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Ofcom Study Confirms Loyal Broadband and Mobile Users Pay More

Thursday, May 17th, 2018 (12:31 pm) - Score 881
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A new report from Ofcom on annual pricing trends has found that 80% of UK households purchased bundled services in 2018 (broadband, tv, phone and / or mobile), which is down from 81% last year. But those who remain loyal to their broadband ISP (i.e. staying after the contract is up) will end up paying more.

The national telecoms regulator reported that just under a third (31%) of households purchased a dual-play landline and fixed broadband bundle, while the same proportion purchased a triple-play service consisting of landline, fixed broadband and pay TV.

The high take-up of bundles means that bundled service prices are more relevant than standalone prices (particularly those of fixed telecoms services) to many UK homes. On top of that bundles remain the cheapest option, although it’s worth remembering that a focus on price alone will always overlook key aspects like service or support quality and any value added extras.

ofcom_bundled_vs_standalone_broadband_prices_uk_2018

Interestingly the gap between the price of a superfast (30Mbps+) and standard fixed broadband connection has also discovered to have narrowed to the point at which there is “little or no difference for some packages“.

The average monthly price premium for superfast vs standard broadband, when purchased as part of a dual-play bundle, fell from £8 in 2012 per to £4 in 2017, while it fell from £6 to £3 for superfast broadband purchased as part of a triple-play bundle. However, the decline in the superfast price premium is primarily due to increases in the price of standard broadband packages.

Most of the major broadband ISPs also tend to offer big discounts on their bundles during the first 12, 18 or 24 month contract term (after this the more expensive post-contract pricing tends to kick in), which makes it cheaper to switch. Data shows that around four in ten bundle users were outside the minimum contract period with their existing provider in July-September 2017.

Ofcom found that the incidence of switching is highest among dual-play customers (17% switched at least one service in their bundle in the 12 months to September 2017). By comparison standalone landline users were the least likely to have switched (5%), particularly if they had no fixed line broadband service (2%).

ofcom_2018_broadband_switching

Elsewhere Ofcom noted that there was a notable increase in the price of BT’s cheapest non-discounted dual-play ADSL bundle between Q4 2015 and Q1 2018, up by £19 per month (79%) in real terms to £42.99 per month. There were also increases for the other ISPs included in their analysis during this period, but these were much smaller, ranging from 1% for Sky Broadband to 5% for EE.

From Q2 2017 onwards, BT’s cheapest dual-play standard broadband bundle had “unlimited” data whereas, before this, data use was capped, so the price increases outlined above are not for like-for-like services. Comparing the price of BT’s cheapest non-discounted “unlimited” dual-play standard bundle shows there was a smaller, but still “significant“, £11 per month (33%) real-term price rise between 2015 and Q1 2018.

Additional Findings from Ofcom’s Study

* Many people could upgrade their broadband at no extra cost. The gap has narrowed between the prices of superfast broadband and the price of standard broadband. (Superfast broadband is a connection that can deliver speeds of 30 Mbit/s.) Some providers now offer up to 25% off bundled services over the minimum contractual period.

* New products that give consumers more flexibility and choice have emerged. TV viewers who pay for channels can watch content in more ways than ever before. These include streaming video services such as Amazon Prime and Netflix, and more tailored pay-TV bundles. Mobile users can choose from ‘zero-rated’ tariffs, where data used to access certain applications (such as Facebook, WhatsApp or Spotify) does not count against their monthly usage allowance.

* Prices have fallen for many customers with standalone landline services. From 1 April 2018, BT reduced its monthly line rental price by £7 per month (from £18.99 to £11.99) for customers who only have a landline, without any broadband, after our review found they were getting poor value for money.

* More choice can mean more complexity for consumers. While more choice and product personalisation can benefit consumers, they can also be confusing. Complexity may lead consumers to disengage from the market, and they can end up paying higher prices by sticking with their current provider. Most people choose bundled services for convenience and value. But the quantity of promotional discounts, call packages, broadband speeds and contract lengths available make it more difficult for consumers to compare bundles.

* Around 1.5 million mobile customers whose contract includes a handset, are still paying the same price after the end of their minimum contract period. Receiving a handset as part of a pay-monthly service is popular, as it allows consumers to pay for an expensive handset in instalments. But most tariffs that provide a handset continue to charge the same monthly fee after the minimum contract period has expired. Around 1.5 million people1 may be spending more than necessary by continuing to pay a monthly fee that includes the cost of a mobile handset after their initial minimum contractual period has ended.

* Even if mobile consumers do exit their contract at the end of the minimum period they will typically pay more for the device than if they bought it separately and used a SIM-only (SIMO) contract. We looked at some of the major providers’ tariffs including the iPhone 8, and found consumers could end up paying over £200 more for the handset through a mobile contract. That is equivalent to an interest rate higher than that of many credit cards.

As usual the key advice that Ofcom has for consumers is to shop around and switch, as well as suggesting that they be aware of their usage needs (i.e. don’t buy lots of something if you won’t use most or all of it, such data, texts or minutes etc.) and be mindful of the end dates for any promotion periods or contracts.

The regulator is currently working to improve this area, such as by proposing to require that providers “proactively inform” their customers when they are approaching or are at the end of their minimum contract term (here). Ofcom has also included a useful summary of their key metrics, which we’ve pasted below.

ofcom_2018_consumer_pricing_key_metrics

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he is also the founder of ISPreview since 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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16 Responses
  1. Mike

    Unless of course you have an old Three AYCE contract ( ͡° ͜ʖ ͡°)

    • Adam Jarvis

      It says a lot that Ofcom’s Group Director of Competiton – Jonathan Oxley began cutting his cloth, as a trainee manager of BT, and stayed there for 8 years.

      Ingrained favouritism to your early maker never leaves you, IMO.

      (So many of Ofcom’s head honchos are parachuted in from BT into key Ofcom roles, though Oxley worked elsewhere in between).

      The recent “BT landline only” cut of £7 to £11.99 ONLY if you don’t have broadband (including completely unconnected VM Broadband) is the Ofcom ‘elephant in the room’, currently.

      As an example of how stupid this is:
      If a consumer doesn’t have broadband, just a BT landline (now paying the reduced £11.99 a month since April 2018, under Ofcom’s ruling) and decide they now want to add Broadband (not uncommon).

      If the consumer signs up to VM Broadband (or other third party broadband ISP-Entanet etc) but keeps their BT landline, BT increase their line rental to £18.99 for having third-party broadband ie. you’re penalised for taking out VM Broadband over (unconnected-to-BT) VM infrastructure.

      Why should they be forced into an 18 month contract bundle?, which disproportionally affects those in rented accommodation.

      How’s that enabling competition / enabling broadband usage exactly?

      The ruling was such a last minute ‘fudge’ in favour of BT, to the point BT’s own online systems haven’t been updated to reflect the current Ofcom policy.

      The online eligibility checker (for reduced £11.99 line rental) shows ALL BT landline only customers eligible for the discount (because the software was written to include ALL BT landline only customers, including those with third-party broadband *before* this last minute ‘fudge’ between Ofcom/BT, took place.

      Its regulation at it’s worst.

    • Web Dude

      My old AYCE (“One Plan”) was unilaterally cancelled by Three (it was only £15 a month with 2000 minutes and 3-to-3 minutes plus thousands of texts, too), so I closed that (and a second account).

      I still think they can offer good value but on the way they handled the One Plan customers and may not keep ‘legacy’ accounts in future when they decide to change their plans, I can no longer trust them and definitely won’t recommend them, as I’d hate for someone else to be let down the way One Plan customers were.

    • Mike

      I was given the option to pay £5 less and keep AYCE (but with limited tethering), in the end it worked out very well for me, all the other heavy users got booted off while I can still use as much as I want by errr…using various methods.

  2. mrpops2ko

    This is exactly what I hate about the pseudo enforced market competition by ofcom. You have to switch. No matter what, I could be completely happy with my service but the service will not be provided to long term customers at the same rate as new entrants.

    I moved away from VM recently because of upstream throughput issues (after 3 years of perfect 400/22 speeds). I went with BT and when you factor in the cashback and reward cards etc. I pay effectively £33 for an 80/20 connection now.

    After my contract is up, that’ll revert to £60 a month (assuming I go rolling monthly contract.) I will probably be given the opportunity to reduce this by recontracting, and it’ll be £45~

    The only way I will get the 80/20 connection for the same price, is if I leave BT and go to plusnet or talktalk or whoever, even though I am happy with BT. I don’t think this is real competition, when you are effectively forced to migrate (or pay DOUBLE).

    • wirelesspacman

      I totally agree with you.

      It would be nice to think that there was someone high up in Ofcom that had some common sense in this regard, but I don’t hold my hopes up. Suspect much of it is trickling down from Westminster who seem to want to make it a criminal offence not to switch ALL of your utility suppliers every two years or so (AND your bank, insurance companies etc etc).

      Pseudo competition sums it up perfectly in my view

    • Steve Jones

      Indeed. One of the measures that all the regulators appear to use is the rate of switching, and if it’s not more than a given percentage, it is seen as some sort of market failure. Heaven knows how much cost goes in extra marketing and sales efforts.

      It puts the onus on people to change suppliers even though it causes them disruption and, inevitably, there will be things that go wrong with transfers.

    • Web Dude

      Do may feel you have to switch, but I feel you should adopt a negotiation beforehand. Some ISPs seem to be more willing to adapt their plans to retain customers than others. I was paying Primus under 10 pounds a month for line rental, and Plus.Net well under 10 pounds (because of past recommendations, dropping the cost by about 6.50) but then Primus (Fuel Broadband) moved users to Post Office and shut shop in UK, and the liee rental hit nearly 17 pounds.

      At the time (January), Plus.Net had a deal for new customers for their “up to 38” Fibre and although I didn’t get any “cashback” benefit, getting the speed increase and line rental for 23.99 (just 2-3 pounds more than I was paying for 11 Mbps, now getting 25++ Mbps) was quite easy and although the cost is going up a pound in June, the Caller Display cost becomes nil, so the actual increase for me is 1p a month.

  3. Alan

    “…those who remain loyal to their broadband ISP (i.e. staying after the contract is up) will end up paying more.”

    I do not think for the most part that it is anything to with being loyal to a provider. Many people just have busy lifes and changing things like the broadband provider may get put on a to-do list but never get done as they have far greater things to take care of. That or many people just leave well alone if things are working fine.

    • Ultrafast Dream

      I have to agree with you. Just as an example if you consider the wider impact the simple change of an email address will have for many. You would probably imagine most would be inclined to stay where they are for the sake of the hassle of change, and of course the potential time and disruption required to commit that change, unless they use Gmail/Outlook.com for example (other email services are available 🙂 ).

  4. Kits

    I find large ISPs tend to increase the price after contract is up, my ISP doesn’t but if for a reason the package price reduces I can request the move to the new prices just means I start a new contract. I find staying loyal I pay less..

    • Web Dude

      Were they charging more than average to start with ?

      Many of the biggest ISPs seem to use a “bait and switch” policy to get new customers and that’s why “loyalty” seems to get ignored so much. A niche ISP with higher charges doesn’t have to have longer term (“mugs”) paying to compensate for their latest intake of bargain hunters, so they don’t need to put up prices because they already set the bar at a profitable level and did not pay for TV ads etc to promote the latest “rock bottom” deal they are running for 3 weeks in every 4.

      I’ve been with Plus.Net (chosen mostly on cost, when they were lower than many, and years before they hit the “Big 6” group) and I don’t plan on moving (I have a fixed IP and not many lower end charging ISPs offer that) but you can be certain that next time prices go up significantly – eg after my initial 23.88/month deal ends in another year), I will try to negotiate a reasonable cost deal, and doubt that whatever I am charged will exceed what AAISP or Zen might charge for unlimited, 25+ Mbps service with line rental included.

      I may take another look at Origin for a second (FTTC) connection but would welcome what others think are reasonable prices for up to 38 Mbps, unlimited data, include line rental but no need for calls packages (I get unlimited calls and texts for a fiver a month) services…

  5. dragoneast

    I suspect the two great bugbears of our property obsession and rentier society (which is why wayleaves are such a hassle) and pseudo-competition, are what keeps the British economy afloat and most people in jobs. (It feeds investments and pensions, another form of investment after all, too). Hence its political popularity. It’s a modern South Sea bubble. We’ve become a nation of spivs.

  6. Simon

    I moved away from VM recently because of upstream throughput issues (after 3 years of perfect 400/22 speeds).

    Wow that’s impressive considering it was not here 3 years ago..

  7. Doug

    I’m in the process of changing from Virgin to another supplier.

  8. TheRealFuzzyDunlop

    I have just renewed my contract with BT. The renewal offer on their website wasn’t much less than I would have paid on a rolling contract but when I called them saying I was thinking about cancelling they matched the price that Plusnet were offeeing which was better than the price they were offering to new customers. The moral of the story – much like other services like insurance and breakdown cover – always ALWAYS phone up your current provider and ask for their best price. More often than not they will match or better the competition. It took literally 10 mins to phone up ask for the best offer and renew. If people choose not to do this then you can hardly blame the companies for taking advantage.

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