Millions of broadband users are in line to benefit from £270-million savings per year following a price review by industry regulator Ofcom. The watchdog and broadband companies recently reached an agreement on commitments and pricing changes that will provide better deals for customers who are out-of-contract or have contracts expiring soon.
Ofcom said it reviewed pricing practices to ensure that customers are always protected from high and unfair prices, especially when they are out of a contract.
An Ofcom report showed that 8.7 million or about 40% of the UK’s broadband customers are out of a contract. Most of these users pay higher bills compared to when they change providers or choose to go on a new deal. These broadband customers pay around £4.70 more than the average price of any provider’s contract per month.
The report also revealed that Sky (42%), Plusnet (42%), and Virgin (61%) have more out of contract customers than any other provider. On the other hand, out of contract users of Talk Talk and EE pay the highest amount per month than that of average deal prices, at £6.90 and £7.90, respectively.
The industry regulator held talks with Virgin Media, Talk Talk and BT in September 2019 to slash prices for out-of-contract vulnerable customers.
Plusnet, EE, and Sky have also committed to lowering their prices for vulnerable consumers. Additionally, Plusnet and EE agreed to provide access to discounted rates for existing customers, which previously was only available for new customers.
Ofcom Director for Consumer Policy Jane Rumble said that the regulator enabled broadband users to avail themselves of discounts that will help them save money. The new rules presented in February include ordering companies to notify consumers of better deals they can switch to once their contract expires.
Which? Home Products and Services Head Natalie Hitchens praised the regulator’s move to work with telecom companies in reducing prices, which a large number of out-of-contract customers can benefit from. The consumer group researchers found that such customers could be paying hundreds of pounds more per year than necessary.
Ofcom stated that the pricing changes could help around a million vulnerable or out of contract customers save up to £70 yearly.
Ombudsman Services Director of Regulatory Affairs Ed Dodman praised the regulator’s decision, saying that this positive step will nurture customer trust in the broadband sector.
Earlier in July, Ofcom directed broadband firms to stop threatening vulnerable customers with disconnection, especially at this time when many people are struggling to pay bills.
Telecom companies have already taken significant strides in assisting vulnerable customers affected by the COVID-19 pandemic. However, Ofcom believes that more actions can be taken to ensure that these customers are protected against high out-of-contract prices post COVID-19.
Firstly, the regulator expects providers to identify their vulnerable customers. Ofcom published guidelines on how companies could provide fair treatment for vulnerable customers.
Secondly, providers should offer better support for customers who have been under the out-of-contract setup for a long time. Ofcom expects companies to reinforce their existing commitments to their vulnerable customers to prevent high prices from aggravating their already troubling circumstances.
Lastly, vulnerable customers are entitled to additional help with their bills. Since the coronavirus has left several people under financial difficulties, the industry as a whole is called on to be proactive in supporting customers who struggle to pay their bills. It includes providing cheaper tariff offers to out-of-contract customers or those who are in debt.
When a customer’s contract is near expiration, the initial discount they received would also end. It means that they can be passed on to the default price, which is generally higher than other deals offered by the provider. While switching providers or negotiating a new contract can help them avoid higher costs, missing the opportunity to score a deal is possible due to a lack of information.
Therefore, companies should prioritise their customer’s welfare by ensuring that they can receive the utility they need without having to pay more than the amount they need to be paying.