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Ofcom Clamps Down on Pricing for UK Mobile and Handset Bundles

Wednesday, September 26th, 2018 (10:47 am) - Score 2,960

The UK telecoms regulator, Ofcom, has today proposed a number of measures that will seek to tackle concerns over airtime packages (e.g. bundling the cost of a Smartphone and Mobile plan together), which can result in consumers continuing to pay the same monthly charge even after their contract has ended.

At present most Mobile Network Operators (e.g. EE, Three UK, Vodafone and O2) will offer new customers a choice of either taking a SIM-Only plan (i.e. you just pay for the text/data/calls or mobile broadband plan of your choice) or a bundle with a mobile handset (airtime plan).

The advantage of a bundle is that it enables consumers to spread the cost of their handset and mobile plan across the contract term (12-24 months), which is particularly useful when you have companies (e.g. Apple) selling new Smartphones for well into the obscenely expensive £1,000+ territory.

Naturally consumers will pay more for such bundles and this can become an issue when you reach the end of your contract term, particularly if you fail to switch your mobile plan to a SIM-Only option and find that the operator is still charging you exactly the same amount as before. Some operators, such as O2, already offer ways to solve this.

Lindsey Fussell, Ofcom’s Consumer Group Director, said:

“Mobile customers should get the best possible deal. We’re concerned that people are not told, or cannot tell, exactly what they are paying for.

So we are extending our work on behalf of mobile customers to ensure that handset charges are clear and fair – not just when they enter a contract, but also when their minimum period is up.”

Ofcom’s research suggests that around two in three Pay-Monthly mobile customers are on a contract that bundles the cost of a handset with the cost of using the phone and they state that “most customers are receiving good value for money.” Despite this the regulator estimates that 1.5 million consumers are out of their contract and still paying instalments towards a handset that many have already paid off.

On top of that the regulator believes that mobile operators are “not transparent” enough about the respective costs of the handset and airtime, which is something they view as being “unacceptable” because customers cannot tell how much they are paying for the different parts of their deal.

Margot James MP, UK Minister for Digital, said:

“It is just not right for consumers to be charged for a product they have already bought. Mobile providers must make it clearer when a customer has paid off their handset and easier to switch to a cheaper deal. We’ve strengthened Ofcom’s powers to better protect consumers, and will continue to work with Citizens Advice and others on a fairer and more transparent system that helps people save money.”

The regulator claims that it has been trying to work with major operators on a voluntary solution to the issue, although sadly “mobile companies have not offered sufficient or firm commitments” and so Ofcom has instead decided to pursue a change via formal regulation. As a result they’ve produced two options for consultation.

Option 1 – Greater Transparency

This would require operators to break down the cost of the different parts of the mobile package a customer is purchasing. That information should be provided clearly and transparently, at the point of sale, and again at the end of the minimum contract period. This builds on their existing plans to require telecoms providers to send customers alerts when their initial contract is coming to an end (here).

Providers might also be required to explain to customers which specific SIM-Only deals they could move to while keeping their handset, and how much they could save. This would allow people to compare packages and make an informed decision about what to do next.

Option 2 – Force Fair Tariffs at the End of a Contract

The toughest and most controversial option would require providers to automatically introduce “fairer tariffs” at the end of the minimum contract period (e.g. moving them to a SIM-Only plan without the handset charges).

For example, providers could move customers automatically onto an existing, 30-day SIM-Only deal at the end of the minimum period. Because available deals may not include the same features and services as the customer’s previous tariff, providers could match customers to the closest deal.

The second option is tricky, not least because customers might object to having their service changed without explicit consent, particularly if they lose features in the process or if the new package results in unexpectedly high bills due to a difference in the included allowances. Ofcom suggests that giving customers an option to opt-out could help to mitigate this, but such things are easily overlooked by subscribers.

Alternatively, providers could do the obvious thing and reduce the monthly cost of the contract to reflect the fact that the handset may have effectively been paid off. One problem with this is that over the course of a long contract term the operator may change their plans, prices and features, which means that what existed when they first joined might no longer be available. Time for a snap poll.

Which of Ofcom's options above do you support?

  • Option 2 - Force Fair Tariffs at the End of a Contract (56%, 132 Votes)
  • Option 1 - Greater Transparency (34%, 81 Votes)
  • Neither! (9%, 22 Votes)

Total Voters: 235

Ofcom’s consultation will now remain open for responses until 7th November 2018.

Ofcom’s Fair Airtime Bundles Consultation
https://www.ofcom.org.uk/../consumers-communications-markets-mobile-handsets

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

    Forced changes is perhaps the worst possible option, I would have lost my cheap AYCE if that had happened.

    1. Simon says:

      Meanwhile I pay £108 a month for 100GB – probably due to cheap AYCE deals

    2. Bob says:

      I agree! I’m happy for dumb people to pay £108 per month for a 100gb tariff, and subsidise my uncapped data allowance=-O

    3. New_Londoner says:

      @Simon
      Depending what you’re using it for, EE offers a 4G data only package for £100 per month, one of its fixed line broadband alternative options.

    4. Mike says:

      £108 for 100GB? Where does one find such a package?

    5. New_Londoner says:

      ^^
      Missed out the key bit in my earlier post, should have said “EE offers a 509GB data only package for £100 per month…”

  2. andy says:

    the government feels the need to get involved because people are too thick to realise that their contract has come to an end and that its time to shop around.

    my god!

    1. New_Londoner says:

      I don’t know about the other networks but I’m pretty sure that you get a handful of reminders from EE as you get closer to the end of your contract. Does this really need government intervention as well?

    2. Bob says:

      Well said!!

      People need to take some responsibility. Set a reminder on your new nice iPhone that your contract ends on “xyz” date and check if you can get a “better deal”

    3. spurple says:

      Since when has “the owner was not paying attention” been a valid defence for theft?

    4. Curious says:

      Sorry, but the excuse of being ‘too thick’ doesn’t cut it.

      I’m great at making sure I get the best deal at the end of my contract, my nan not so much. She has not got the first clue as to when her contract expires. She’s 86. You are trying to say she should be more clued up?

      If that’s the case, I’d love to know how.

      You can’t paint everyone with the same brush.

      The best way to do this is if it’s a requested feature.
      I don’t need this, so wouldn’t ask for it, but someone like my Nan would, so at the POS it would be good if there was an option to change your tariff at the end of contract automatically to the remove the handset cost, and be contacted to learn of upgrades/tariffs available.

    5. spurple says:

      @curious, it begs the same question. Is it ok to steal from people because they’re thick as you put it?

      [shaking my head in bewilderment]

    6. andy says:

      well if you are so concerned about your nan then why don’t you (or your mother or father) be the one that sorts that out for her rather than expecting the government to hold your hand.

      For the other commenter shaking their head in bewilderment. I think that says it all. It’s completely laughable. Take responsibility for the contracts you sign up for. No need to moan when it doesnt go your way or complain when you missed the email the company sent you on day 364.

      Take some responsibility why dont you.

    7. joe says:

      “well if you are so concerned about your nan then why don’t you (or your mother or father) be the one that sorts that out for her rather than expecting the government to hold your hand.”

      1. How rude and ill thought through
      2. Companies will often only deal/speak to the person named on the bill
      3. Many elderly live alone and do not have family to rely on near to them they may not even of had children.
      4. If you want rid of regulation so much and want others to sort things out thereself, then i hope you will never get old and need help. Better yet lets ban consumer rights entirely then when you buy something completely unfit you can be stuck with it.

  3. GT says:

    You sign a contract at a price, after that contract you are free to leave it. If people can’t grasp this very simple concept, then that’s their problem.

    1. S Wakeman says:

      It’s all very well saying that if you’re savvy. What about people or people who don’t grasp technology and what they’re actually paying for because it’s bundled?

      You are in effect saying that you agree with the notion that a company can and should be able to continue to charge for something that has been paid off. Because caveat emptor? Because if you’re too stupid to carry on paying etc.

      Please provide a single example of another industry where this practice is prevelant and accepted.

      You’re telling me you’d be okay with a finance company continuing to charge you for a car you’d paid off. Or a bank charging you a mortgage that you’d fully paid just because you hadn’t made it clear to them that you didn’t want to keep paying for those things and that they could merrily assume you were happy to continue paying for them? Please do pull the other one.

  4. M Hudson says:

    The problem is that mobile phone contracts are not sold as airtime + separate finance deal for the handset. The current practice dates from the early days of mass market mobile phone use. In 1995 when I got my first Nokia Orange the handset had a significant upfront cost, payable to a dealer (networks didn’t have their own stores in those days), and the line rental was £25 a month for Talk 60 (60 minutes of calls). But the phone was always my property from day 1, there was no credit deal just for the handset element, as now.

    The networks started offering bigger kickbacks to the dealer and dealers began to use that to subsidise the upfront cost of the handset. When the networks own stores (physical and online) showed up they kept this up and increased minimum terms from 12 to 18 to 24 months and that’s how we ended up where we are today.

    They rely on apathy for people not to do anything at the end of their contract. Most people are well aware there is an element of their monthly subscription covering the cost of the handset, after all PAYG is an option available to them where top of the range handsets are either very expensive or unavailable at all.

    A good option is to get your own credit deal for your handset and a SIM only or PAYG airtime plan. For example Argos sell all the top line phones at good prices and the majority are available with at least 12 months interest free credit, (buy now pay later) so provided you pay it off within 12 months there’s no interest to pay. The monthly payment for this plus a good SIM only tariff is competitive against 18 and 24 month deals from the network, yet you will pay off the handset in 12 months.

    1. spurple says:

      Argos Buy now pay later is 29.9% APR: https://www.argos.co.uk/help/argos-card/

  5. Curious says:

    @spurple

    There’s no interest to pay if you pay off the balance before pay later period ends.

    “You won’t be charged any interest if you pay off your plan within the Pay Later period and keep your account up to date. If you don’t pay off your plan before it ends, you’ll be charged interest at your normal plan rate from the date of purchase. However, if you choose to make payments without clearing the balance, the earlier you pay the less interest you’ll be charged”

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