Ofcom claims it's engineering fairer prices for UK broadband

Via Ofcom

Oct 13, 2019

11 October 2019

  • New measures to protect vulnerable customers from high prices and ensure they are treated fairly
  • Broadband companies to cut prices for out-of-contract customers after Ofcom review

Ofcom has today 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.

We have been concerned about some broadband customers who pay 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 our programme of work to ensure fairness for customers, we have reviewed broadband pricing practices, to determine the best way to help these customers get better deals. In particular, we have examined the barriers people face when shopping around, and how vulnerable customers are affected.

We 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.

We have also published a proposed guide on how firms can improve how they treat vulnerable customers. Our existing rules require all companies to support their vulnerable customers and treat them fairly. We’re calling on industry to do better in this area.[1]

Company price commitments

We have 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. We are 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.[2]

As a result of our 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.[3]
  • 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.[4]

What our review found

We have analysed the broadband market in unprecedented detail, looking at the prices paid by more than 20 million customers.

We found that people who sign a new deal with their current provider could typically pay £8-9 less per month than customers who remain out of contract. This is almost as much as the average saving of £9-10 per month made by new customers signing up to an introductory discount with that provider.[5] And a third of those who negotiate a new deal with their provider actually pay less than those on introductory deals.

However, we are concerned about some people, particularly those in vulnerable circumstances, who may be paying more than they need to – because they lack the confidence to navigate the market or talk to their provider.[6]

Our analysis also found that last year – for the first time – discounted prices for superfast broadband were lower than those paid by some out-of-contract customers for slower copper broadband. This pricing approach encourages customers to move to faster, better services but they can only make that move if those services are available in their area.

However, with its new commitment, BT will ensure its customers without access to superfast broadband will no longer pay more than entry-level superfast customers.

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.”

A special tariff for low-income customers

Getting a fair deal is particularly important to financially vulnerable customers, who might struggle to afford a broadband service. So we are exploring the case for a new, special tariff to protect low-income households.

This would require broadband companies to offer a simple, low-cost broadband service to eligible customers. We are investigating the affordability of broadband services to inform our assessment of this option, which would require legislation.

Making it simpler to switch

Ofcom has an extensive programme to make it simpler for customers to switch or find a better deal with their existing provider. This includes:

  • New proposals, published today, which would require providers to trial new measures to help people shop around, which could include a collective switching trial.
  • In line with the Government’s Smart Data Review, we are considering how customers could use data on how they use their broadband to help them find the best deals.
  • A consumer information campaign, launched this month, to highlight the benefits of switching broadband and mobile provider, and offer advice on how to do so.
  • Customers can also visit our switching website, BoostYourBroadband.com, to find out how to get more for less from their broadband.
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