worth noting that Ofcom banned "automatic rollover contracts" for consumers and businesses with no more than 10 employees in September 2011. But the ban only applied to landline voice and broadband services, and it only means the customer can't be automatically renewed into another extended 'minimum contract period'. The new rule is that the maximum duration of initial contracts can only be 2 years; and at that point users must be offered an option to contract for a further maximum duration of 12 months. That means they are prompted to extend, switch or cancel.

Should a similar rule be brought in for mobile services?

 

Evidence From Lloyds' PPI Crew

If the clip below won't work, try here.

The Banking Standards Commission has heard that Lloyds Banking Group's payment protection insurance profits were so critical to the viability of its personal loan business that "it was not a standalone product," according to Helen Weir. Yet the bank hadn't considered that people might repay the loan early and that the insurance should therefore end at the same time. She claimed some customers asked for the product in focus groups "because it gave them peace of mind". Yet the claims ratio as share of premium was lower than comparable products (20-50% vs 60-65% for life or property insurance, and higher for motor insurance).

Carol Sergeant, then Lloyds' Chief Risk Officer, and formerly the FSA managing director who led the investigation into Lloyds' mis-selling of precipice bonds (now the Treasury's adviser on the doomed 'simple products' intiative!) said:

'I feel I bear accountability for not taking up with the FSA more clearly at the outset what principle’s based-regulation meant in the conduct area. ‘I made the wrong assumption, because it worked in other parts of the forest that we would know how it would work and as time goes on by continuing to address the various issues that were coming out of thematic reports I thought that this [mis-selling problem] could be mended.’

This from a former managing director of the FSA who, I repeat, led an investigation into Lloyds' mis-selling of precipice bonds...

Is this the kind of future that Hector Sants faces, having been knighted on his way from CEO of the FSA to leading up Barclays' compliance function?

Banks Tell Customers Last

Bailing out (of) the UK

Two days ago it was all over the national media that ING Direct UK's savings and mortgage business had been sold to Barclays, with the actual transfer to occur in Q2 2013. Yesterday, the media were telling us what it means for customers. Yet only this morning do I receive the self-centred email from ING Direct UK (extract below). I'm not suggesting that we customers should get the information ahead of the stock market (if it's price sensitive). But I think we should've been among the first to know directly, rather than being told by the national media. 

Of course, the note also reveals that the bank views its customers as just a bunch of financial assets, and that the deal is a huge blow to competition and innovation in the retail banking market. The first three paragraphs blather on about the wisdom of ING slimming down and how the business "is a good fit" with Barclays millions of other customers. This makes us feel so special. Then, as an afterthought, they add the weazily statement that "there will be no immediate effect on the services you currently receive." Weazle word: "immediate". As in, "get your money out immediately." If I'd wanted to save with Barclays, I'd have followed the 15 million other sheep long ago. My old Egg credit card got bought by Barclays and that experience hasn't been warmly personal either. Time to switch.

"We wanted to let you know directly that it has been announced that ING Direct N.V has entered into an agreement with Barclays to acquire ING Direct UK’s savings and mortgage business.

This decision is a result of ING Group’s continued evaluation of its portfolio of businesses, in line with its stated objectives of sharpening its focus and streamlining the group. It is expected that the actual transfer of ING Direct UK’s savings and mortgage business will take place during the second quarter of 2013.

ING Direct UK is a good fit with Barclays existing UK Retail Banking Business that looks after more than 15 million personal and 700,000 business customers in the UK. With a network of around 1600 branches in the UK, customers can bank in person, over the phone, online and through mobile applications. Barclays look forward to continuing to provide a secure home for your savings and/or mortgage in the future.

There will be no immediate effect on the services you currently receive."

Dead Simple Financial Products

Little wonder that the UK Treasury is still trying in vain to persuade financial institutions to supply 'simple' financial services. The recent report shows that the government is relying on the same old players and the same old view of the marketplace to come up with the same old result. The challenge for new entrants will be whether they will be able to cut through the wall of spin and marketing noise to reach consumers with truly cost effective services that are adapted to their day-to-day activities.

The Simple Products Steering Group's recent interim report continues to view the financial services market through the lens of traditional products, providers and consumer segmentation. Its working groups are drawn exclusively from existing providers. The report refers to the so-called "mass market" and believes that simple products "should not be tailored to individual needs". It equates 'choice' with complexity. It seeks to balance “a fair deal” for consumers with “a viable commercial proposition for [existing] providers". Perhaps worst of all, for simple financial products to succeed the Steering Group believes “it is essential to improve the awareness and financial capability of UK consumers.” The report recommends two types of savings accounts (at-call and 30 days’ notice) and life cover. Apparently, millions of us will pile into these things on the basis of a little consumer education, a kite-mark, feel-good messaging and… certain choices embedded in default settings.

Hello?

If retail banks and life insurers were capable of delivering cost effective, useful financial services, there would be no need for the Simple Products Steering Group.

When will the authorities realise they’re flogging a dead horse?

As explained here, the route to simplicity and transparency lies in first understanding the complexity of the consumer problem being addressed, then figuring out the simplest, most consumable service that will solve it. That's the role of a facilitator. By contrast, those producing complex products are unlikely to be focused on the consumer's problem in the first place, let alone understand it - they're focused primarily on solving their own problems at consumers' expense. Trial and error, testing and learning, flexibility and adaptability are vital steps in this process. Yet our financial services framework is intolerant of them. A new service should be able to launch and undergo several iterations in the time it takes to get through today's authorisation process. Tiny factual differences have seismic regulatory implications in the type of permission or licence needed, and this adds to the time-lag and legal advice involved.

We must figure out how to make the process of decent innovation easier.

Image from Worth1000.

Of A 900 Year Old Dwarf, Trinkets And Baby Steps

Voda Yoda

How apt that Vodafone has settled on a film character from 1980 to advertise the ability to... [sound of trumpets]... charge your phone in a taxi in 2012, when we've been charging phones in our own cars for many years. No wonder the little fella appears a bit non-plussed. Sadly the TV version doesn't record why he fires up his lightsabre, but I'm guessing from all the inane chat that it might be to dispense with the cabbie.

Such trinkets as in-cab charging are perhaps a small sign that Vodafone recognises at least one of the day-to-day hassles associated with mobile phones usage. So let's acknowledge them for a baby step in the right direction. The fact that London's black cabs hadn't already provided a 'free' charging facility to passengers tells you how great that particular monopoly is working for the consumer. 

Yet I still can't download my mobile phone billing information from the virtually useless "My account" section of the Vodafone.co.uk website. In fact, despite numerous calls to customer service over the years - usually around tax time - the most they've been able to do is send me physical copies of my bills free-of-charge. So 1980.

Image from DigitalSpy.

Rethinking... Financial Services

How time flies when you're having fun. When not engaged in rethinking personal data, I've been experiencing the deep joy of rethinking financial services regulation, now that the Financial Services Bill has reached the House of Lords.

As I've explained in the other place, this is not about flogging a dead bank. This is about enabling the growth of new facilitators - the same kind of evolution towards cost-efficient and transparent financial services that we have already seen in other retail markets. The same evolution that Andy Haldane of the Bank of England has advocated - or Lord Young, for that matter.

My experience so far leaves me optimistic that the UK's creaking regulatory framework can be successfully overhauled. Unlike the MPs in the House of Commons, the Peers are less interested in the politics and more interested in the detail of what works and what doesn't. For that reason, the passage of the Financial Services Bill through the House of Lords provides a rare and invaluable opportunity to confront the government - and the Treasury - with all those gripes and suggestions that have been ignored for years.

So please take that opportunity - whether it's via comments on media stories, through the blogosphere or any contact you may have with the powers that be.

Next stop: Europe.

Image from The Philosopher's Magazine.

How We All Pay For Card Payments

Few people are aware that when you pay using a credit or debit card, your 'issuing' bank charges the retailer's 'acquiring' bank an "interchange fee". The rate is either agreed directly between the banks, or is imposed via a card scheme, like Visa or MasterCard. Nobody outside the banks and card schemes really sees this fee. The retailer receives your money for the purchase price, less a service charge. A little bit of that service charge is kept by the retailer's bank as a payment processing fee, but most is kept by your bank as its interchange fee.

Like any other retail overhead, these charges need to be accounted for in retail pricing. So, even if you aren't paying by card, interchange fees are a significant drag on your personal economy. The European Retail Round Table, a network of large retailers, has found that "the average European household pays €139 per year on interchange fees". And, according to the European Commission, "in the EU, over 23 billion payments, exceeding a value of €1350 billion, are made every year with payment cards." In other words, retailers have no real choice but to accept payments by card.

But who benefits? The ERRT cites a 2006 report found that only 13% of the fees go toward your bank's processing cost, while 44% of interchange fees pay for cards reward programmes - which of course only benefit cardholders. That leaves a healthy profit for issuing banks. In their defence, Visa and MasterCard claim that interchange fees are essential to investment in systems, marketing and anti-fraud efforts. Which is what banks must do themselves, anyway, to meet their own anti-money laundering and prudential requirements. The schemes also suggest that interchange fees may be cost-neutral to retailers if savings on the acceptance of cash and reduced check-out times for card payments are factored in (which has not been accepted in Europe).

Looking at the situation from the consumers' standpoint, non-cardholders get no benefit from card loyalty schemes at all. And even cardholders themselves might prefer the equivalent of interchange fees being spent in ways that directly improve their retail experience.

The card schemes argue that because retailers say they have no choice but to pass on interchange costs to consumers, the measure of whether interchange fees are really too high is whether retailers would actually lower their prices - and they would not. That doesn't hold water. Firstly, all of a retailer's costs are ultimately accounted for in its prices. So it would be wrong of retailers to say that all consumers are not paying for interchange, unless the retailers specifically imposed a specific interchange-related fee only on those paying by card. Secondly, as I commented earlier on Digital Money, the card schemes' assertion rests on the assumption that the only way retailers should reasonably differentiate themselves from each other is in terms of price. So the card schemes would have it that every time a retailer cuts any of type of cost, including interchange fees, the retailer should take the ultimately suicidal step of always reducing prices to the consumer, rather than, say, investing in increased selection, improved customer experience or expansion to achieve economies of scale. That's an unrealistic position in itself, let alone one that would support the assertion that if retailers do not cut prices to consumers on the back of lower interchange fees, they are somehow behaving just as anti-competitively as the card schemes are alleged to be in imposing them. The retail markets are distinct from the market for payment services. Lack of competition in retail markets can be - and is frequently - addressed on its own merits and action taken accordingly.

So it's no surprise that competition regulators have given a lot attention to how interchange fees are set and imposed. The Reserve Bank of Australia has perhaps been the most progressive. It was the first to impose a standard rate for interchange fees in July 2003 and has maintained downward pressure ever since. In December 2007, the European Commission ruled as anti-competitive interchange fees on cross-border MasterCard and Maestro branded debit and consumer credit cards. The EC later accepted certain undertakings to settle proceedings for alleged breach of the ruling. European Commission action in relation to Visa Europe's interchange fees has culminated in a reduction of debit interchange fees. But importantly that decision "does not cover MIFs for consumer credit and deferred debit card transactions which the Commission will continue to investigate. The proposed commitments are also without prejudice to the right of the Commission to initiate or maintain proceedings against Visa Europe's network rules such as the "Honour All Cards Rule", the rules on cross-border acquiring, MIFs for commercial card transactions, and Inter-Regional MIFs."

The battle is also raging in the US, where three bills were put before Congress in 2009 to regulate interchange fees. The Federal Reserve is consulting on proposals to limit debit card fees from July 2011 "one that would base fees on each issuer’s costs, and one that would set a cap of 12 cents per transaction", as explained here by Jean Chatsky, and discussed on Digital Money. Potential implications for bank stocks are discussed here.

Ultimately, however, the outcome of all this depends on which payment services best facilitate the end-to-end activity in which a payment is being made. The winners will not be those who insist on viewing consumers' activities through the lens of their own payment product.


Image from GAO report on interchange.

Christmas Special

Here's a little thought to distract you from the frustration of seemingly insufferable transport delays over the holiday season: might all this grief be a signal to either buy transport companies' shares or short them?

If it's true (as you may bitterly begin to suspect) that transport companies are ultimately profiting from captive UK customers (and the government) by raising fares despite ongoing public subsidy, under-investing in service improvement or snow-clearing and/or saving money by reducing services during difficult weather conditions, then might it not be worthwhile to buy their shares? I mean, if they're engaging in all theses tactics to be more profitable, then why not climb aboard?

Or perhaps you would prefer to bet that, if transport companies are unfairly taking advantage, then sooner or later they'll get rumbled and their stock prices will fall. In which case it may be worth shorting their shares.

In either case, any gains you might make would at least off-set fare increases and other costs. And the consolation that you are personally profiting from disruption might ease your personal discomfort.

Of course, your suspicions may prove to be unfounded or, even if true, may not be material to corporate results or otherwise sound in the market. In which case your investment won't pay off and you're misery may increase. But, hey, at least you'll be able to console yourself that you didn't just sit there simmering helplessly ;-).

Anyhow, safe travels and have a happy Christmas and New Year.


Image from ImpactLab.

Big Media Must Make Itself Useful

Rupert Murdoch thinks search engines are getting a 'free ride' on News Corp's content. He also sees little value in 'occasional' visitors who are attracted by a headline they see on a search engine and click through. He says so much content is freely available online because the traditional media 'have been asleep'. Clearly, he wants people to use - and pay for - each of News Corp's media properties as an activity in itself, as in "I want to read the Sun," or "I'm going to watch Fox News now" rather than as an adjunct to their every day activities. To achieve this, he proposes withholding content from the search engines.

He's not alone. Lots of newspapers seem to be planning to reintroduce subscription services online, and there's plenty of discussion about what content might attract a premium.

Of course, many businesses look at the world through their own products, rather than what people are actually doing, or would like to do. Banks, for example, offer 'personal loans' and 'mortgages' quite independently of the use of the processes involved in actually using the money they lend. As a result, people have come to see their bank as just a very basic utility, rather than an integrated part of their lives. 'News' already seems to have gone the same way.

What the media and the banks of this world don't seem to 'get' is why search engines have become so central to people's behaviour.

People don't 'read' search engines. They don't even spend much time there, compared to their destination sites. So why do search engines dominate the advertising world? Because they are key enablers or facilitators of what people are actually doing or want to do. Even if some links are sponsored, a search engine doesn't try to determine what you see or do. Unlike the 'traditional media' or banks. A search engine enables you to efficiently answer the vast number of often quite mundane questions that confront you every day - 'Where are their offices?' 'How do I get there?' 'Can I get this cheaper anywhere else?' 'How many goals has Blogs scored this season?' 'Why are Australian animals so weird?'

No matter how much different content any one provider offers, it will never answer all of everyone's critical questions. And the more it tries to corral people and dictate what they see, the less they'll trust it to give them the information they want.

So the challenge for traditional media is not whether or not they charge for their content. Instead, opportunity lies in becoming more integrated with people's actual or desired every day activities. The more integrated the media are, the greater share of the consumer value chain they might command.

Gordo Got You Down? Try Power 2010!

If you aren't thoroughly disillusioned with UK politics and hell-bent on doing something about it, I don't know how much more mayhem it will take.

The good news is that even Gordon Brown admits he has to unwind his vast public sector binge of the past twelve years. The chips are really down.

But as the great HST himself said, "when the going gets tough, the weird turn pro".

So now is the time to ensure we get to keep and invest in what's important.

Enter Power 2010, a campaign chaired by Helena Kennedy and funded by the Joseph Rowntree Charitable Trust and the Joseph Rowntree Reform Trust.

Like MySociety, Power 2010 uses the internet to enable you to share your thoughts in a way that politicians cannot ignore without being called to public account. It doesn't matter whether Parliament is sitting or not. The internet is always on, 24-hours of disinfecting sunlight shining into the Westminster pit.

So please share your ideas now, at http://www.power2010.org.uk/page/s/yourideas.

Everything's Amazing, Nobody's Happy

While it's of course vital that we identify and solve our real problems, it's worth keeping a little perspective...

Is This Entertainment?

"The entertainment industry scored a rare victory on Friday," says the FT, reporting the prison sentences and fines handed out in Sweden to the four promoters of Pirate Bay.

Really?

As has been shown in the UK, there is no economic justification for spending public money on special life-support for the so-called "entertainment" industry's antiquated set of business models, let alone on imposing criminal sanctions. And doing so in the case of file-sharing only encourages these laggards to persist in their efforts to slow the development of an open internet to their snail's pace.

When lobbied for more public resources to tighten the entertainment industry's failing grip on consumers' wallets, Ministers should demand instead that the industry delight people to the point where they don't need or want to use the likes of Pirate Bay.

Now that would be a victory for the entertainment industry - and entertaining to boot.

Beware Pleas Based on Moral Panic

William Patry made this excellent point in tonight's SCL Annual Lecture, specifically in connection with proposals to extend further the term of copyright: political appeals based on  moral panic are most often made where there is asymmetry in the information available: criminal law and copyright law being key examples. There is no evidence from the other side - the alleged perpetrator - unlike in cases where two sets of industry players are pitted against one another, which usually produces hard evidence pointing in each direction (e.g. competition law disputes). So the way is clear for, say, the security agencies or copyright owners to appeal for protection merely because it is "right and just" rather than to protect against any proven harm.

Such pleas may ultimately be futile, of course. Attempts by the music industry to deny access to music downloads neither prevented the rise of Napster and iTunes, nor prevented the steady demise of EMI. As I've also mentioned before, the root cause of music industry disruption is consumer dissatisfaction, not copyright violation.

William Patry's suggestion is to insist on an empirical approach to the issue of whether or not the copyright regime works, rather than a continued assumption that it's a property right that deserves protection at any cost. Only then will a proportionate response emerge. I share the view that in all regulatory matters - like business process issues - one must first define the problem and ascertain its scale before deciding whether or not to devote precious state resources to resolving it. At that point, legislators should insist on finding the root causes and implementing the best solutions to tackle them.

Attempts at providing empirical evidence on these issues in the file-sharing context, for example, have been pathetic. Claims that music providers will lose £1bn in CD sales over the next 5 years are disingenuous when their digital sales are increasing at the rate of 28% a year. And where is the evidence that extending the term of copyright will result in more copyright works that will yield satisfactory incomes for creators? Is it not possible that shortening the copyright term would result in a far greater volume of sales for more artists at lower prices to consumers?

The people should be told before any further extension to copyright is granted.

Will The Semantic Web Kill Price Comparison Sites... Please?

Maybe I'm confused, but every time I see a TV ad for one of the multitude of financial services price comparison web sites, I wonder what proportion of the gross product price or insurance premium is commission to cover all those advertising costs.

Yet it's claimed that I'd pay the same price if I went directly to the product provider...

So then I wonder: if there has to be enough fat in the price to cover multiple distributors' TV ad campaigns, why don't product providers start semantic publishing? That way, a widget on my own computer could scan their datafeeds and identify the product that's right for me, based on my personal profile and other parameters I specify?

Surely this would bring down the cost of products and I would also see the whole market, not just those who are prepared to pay to be on the price comparison sites?

Banks Bow to Pressure on PPI

Finally, the Great PPI Robbery is over. The news from various high street banks effectively concedes it was too difficult for them to sell this little-used insurance policy in a compliant manner to enough customers to make a fast buck.

It was a long overdue concession, only wrung out of them after years and years of expensive market reviews, inquiries, regulation, more inquiries, and heavy fines - culiminating in the record £7m fine imposed on Alliance & Leicester last October.

Will they capitulate on bank charges next?

The Bank That's Fair

To keep up my professional development points, I'm currently groaning under more than just the weight of the judgments in the UK overdraft charges litigation against the 7 institutions who've cornered the current account market.

Here's some context for the case:

• UK overdraft users - and particularly those who incur fees - essentially pay for everybody's personal current account service. Mr Justice Smith found in his April judgment that interest on credit balances as well as overdraft interest and fees are relied upon by banks to provide "free-if-in-credit banking" (para 53). The fees "are not set by reference to the costs of activities which give rise to them, but... to support the personal current accounts service as a whole" (para 54).
  

• Further, consumers have no real choice in the market for current accounts. So they're stuck with the current pricing situation. In July the OFT reported that:
  

"The complexity and lack of transparency of personal current accounts makes it extremely difficult for individual customers to compare their bank account with other offers. There is thus little incentive for consumers to switch - especially as people generally believe that it is complex and risky to switch accounts. Also, when the switching process does go wrong consumers can find themselves bearing a significant proportion of the resulting costs. The result is that only six per cent of customers we surveyed had switched in the last 12 months - one of the lowest switching rates in Europe."

While I'm interested in the judicial reasoning to date, you'll be aware the case is frustratingly inconclusive on whether or not the charges can even be assessed for fairness, let alone whether they are actually fair or not. In the current economic circumstances, I agree with Which? that such uncertainty is "piling on the misery" for those affected - and as Mr Justice Smith found in his April judgment (at paras 56, 57), that's roughly 20% of current account customers with an overdraft facility. The Financial Ombudsman Service is awaiting the outcome of proceedings before processing any more complaints and this has encouraged various opportunists to bury their snouts into the trough of despair.

In the midst of all this, you may recall that Barclays recently launched its "Personal Reserve" - an 'over-overdraft', as it were. It's obviously an attempt by the bank to dig its way out of the litigious mess. But as this slew of Google search results demonstrates: when you're in a hole, stop digging.

Personal Reserve is supposed to be a very "simple and transparent" "service" in itself. Trouble is it's targeted at overdraft customers on an opt-out ony basis. And surely one can infer that it is intended to address a key issue with the underlying overdraft - what happens when you exceed the limit. In that sense it could be seen as a feature of the overdraft, rather than a service in itself. Further, a trawl through the multiple web pages describing the feature alone suggests that it is some distance from being either simple or transparent. It's less than clear what happens if you opt out - I can't even find a link to an explanation of the ordinary unarranged overdraft situation, if that still applies. And the fact that there are many different circumstances which can trigger additional charges makes it just as tough to forecast the potential cost of a 'bad month' as with any overdraft - something that's never been what you'd call "simple" or "transparent". Finally, it just doesn't smell right that one could be charged £22 every 5 days that you use as little as £1 of your "Personal Reserve" (see FAQ #7).

I'll spare you further detail, save to say that the feature does rather whet one's appetite for a whole new merry-go-round of analysis as to how well it really complies with the myriad technical requirements of the law related to fees, interest rates, advertisements and consumer contracts, including the Unfair Terms in Consumer Contracts Regulations 1999 (the subject of the current litigation) and the brand new Consumer Protection from Unfair Trading Regs. Indeed, it will be interesting to see how this feature, and overdraft charges generally stack up as "treating customers fairly" etc., etc., under the FSA's reforms to the retail banking regime, whenever those might take effect.

But as the current inconclusive litigation demonstrates, the legal niceties don't transmit to the coal face very quickly, if at all.

So surely there's a golden opportunity for one of the members of the current account collective to break ranks and genuinely distinguish itself from the others. It could start by submitting to an independent assessment of the fairness of its charges. Then it might capitalise on the pleasant surprise by diverting the money it spends on TV ads claiming to have the personal touch towards actually engaging with customers to produce something that they buy into as fair.

Anyone for first-mover advantage?

Even Faster Payments, Please

My refusal to pay for a current account landed me at Alliance & Leicester some time ago, as it also took the extraordinary step of paying decent interest on a regular balance. "Clunky" is not the word for it, and you really need your wits about you to avoid the fees lurking within. Being a retail financial services lawyer helps mightily.

Recently the bank left me a message to say that it had decided to introduce so-called Faster Payments. This is hardly dazzling - you may be aware that this has its roots in the tidal wave of frustration at slow payments that was punctuated by the Cruickshank Report in March 2000, and the ensuing regulatory saga. I was there to help "sink the slipper", as a quaint Australian rugby expression would have it. Typically, the UK banks fought tooth and nail to avoid the inevitable conclusion that:

"there were profound competition problems and inefficiencies associated with payment systems in the UK. The report found that the underlying economic characteristics of the systems did not deliver price transparency, good governance, non-discriminatory access, efficient wholesale pricing and innovation."

I won't bore you with the catalogue of dithering over implementing a solution, but the fact that "faster payments" are long overdue is evident from the APACS's bizarrely triumphant puff:

"Faster Payments is the first new payments service to be introduced in the UK for more than 20 years. For the very first time phone, internet and standing order payments can move within a few hours - almost at the touch of a button."

But compare the APACS puffery, with the statements below from Alliance & Leicester. Note the nasty little catches marked by * and **. I've brought the weasel words up from the footnotes and placed them in bold italics immediately after each. I've even had to use red text to show the nasty catches within the nasty catches. There's a way to explain what they're doing without making such sweeping claims or promises in the first place. Faint hope that nonsense like this might disappear under the tighter FSA regulation of retail banking.

"We are improving our service to you by taking part in a payment scheme being introduced across the banking industry called Faster Payments. This means that when you move money electronically either by internet or telephone banking it will usually be available for you to use on the same day*. Other types of payments such as direct debits and the time it takes for a cheque to be available will not change. Payments to Alliance & Leicester Credit Card will not be sent using the Faster Payments scheme. This means that the time it takes for these to go through will also not change.

What this means to you

Currently, if you move money between accounts or make bill payments, it will normally be available 3 to 4 working days later. Faster Payments means your money will usually be ready to use on the same day.

We are now able to receive money by Faster Payments and have started to send money by the scheme. We plan to have the Faster Payments scheme fully implemented later this year. Certain conditions will apply**. If the bank (or account) you have requested the money to or from is not part of the Faster Payments scheme, your money will continue to be moved using the BACS (Bankers' Automated Clearing Services) scheme and will be available for you to use 3 to 4 working days later. The Faster Payment scheme limit is £10,000 for immediate transfers and one off transfers that are set for a future date. The limit for standing orders is £100,000. Standing orders move money to another account on a regular basis. To start with we will have lower limits. These limits may change at any time without us telling you first. Other banks' limits may be different. Additional security checks may be carried out to protect you from fraud. If this happens your money may not be available on the same day.

You can easily make transfers or bill payments 24 hours a day, 7 days a week using our internet or telephone banking services.

[skipping several paragraphs of guff about internet and telephone banking that separates the * and the ** from the corresponding footnotes]

The Faster Payments scheme will allow you to keep your money in your account for longer."

A little premature to make the last claim so unreservedly, I'd say.

PS: 18 June '09: Here's John Kay's piece on the anniversary of the "faster" payments programme.

Consumers Paying For Services That Are Free

In these troubled times, we as individuals must take economics into our own hands - cut costs, repair balance sheets. And so on.

One needless expense is the purchase of complaints handling services from private suppliers when the alternative is free of charge.

Not only does that cost you money, but it also means your complaint may not be visible to the authorities. So there won't be as much pressure on the product provider to cure the problem you're complaining about.

Topical examples include:

• financial services claims management companies - why pay these guys, when the Financial Ombudsman Service (FOS) is free to consumers? The regulated product providers must pay FOS's fee for handling the dispute. That's an added incentive to resolve your complaint more quickly, and to avoid causing problems in the first place. But, as I've pointed out before, some claims management companies and law firms continue to promote services where the consumer bears the expense. There is even speculation within the industry that some product providers who've mis-sold financial services in the past are either starting up claims management companies or selling lists of affected consumers to them in order to profit from curing the problem they helped create. Your first complaint should be the product provider. But, if you aren't satisfied, then FOS is your best bet. Going to the media might sound attractive, but you shouldn't have to bear your soul in public to get a private financial matter resolved.
  

• call blocking services - sure, cold calls are annoying - especially those from an automated calling system that fails to connect anyone when we pick up the phone (known in the industry as "silent calls"). But rather than pay for a blocking service, the best solution is to help ensure the people using these systems get named, shamed and fined. That way, it's the perpetrators who will demand - and pay for - the improvements in technology that stops this happening, not you. So, before you pay for one of these blocking services, complain to Ofcom or the Information Commissioner. The Ofcom policy on the subject is here. You'll be comforted to hear that Ofcom fined Barclaycard the maximum fine of £50,000 for breaching the rules on silent and abandoned calls last month. It may not sound like much, but it will end up saving you money on a blocking service.
  

We all whinge when the Government doesn't act. But we only have ourselves to blame if they do act and we don't take advantage - and end up paying for it.

War on File-Sharers Spells D-o-o-m for Net Neutrality

The UK government is planning to promote "attractively packaged content" on the internet, bowing to pressure from copyright owners to prevent online piracy.

Only figures for the music industry are cited in the consultation paper, yet various regulatory and co-regulatory solutions are proposed that will affect all copyright content online.

The paper claims that about 6.5m people in the UK (25% of UK internet users), engaged in illicit P2P file sharing in 2007. This is estimated to "cost" the "music industry" £1bn over the next 5 years, against revenues of about £1bn per annum.

So, where's the problem? The "music industry's" digital music sales increased by 28% in 2007. Sure, declining CD sales resulted in a loss, but that's like saying Ford made a loss because no one wants to by the Model T anymore. It is also conceded that the decline in CD sales wasn't due to piracy alone - supermarket discounting and the shift to digital purchases were chiefly responsible. In other words, the "music industry's" woes are born of consumer dissatisfaction.

Consumers are used to getting content for free online, knowing that providers are making money out of advertising. So it's no surprise that 91% of survey respondents file-share because the content is free. More telling is that 42% say it's because they could find everything they were looking for. In other words, constraining supply by "attractively packaging content" doesn't work, and the music industry needs to get with the programme.

Of course, file sharing isn't actually not free. File-sharers spend time and pay for wireless technology, proxy servers, encryption and communications to download the material. No figures are given for how much revenue this generates, but at 6.5m UK consumers, it seems to be a sizeable market. I wonder who's making money out of that?

The chief cause of music industry misery actually seems to be the cost of enforcing copyright via the clunky legal system. They say it can cost £10,000 for each court order to obtain the IP address for each file sharer. I'm prepared to believe that, and I'm all for reducing the cost of enforcement. But that problem shouldn't need a "memorandum of understanding" among the rights owners' associations, network service providers and goverment, paragraph 3 of which says this:

"Many legal online content services already exist as an alternative to unlawful copying and sharing but signatories agree on the importance of competing to make available to consumers commercially available and attractively packaged content in a wide range of user-friendly formats as an alternative to unlawful file-sharing, for example subscription, on demand, or sharing services."

One shudders to think what is meant by "attractively packaged content". But it's implicit that any such packaging will be done by, and must suit, the few industry players who signed the MOU.

And that implies we'll be forced to pay for premium content bundled with rubbish, like "albums" on CDs. A sort of packaged internet, chosen for us by cosy institutions.

The neutral, open internet appears to be doomed.

PS: The Society for Computers and Law response to the consultation can be viewed here, and the SCL's response to proposals to increase the penalties for criminal infringement of intellectual property rights can be viewed here.