1.3 million broadband and mobile customers have been prompted to seek out better deals as a result of the end of contract notifications telecoms providers are now required to send, regulator Ofcom said.
That has wiped £100 million off the “loyalty penalty” paid by idle telecoms customers who don’t seek out better deals.
In 2019, before the rules about end of contract notifications were introduced, just 47% of broadband customers reaching the end of their contract signed a new deal, either with their existing ISP or a competitor, Ofcom said.
That meant that 53% were rolled onto often expensive out-of-contract pricing, Ofcom said. The regulator has found that out-of-contract customers pay around £5.10 per month more than they need to.
To tackle that loyalty penalty, from February 2020 Ofcom required all fixed broadband, home phone, mobile, and pay-TV providers to contact customers ten to 40 days before their contracts lapse. These end of contract notifications (ECNs), delivered via text, email, or letter, must include the contract end date, the price paid before that date, any changes to price or service after that date, the notice period required to terminate the contract and the best deals that provider currently offers.
The notices are supposed to impel customers to seek out another deal. And they’ve been successful, Ofcom said, after analysing a sample of customers from five mobile operators and three broadband providers who had been sent ECNs.
“There is evidence that indicates that these timely prompts from providers are working,” Ofcom said.
It found that two-thirds of customers who received an end of contract notice remembered receiving one. Of those, 90% found it helpful and a fifth reported they were prompted into action they would not have otherwise taken.
In total, in 2020, 62% of broadband customers sought out a new deal at the end of their contract, up from 47% the year before, Ofcom found.
The number of broadband customers out of contract also fell, from 8.7 million (40% of the market) in 2019, to 7.4 million (35%) in 2020. That means 1.3 million more customers signed a new internet deal.
Vulnerable broadband customers, including pensioners and those on benefits, are more likely to become out of contract and the new notices have particularly helped them, Ofcom found. On average, those customers are paying £2.30 per month more than their provider’s average price for the service, down from £4.40 per month in 2019.
However, millions of broadband customers continue to pay over the odds. This share of out-of-contract customers isn’t steady across the market. Virgin Media has the highest proportion of broadband customers who are out of contract, at 52%. However, this is down from 61% in 2019 and may reflect Virgin’s current position as the provider of the most widely-available fastest broadband. EE Broadband has the lowest percentage of out-of-contract customers (21%), along with BT (28%) and TalkTalk (29%).
Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection, said: “Prompts from providers are turning into pounds in people’s pockets. It’s great to see more people shopping around and saving money since we took action.
“But millions are still potentially paying more than they need to. We’ve made it easier to grab a better deal, so it’s worth taking a few minutes to check what’s out there.”
Also in February 2020, Ofcom introduced a voluntary code asking mobile operators to scrap handset charges for out-of-contract customers. The regulator had found that mobile operators were regularly continuing to charge customers with bundled handset and airtime plans for their devices after they had technically paid them off.
Currently, all of the UK’s major mobile operators, with the notable exception of Three, have signed on to this voluntary code. This has more than halved the amount bundled out-of-contract mobile customers overpay relative to customers on like-for-like SIM-only deals, from £182 million in 2018 to £83 million in 2020.
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