Ofcom: Telecoms customers saving millions
November 30, 2021
More UK broadband and mobile customers are shopping around and signing up to better deals – and saving themselves millions of pounds – following rule changes implemented by regulator Ofcom.
In 2020, around two thirds (62 per cent) 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 per cent 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 per cent) in 2019 to 7.4 million (35 per cent) in 2020. On average, these customers pay around £5.10 (€6) per month more than they need to.
New Ofcom rules came into force in 2020 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. Ofcom 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 Ofcom research, two thirds of customers who were sent an end-of-contract notice recalled receiving one. Of those, 90 per cent found it helpful and a fifth reported that they were prompted into action they would not have otherwise taken.
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.
Ofcom 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 per cent) remained out of contract in 2020 – although less than in 2019 (61 per cent) – while EE had the lowest proportion at 21 per cent (down from 24 per cent in 2019). Plusnet saw the biggest decrease in the proportion of out-of-contract customers year on year – from 42 per cent to 31 per cent.
In September 2020, 52 per cent of Virgin Media customers were out-of-contract. This was higher than Sky (32 per cent), Plusnet (31 per cent), TalkTalk (29 per cent), BT (28 per cent) and EE (21 per cent).
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 per cent of these customers out of contract. And Ofcom research suggests customer engagement in the market is increasing.
Since the commitments Ofcom secured came into effect, more than three quarters (76 per cent) 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 per cent 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 £182 million in 2018 to £83 million in 2020.
Vulnerable broadband customers who pass the end date of their initial deal now also have greater protection from higher prices, due to the commitments Ofcom 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.
“Prompts from providers are turning into pounds in people’s pockets,” said Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection. “It’s great to see more people shopping around and saving money since Ofcom 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,” she suggested.
In response to the rule changes Ernest Doku, broadband expert at Uswitch.com, said: “With the prices of so many household essentials rising, it’s more important than ever to keep control of your bills. While it’s positive that end-of-contract notifications have helped reduce the numbers of out-of-contract consumers, there are still more than seven million people paying more than they should. It’s telling that more than half of Virgin Media customers are out of contract, a far higher proportion than other providers. This is despite any material change to your bundle resulting in your contract being extended. Clearly more can be done to make their offerings more appealing to consumers, either by improving the product or reducing prices.
“If your broadband, mobile phone or pay TV deal is due to come to an end you will receive a letter, email or text informing you of the cheapest deals your provider can switch you to, should you decide to remain with them. Either way, when you get this notice, it’s time to take action. When you receive this information, it is worth remembering that you don’t have to accept the deal on offer as it may not be the best option for you in the market. To ensure you are getting the best possible deal for your needs and, armed with details of how much you are going to be paying, it is a good idea to run a quick comparison to see what other providers are currently offering. Don’t wait for a letter to drop through your front door if you know you are out of contract. Get online now and start researching what deals are available, even if they are with your current provider,” added Doku.