Ofcom has set out a range of measures to help ensure out-of-contract broadband customers pay fairer prices, and providers offer better protection to vulnerable customers.
Ofcom says that it has been concerned about some broadband customers paying high prices when their introductory offer has ended, meaning they are ‘out of contract’. Many of these customers could save money by negotiating a new deal with their existing provider or switching to a new one.
As part of Ofcom’s new program of work to ensure fairness for customers, they have reviewed broadband pricing practices, to determine the best way to help these customers get better deals. In particular, it has examined the barriers people face when shopping around, and how vulnerable customers are affected.
Ofcom’s research has found that around 40% of broadband customers (8.8 million) are out of contract, and that significant savings are available to those who sign up to a new deal with their current provider. Ofcom has also published a proposed guide on how firms can improve how they treat vulnerable customers.
Ofcom has challenged broadband companies to make their prices fairer for out-of-contract customers. Although it is common in competitive markets for companies to offer discounted prices to attract new customers, some groups – including some vulnerable customers – could be left behind. Ofcom says it is also concerned about the out-of-contract prices paid by people who are stuck on copper broadband, without the option of switching to superfast broadband yet.
As a result of the review, the UK’s biggest broadband companies have made a range of commitments to protect customers and cut prices for those who are out of contract.
- BT, Sky and TalkTalk will allow their out-of-contract customers to get the same deals as new customers, when they take out a new contract.
- The difference that any of Sky’s newly contracted customers will pay when their contract expires is no more than £5 per month. From February, BT will cap the difference that existing in-contract customers pay when their contracts expire – it will confirm the amount of this cap in due course.
- BT customers without access to superfast broadband will no longer pay more than entry-level superfast customers. And BT will provide a one-off automatic price reduction for vulnerable customers who are currently out of contract on more expensive deals.
- TalkTalk and Virgin Media will carry out annual price reviews with their vulnerable customers to ensure they are on the best deal for their needs, providing automatic discounts where appropriate if customers do not respond.
- BT, EE, Plusnet and TalkTalk will protect out-of-contract customers from above-inflation price rises.
Most of these commitments will come into effect by March 2020.
While existing laws do not allow Ofcom to cap prices in general, these commitments from industry will help protect out-of-contract customers from high prices.
From February, broadband customers must also be told when their contract is coming to an end, and shown the best deals available. People who choose to stay with their provider without signing up to a new contract will be given details of their firm’s best deals every year.
Lindsey Fussell, Ofcom’s Consumer Group Director, said: “Broadband customers who are out of contract can make big savings – around £100 a year on average – by picking up the phone to their current provider and signing up to a better deal. And in future, everyone will be told about the best tariff on offer. Thanks to the commitments we’ve secured from major broadband firms, many customers – including the most vulnerable – will pay less.”
Andrew Milburn, Director at comparethemarket.com, said “It’s simply not acceptable that 8.8 million customers are out of contract and likely paying significantly over the odds for their broadband. The new rules, that will ensure that customers are told when their contract is coming to an end, cannot come soon enough. Currently the onus is still on the customer to notice that they have fallen out of contract. Getting a fair deal should be the minimum obligation, and helping customers navigate this often complex and opaque market should be a priority for the industry.”
Gillian Guy, Chief Executive of Citizens Advice said “Our super-complaint, submitted a year ago, found that loyal broadband customers lose over £1 billion a year. Ofcom has today confirmed that finding. The fact that 43% of all vulnerable customers are out-of-contract means that Ofcom needs to tackle this problem urgently.”
“While we welcome today’s announcement, it’s unlikely that voluntary, piecemeal commitments from providers will address the sheer scale of the challenge we’ve identified. It’s vital that we see stronger, faster action in the broadband market before the Competition and Markets Authority report back in December on progress since our super-complaint. If this fails to happen, we expect them to conduct a market study to ensure loyal customers can get a fair deal once and for all.”