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Telecoms customers saving millions as Ofcom rules bed in

More broadband and mobile customers are shopping around and signing up to better deals – and saving themselves millions of pounds – following Ofcom rule changes.

  • 1.3 million broadband users secure better deals since introduction of prompts to shop around
  • Overpayment among mobile customers has dropped by £100m, after operators committed to cut prices when initial contracts end
  • Vulnerable broadband customers who are out of contract have greater protection from higher prices

Last year, around two thirds (62%) of broadband customers who were nearing the end of their contract either signed up to a new deal with their current provider, or switched to a new one when their existing deal ended. This is up from 47% of customers in this position in 2019.

In addition, the number of broadband customers who are out of contract fell from 8.7 million (40%) in 2019 to 7.4 million (35%) in 2020. On average, these customers pay around £5.10 per month more than they need to.

End-of-contract alerts prompt customer action

Last year, new Ofcom rules came into force that require phone, broadband and pay-TV providers to warn customers when their current contract is ending, and what they could save by signing up to a new deal.[2] We also secured commitments from major telecoms firms to reduce the bills of many out-of-contract customers.

There is evidence that indicates that these timely prompts from providers are working. In our research, two thirds of customers who were sent an end-of-contract notice recalled receiving one. Of those, 90% found it helpful and a fifth reported that they were prompted into action they would not have otherwise taken.

Broadband customers better off

The number of broadband customers who were out-of-contract in 2020 fell by around 1.3 million from the previous year. This reduction was largely driven by people securing a new contract with their existing provider, rather than switching. The average prices paid by broadband customers also fell over the same period, from £39 in 2019 to £38.10 in 2020, while average speeds continued to increase.

Our analysis also shows that some providers have a greater proportion of out-of-contract customers than others. More than half of Virgin Media’s customers (52%) remained out of contract in 2020 – although less than in 2019 (61%) – while EE had the lowest proportion at 21% (down from 24% in 2019). Plusnet saw the biggest decrease in the proportion of out-of-contract customers year on year – from 42% to 31%.

In September 2020, 52% of Virgin Media customers were out-of-contract. This was higher than Sky (32%), Plusnet (31%), TalkTalk (29%), BT (28%) and EE (21%).

Mobile customers save £100m

Mobile customers on bundled contracts, who pay for their handset and airtime together, are particularly likely to sign up to a new deal when their existing one expires, with just 11% of these customers out of contract. And our research suggests customer engagement in the market is increasing.

Since the commitments we secured came into effect, more than three quarters (76%) of mobile customers on bundled tariffs who were nearing the end of their contract took action to shop around and secure a new deal – up from 70% in 2019.

Also, the amount that bundled out-of-contract mobile customers overpay, relative to customers on like-for-like SIM-only deals, has more than halved – from £182m in 2018 to £83m in 2020.

Vulnerable customers protected

Vulnerable broadband customers who pass the end date of their initial deal now also have greater protection from higher prices, due to the commitments we secured from providers.

On average, these customers pay around £2.30 per month more than their provider’s average price for their service, a significant reduction from £4.40 in 2019.

Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection said:

Prompts from providers are turning into pounds in people’s pockets. It’s great to see more people shopping around and saving money since we took action.

But millions are still potentially paying more than they need to. We’ve made it easier to grab a better deal, so it’s worth taking a few minutes to check what’s out there.

Are you in or out of contract?

Out-of-contract customers don’t have to wait to hear from providers before securing a better deal. Ofcom has a simple, three-step journey to help people find the best offers on the market.

Notes to editors

  1. Figures for broadband and mobile customers nearing the end of their contract who either signed up to a new deal with their current provider, or switched to a new one are from September 2020 and September 2019.
  2. End-of-contract notifications came into force on 15 February 2020. They can be sent by text, email or letter – between 10 and 40 days before a contract comes to an end – and must include:
    1. when your contract is up;
    2. what you’ve been paying until now, and what you’ll pay when your contract is up;
    3. any notice period for leaving your provider; and
    4. your provider’s best deals, including any prices only available to new customers.
  3. Ofcom conducted research among a sample of customers of five mobile and three broadband providers, who had been sent an ECN for a service contract ending in September 2020.
  4. Average broadband prices are based on customers from six providers from whom we obtained data (BT, EE, Plusnet, Sky, TalkTalk and Virgin Media).
Channel website: https://www.ofcom.org.uk/

Original article link: https://www.ofcom.org.uk/news-centre/2021/telecoms-customers-saving-millions

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