Ofcom’s new measures cut charges for out of contract customers

Ofcom has set out a range of measures to increase fairness for mobile customers – including greater transparency, fairer contract terms and a range of price cuts by operators.

Many mobile customers pay for both their handset and its usage (or ‘airtime’) bundled together in a single contract. Ofcom said that they have been concerned that these customers could be paying more than they need to once they pass their initial contract, so last year they began a review of the market. Previously proposed options included greater transparency around handset pricing; and moving customers automatically onto a default tariff such as an equivalent ‘SIM-only’ deal when their initial contract has passed. Since then, new EU laws have been passed. They provide a package of measures designed to address many of the concerns that Ofcom has identified. But they fall short of giving Ofcom the legal power to impose default tariffs, ruling out such a measure.

New research also shows that default tariffs could leave many customers worse off. Ofcom has analysed the market in unprecedented detail, analysing the prices paid by all two million mobile customers on bundled deals who are out of contract and have found that more than a quarter would actually pay more if they switched to an equivalent ‘SIM-only’ deal.

Under the new EU rules, which must be implemented by the end of next year, mobile customers entering into a bundled contract will be told the cost of buying the handset and airtime separately. Ofcom says it wants to introduce this for UK customers as quickly as possible, and will set out our plans in the coming months.

Mobile customers are increasingly turning to ‘split’ contracts – with separate contracts for the handset and airtime – so they can afford an expensive mobile phone in instalments.Ofcom is concerned that longer split contracts could make it harder for customers to switch, if they have to pay off their handset first. So today Ofcom has proposed a new rule to ban mobile operators from linking split contracts where the handset contract is longer than 24 months.

Alerts when your contract is up. Under Ofcom rules announced in May, mobile companies must tell customers when their contract is coming to an end, and explain their best deal including a SIM-only tariff. And if a customer wishes to switch to a different network, from this month they can leave their current provider with a simple text message.

Ofcom says it has also challenged the industry to take action and have announced commitments from a number of the UK’s biggest mobile companies to reduce customers’ bills.

• Virgin Mobile will move its out-of-contract customers to the equivalent 30-day SIM-only deal.
• Tesco Mobile will reduce the monthly charges of out-of-contract customers who are overpaying to the best available airtime tariff.
• O2 will reduce the monthly price of its out-of-contract customers to the equivalent 30-day SIM-only deal. This will apply to its direct customers only, but O2 will discuss options for customers who take out O2 contracts with third-party retailers.
• Vodafone and EE will reduce their prices for customers out of contract for more than three months. Both companies will confirm the level of this discount before the end of the year. The discount to take into account the level of savings available if customers switched to a comparable SIM-only tariff.

Three is the only major provider that has refused to apply any discount to its out-of-contract customers. As a result, these customers will continue to overpay and will not receive similar protections if they stay on their current deal.

All of the discounts will come into effect by February 2020.

Lindsey Fussell, Ofcom’s Consumer Group Director, said “Our research reveals a complex mobile market, where not everyone is getting a fair deal. So we’re introducing a range of measures to increase fairness for mobile customers, while ensuring we don’t leave existing customers worse off.”

“All the major mobile companies – except Three – will also be reducing bills for millions of customers who are past their initial contract period.”