Can social media improve access to drinking water?

CI’s Hubert Linders looks at a project in Latin America which allows consumers to participate in regulating formerly public services through the use of social networks. 

Access to public utilities like drinking water, energy or telecommunications, require vast infrastructure investments and maintenance. Many Latin American countries privatized these services in the last decades of the 20th Century, telling consumers that private companies would be able to provide more efficient and cheaper services than government-owned institutions.

In their apparent rush to do so and because of lobbying by specific interest groups, regulation was often forgotten or poorly taken care of by the governments, leaving end-users without the possibility to claim their rights when the service delivery was less than optimal.

About two years ago, Canada's International Development Research Centre (IDRC) approached Consumers International (CI) in Santiago to ask if we were interested in carrying out a project on the use of ICT tools to improve the participation of consumers in the processes of regulation of and access to public services.

A pilot project was designed in which two CI members, CDC in El Salvador and ASPEC in Peru, worked in a peri-urban zone where a public service – access to drinking water – became the subject of an investigation.

The organisations were asked to define target groups of citizens within their respective working areas and find out about the use of communication technology (access to internet, use of web 2.0 sites or social networks, application of mobile phones, etc.), their problems with respect to the service, and contacts with the provider and regulator.

Text messages were chosen as the ‘tool’ to allow the people participating in the project to communicate with their water providers (eg, to report problems) as there is more access to mobile phones than the Internet in the project area. Providers can use the same system to warn end-users of changes or cut-off of their water supply because of repairs or other problems.

CDC developed its own application, Matilti (meaning communication in Nahuatl, the local language), while ASPEC decided to use an existing tool, TextMagic. Both organisations designed a capacity-building programme to train the people in the use of the tool and to educate them on the work of the respective consumer associations, consumer rights and how to claim these rights.

Both organisations then encouraged participants to communicate via text message with their water provider and regulator to improve client contact and complaint handling.

A project website and a blog  were set up to inform about the project’s objective, the activities in both project countries and about the investigation.

All participating organisations were very enthusiastic about the opportunities the social networks offer. They not only make it easier and faster to reach a wider audience but also opened up the issues to a new audience of the younger citizens who show little previous interest in consumer rights issues.

The outcomes so far look very promising in Peru where the drinking water provider (SEDAPAL) and the regulator (SUNASS) are becoming more responsive to comments and complaints from consumers as the project progresses.

While in El Salvador, communities are directly communicating more and more with the water provider, ANDA. Here, the governmental consumer protection agency, Defensoría del Consumidor, also receives messages sent to ANDA and will take action if the provider does not resolve the problem within a fixed time.

Also, the Ministry of Health is looking at the tool to see if it can be used to monitor the prices of medicines set by pharmacies throughout the whole country; while the Ministry of Economy has shown interest as well.

The project runs until (end of) February 2013 and we are looking to extend it until (end of) June 2013.

The dark side of digital

Lucy Hopkins from Consumer Focus asks us to consider the potential pitfalls for consumers in the internet era, and how regulators can pre-empt the dangers.

Imagine a world where a company can refuse you a loan because one of your friends on Facebook has a bad credit rating.

Imagine you get worse deals than others when buying online because a company has tracked your search patterns and knows that you’re not much of a bargain hunter.

Imagine you leave negative comments for a company on a review site and someone starts posting malicious information about you online which spreads like wildfire, leading to you losing your job.

These are just some of the problems that an increasing number of people could be facing in the digital age.

This is not to say that digital advances are a bad thing. Widespread access to the internet and the tools and applications that have been built on it has brought many benefits—such as increased access to information, transparency, convenience and new means of communication—to millions of people.

But there has been less focus on what potential risks and challenges will emerge from how providers will deploy these technologies. Consumer Focus’ review of digital downsides 'All that's digital isn't gold: The challenges and risks of the digital age,' (pdf) aims to do just that.

It covers issues from new web monopolies and online reputation management to unfair terms of data sharing and biased search engine results.

The aim of highlighting these and other detriments is to prompt debate and persuade those who are in a position to pre-empt and prevent these (regulators, enforcers, consumer groups and companies that operate in this area) to understand and respond to these consumer  issues now before they become widespread problems.

Reviewing these downsides, it becomes clear that there is not one, single way of addressing or mitigating their effects. The rapid pace of change in the digital world moves faster than traditional regulatory approaches are typically able to, meaning classic responses might not always be suitable for the problems that are emerging.

This fast pace and unpredictable nature of change also makes it difficult to anticipate problems and plan responses.

So regulators, and other bodies working in the consumer interest, will need to start to consider how they can be more agile in order to respond to the challenges these detriments will present to our traditional regulatory frameworks.

How group action is reinventing consumer activism

Richard Bates, from CI member Consumer Focus, explains how social technologies are revolutionising consumer action—an important lesson for consumer groups around the world

Here’s a theory I’m sure you’re familiar with: foster competition within a market and its benefits – prices held down, service driven up and thriving innovation – will follow, as engaged consumers work to maximise their own interest and seek out better deals.

It’s a notion that underpins our energy, telecoms and financial services markets here in Britain. 

And here’s a reality that I suspect won’t be unique to Britain: mass inertia is the norm across these sectors. It’s a predictable and understandable consumer response in markets where engagement is not a high priority and which suffer from being archetypal ‘confusopolies’.

The result is an impasse. Consumers stay put and competition gives way to complacency on the provider side. The benefits that competition should deliver for consumers are then in short supply. The fabled invisible hand is, well, all too invisible.

But, what if we created an alternative, much simpler, more powerful way of making these markets work for consumers? One where an intermediary works on behalf of consumers to:

• Provide a focal point around which consumers who want better value, but reject the conventional ‘go it alone’ route to market can cluster
• Convert mass inertia into a competitive impetus by grouping participating consumers’ aggregate demand into a winnable block of market share
• Leverage that aggregate demand to secure a better deal
• Manage the mass switch of participating consumers to the provider who makes the best offer to the group

In a new report for Consumer Focus, I’ve argued the possibility of doing just that. The report expands on a trend I termed ‘Get it, together’ in a previous CI blog. At the core of this trend are the opportunities for new forms of group action enabled by social technologies.

Of course, coming together as a group in order to pursue a shared objective is nothing new. 

History is rich with examples of people organising in groups and using the consequent power of numbers to advance collective interests and press for change – whether social, political, or economic.

But the costs associated with large-scale group formation and, subsequently, the co-ordination and management of group action meant that only large organisations with hierarchies and management structures could act in this way. And only then if the benefits achieved outweighed the costs incurred.

Instances of people collaborating as a group outside the bounds of an organisation were mostly limited to small scale, local initiatives.

But social technologies have eroded those costs, meaning it’s not only easy for people to form groups now, it’s also easy for the group to achieve critical mass and to co-ordinate and synchronise its actions to achieve a shared goal.

As a result, we are seeing a proliferation of new kinds of groups, including consumers working together or through intermediaries to achieve a shared objective in the marketplace. The Bank Transfer Day campaigns in the USA harness precisely these dynamics, as do local Carrotmob initiatives.

What’s more, in the past effective group effort often depended on a division of labour that assigned all members a task to undertake in pursuit of the group’s aims. Not anymore.

An active intermediary can now work on behalf of the group and harness the power of its numbers - rather than the efforts of its members - to achieve the shared goal. Other than aligning with the group and signalling assent to an action being undertaken on their behalf, individual members can now be effective in aggregate while remaining largely passive in practice.

In a consumer context, this solves the problem of inertia and minimises the costs of market participation for consumers, offering them the attractive proposition of better outcomes for less effort.

Today, we’re seeing the first wave of initiatives that look to put these ideas into practice and disrupt the markets to which they’re applied. Within the next three to five years collective switching could well turn the status quo on its head and create a situation where providers will have to work much harder to win and retain the custom of large groups of consumers.

Already, collective switching pioneer – iChoosr – has secured significant savings on energy bills for hundreds of thousands of consumers in Belgium and the Netherlands. Consumentenbond has also applied the approach successfully in the Dutch energy market. Which? has just overseen the first instance of collective switching in the British energy market, resulting in a straightforward route to an average saving of £123  for up to 200,000 participating consumers. Choice provided a much needed jolt to the Australian mortgage market by applying a variation of the approach there. 

As you may have noticed, three of those four initiatives have been offered by consumer bodies. The success of the exception, iChoosr, has been built on working in partnership with community organisations that consumers know and trust.

This suggests that integrity – a quality with which consumer and community bodies are strongly associated – will be key for consumer adoption of this approach. That’s hardly a surprise given that having the confidence to engage with an intermediary platform on a novel approach to markets that can represent a major financial commitment, will be a key issue for consumers.

Collective switching and wider initiatives harnessing the group dynamic have the potential to disrupt and rebalance how power and information flows in markets. Therefore, existing players who have most to lose are likely to resist the sea change rather than make the running in developing this kind of service.

Bodies working in the consumer interest therefore have vital roles to play as catalysts for collective switching. This could take the form of supporting pioneering intermediary services that work on behalf of consumers in markets; or, wherever necessary, involve the direct development and deployment of the platforms that can open this alternative approach up for consumers.

Richard Bates leads the Consumer Empowerment Programme at Consumer Focus @rchrdbts

Three social media challenges for the consumer rights movement

Richard Bates, of the UK’s Consumer Focus, on how new consumer empowerment is changing the role of consumer rights bodies.

In an era where consumers have a voice and are not afraid to use it, what’s the role of a body that claims to be the voice of the consumer?

Remember the 20th century? Such question wouldn’t have arisen then. We didn’t necessarily like it, but as consumers we knew our place. For the most part, we were isolated individuals, stranded at the receiving end – literally – of mass production, hyped by mass marketing, reaching us through mass media. Of course, we were frustrated when the reality of products and services didn’t marry up with the promise, but our only hope of resolution lay at the outer reaches of a customer ‘support’ labyrinth. Our best chance of sharing experiences widely with our peers lay in having a tale of woe that was extraordinary enough for the press to show an interest.

The mission of consumer bodies was clear too: work on behalf of consumers to expose problems, propose solutions and ensure government, regulators and business took heed.

Just one decade into the 21st century, and the old certainties are falling apart. According to market research agency Forrester, we now live in the ‘age of the customer’, where a company’s success depends on its 'engaging with empowered consumers'.

When Unilever CEO, Paul Polman, talks about consumers being able to “bring us down in nanoseconds” you start to think Forrester might be on to something.

The balance is being tipped in favour of consumers by social media. Connected and part of the conversation, we’re fast evolving from passive recipients, to active participants in the media of the masses. As Clay Shirky puts it in Here Comes Everybody, consumers talk back to businesses and speak out to the general public, and can do so en masse and in coordinated ways.

The upshot is dynamic new approaches to consumer empowerment. Three themes I’d pick out as having considerable impact, both individually and in combination, are:

(1) Brands in our hands: where connected consumers share experiences, feedback and information in ways that make brand transparency inevitable. If a brand doesn’t live up to its promises, Polman’s prophecy comes to pass.

(2) Get it, together: where connected consumers aggregate and synchronise their buying power to achieve better value and/or social and environmental goals. High opportunity and transaction costs used to ensure this was difficult to the point of prohibitive, but technology has eroded those costs and ignited an explosion of activity in this space: ranging from the Chinese ‘team buying’ phenomenon of tuangou, to Carrotmob.

(3) We can do this: where the growth of peer-to-peer marketplaces and collaboration is posing a challenge to incumbent providers in some sectors – Zopa, the peer-to-peer lending platform being one such example.

None of these innovations can be traced back to the consumer ‘establishment’. Instead, their origins are with entrepreneurs who have capitalised on the opportunity to offer intermediary platforms that make new approaches possible; or with civic-minded developers, such as mysociety.org in the UK; or, as with Australia’s Vodafail, consumers speaking back directly and with real impact.

So, is the traditional consumer body surplus to requirements? Well, no. In an age of consumer voice, many remain voiceless and in need of representation. There’s also an ongoing need to fight the consumer corner when complex decisions are made in regulated markets, especially long-term policy decisions. Technology that presents new opportunities also presents new risks – at least 50 of them according to a project we have underway to identify and pre-empt sources of ‘digital detriment’.

But, we have to extend our capabilities to harness new opportunities for tackling old problems, and do so in ways that see us collaborate with and work through the actions and decisions of consumers themselves. Otherwise, that ‘traditional’ prefix will challenge our relevance, as more fleet-footed, innovative actors become useful to consumers and start to command the space.

Finally, given the number of contentious issues on the horizon – how we meet costs of a sustainable future, for example – there’s perhaps another question we should all be considering: when a body acting in the consumer interest takes a divergent view to a vocal mass of consumers acting in the, erm, consumer interest, who’s right?

Richard Bates leads the Consumer Empowerment Programme at Consumer Focus, the UK’s statutory consumer body. The Programme is focused on analysing, developing and promoting innovative approaches to consumer empowerment.

Israel's cottage uprising: consumers unite on Facebook to force inflated food prices back down

Prof Michal Gal, by Shmuel Almani

Professor Michal Gal reveals how consumers in Israel have used Facebook and collective power to successfully force high food prices back down.

There have been some exciting events taking place in Israel for the past three months or so. The first is a revolt by consumers, in what has come to be known as "the Cottage Uprising", which reached one of its climaxes this week when hundreds of thousands of consumers decided to boycott Tnuva products, a major supplier of dairy products. This figure represented a large number of consumers for such a small country. They were connected and informed through social networks, supporting media and volunteers.

It all started when one conscientious consumer posted a call on Facebook to boycott cottage cheese produced by Tnuva, the largest cottage cheese manufacturer in Israel. Cottage cheese is an important part of an Israeli diet and, believe it or not, it is actually tasty! He pointed to the fact that in the past year, ever since the price of cottage cheese was deregulated, it rose by more than 25% percent. Surprisingly, more than 100,000 consumers joined him within days.

Tnuva has caved in to consumer pressure

At first Tnuva, which is now largely owned by the British APAX investment fund, responded that it would not reduce prices, but soon it began to understand that it had a real problem on its hands. Within days it reduced prices and set them closer to their previous levels. The harm to Tnuva was not only the direct loss it suffered: Tnuva uses the picture of a "cottage" (house) which is posted on its cottage cheese as its main image and bases its slogan on it: "Tnuva - the Israeli home".

This was only the first step in this summer's social revolution. Hundreds of thousands of Israeli consumers (450,000 people - out of approximately 7 million people participated in the biggest march ever in Israel) protested against the high prices of many products. These high prices make it difficult for many to live a comfortable life despite many having a good education and working long hours. Indeed, research done for the Israeli parliament indicated that between 2006 and 2011 the average salary in Israel rose by 2.6 percent while the Consumer Price Index rose by 25 percent. Salaries in Israel are the third lowest of all of OECD members, while prices and taxes are among the highest.

This was mainly a protest led by the young and educated, who saw their dreams of buying their own apartment get further away from them due to the extreme rise in housing prices. They have also experienced growing difficulties of paying their bills, not to mention saving for a rainy day. They were joined by many other groups protesting against "social injustice." They pointed to, among other things, the fact that while the country's macro-economic indicators painted a bright picture, the benefits did not trickle down to most groups in society and they were largely enjoyed by a small group of business people who control large parts of the Israeli market. This small group, whose interests are often protected by politicians, enjoys the quiet life by not stepping on each others' turf.

Accordingly, the protest was not necessarily about the capitalistic model that Israel adopted, but mostly about the unnatural causes that enabled huge conglomerates to develop and prosper and the lack of regulatory tools applied to limit their market power.

As part of this social revolution, people built tents in the centres of towns all around Israel, and created "town squares" for public discussions about how to use public funding to create a better life for most citizens. It is a great example of Israeli democracy that these "temporary settlements" were allowed, despite the fact that they criticised the government quite severely (it was a great lesson in democracy for my kids).

Earlier this month, after the largest march, most tents were taken down by the protesters. The hope is that the discussion will continue and will affect governmental policies. Committees were created in order to push forward a more socially oriented policy. As studies began to accumulate that showed the high profits of many major suppliers in Israel, a group of students initiated what they call a "changing boycott," where each week one major food producer would be boycotted, to indicate the consumers' power if prices were not reduced to "fair" levels.

Tnuva reacted to this action not by reducing prices, but by increasing the sizes of its products by 10% and selling them for the previous price. We will have to wait and see what will develop.

I find this collective use of consumer power quite exciting, especially when this power is used to reduce high prices that are a result of governmental failure to perform the regulatory tasks it should have performed (eg reducing entry barriers, placing more emphasis on market power considerations in privatisation decisions, resisting interest-group pressures, and not allowing conglomerate mergers with significant market-power effects that do not create offsetting efficiency benefits). At the same time I hope that such consumer power is not abused and will not reduce incentives for dynamic and efficient production. I hope we will get the right balance.

Professor Michal Gal is a Professor, Vice Dean, and Co-Director of the Forum on Law and Markets at the Faculty of Law, Haifa University, Israel.

Gerd Leonhard video on 'Consumer empowerment in the networked society'

Gerd Leonhard, CEO of The Futures Agency, addresses the Consumers International World Congress on 'Consumer empowerment in the networked society'. Hong Kong, 5 May 2011.

Gerd Leonhard looks at the power of networks to facilitate activism, as well as commerce. In a fascinating lecture he explores the power of Facebook, Youtube, Twitter and other social media tools, and considers future trends in consumer activity, communications and advocacy.