31 July 2018
- 10 million communications customers are facing higher prices when out of contract
- Most providers don’t notify customers when contract is about to end
Customers of landline, broadband, TV and mobile services must be told when they approach the end of their minimum contract period, under new rules proposed today by Ofcom.
The plans are part of Ofcom’s work to help people shop around and secure the best communications deal for them, whether by switching provider or striking a new deal with their existing one.
More than 20 million customers are outside their minimum contract period, and more than 10 million are on deals with an automatic price increase at the end. As a result, millions of customers could be paying more than they need to. For example, customers who bundle their landline and broadband services pay, on average, around 20% more when they are out of contract.
Ofcom has been examining ways to allow consumers to avoid price increases and take full advantage of the wide choice available in the market.
Currently, most providers do not remind their customers when their minimum contract period is coming to an end. Nor do they explain what will happen after the contract ends.
So we are proposing that providers must notify their customers when their contract is coming to an end. The notification would inform them of any changes to their price or services and let them know their options, including that they could save money.
Providers would also be required to send a one-off ‘out-of-contract’ notification to all existing customers whose initial contract has ended, and who weren’t given this information at the time.
The alerts should use the customer’s preferred communication channel, which could be a text message, email or paper letter.
Lindsey Fussell, Ofcom’s Consumer Group Director, said: “We’re concerned many people are paying more than they need to – particularly those who are out of contract.
“Customers have told us they want to be alerted when their phone, TV or broadband contract is coming to an end, and get advice on their options. Under our plans, providers would have to do exactly that.”
Under Ofcom’s proposals, notifications should be sent to all residential and small-business customers (ten employees or fewer) who use services including landline, broadband, pay TV and mobile (either standalone or as a bundle). The notifications should be sent 40-70 days before the contract ends.
Millions are out of contract and overpaying
When a customer’s minimum contract period ends, they are no longer tied into their existing deal and have different options available to them. If they do nothing at this point, their contract is likely to continue on a monthly rolling basis. They may face a price increase, or elements of the deal they originally signed up to may change.
Ofcom’s research found that many people are unsure whether they are still in their minimum contract period, or when their contract ends. So customers often stay on the same deals for longer than they may otherwise do, paying higher prices and potentially missing out on deals that could improve their package or save them money.
Next steps and wider work
Ofcom is consulting on today’s proposals until 9 October 2018.
They form part of our wider programme of work to help customers get the best from their phone, broadband and TV services.