Survey Points to Flaw in Ofcom’s Planned End of Contract Notifications

The latest uSwitch survey of 2,006 UK adults, which was conducted in September 2018, has suggested that Ofcom’s new end-of-contract notification letters could save mobile, phone and broadband ISP consumers £1bn+ a year. But there’s concern that the letters may also result in some being hit by early termination charges.

Back in the summer the regulator noted that consumers are often hit by higher prices at the end of their minimum contract term (e.g. when the initial discounts have ended). In an effort to tackle this they recently proposed a new rule that would require providers to pro-actively inform their customers about the forthcoming end of such a term (here).

The notifications would then be sent some 40-70 days before the contract ends to all residential and small-business customers (i.e. 10 employees or fewer) who use services including landline, broadband, pay TV and mobile (either standalone or as a bundle). Providers would also be required to send a one-off notification to all existing customers whose minimum term had already ended.

In keeping with this the uSwitch survey found that 27% of respondents were already out of contract and 10% didn’t know if they were outside of their contract or not. Out of that group some 74% said they would be likely to act on such a notification by exploring the available options in the hope of making a saving.

Meanwhile some 87% of broadband users said they were ‘bothered‘ or ‘annoyed‘ by the lack of notices being sent by ISPs today, which is despite such notices being commonplace in the UK energy and insurance sectors.

Caveat in the Notifications

The survey fears that such savings could “go to waste” if customers are notified too early, which might result in them trying to switch at the point of notification and then finding that this could attract early termination charges (i.e. the currently proposed notice period of 40-70 days may be too early). Indeed 77% of the survey respondents felt that even 21 days+ before their term ends is too early to receive a notification.

In response it’s suggested that the window for these letters to be sent out needs to be reduced significantly, although uSwitch doesn’t propose a specific figure. On the other hand providers must allow some time for the letters to actually be received and read. Equally we don’t think it would be too difficult for providers to include a clear warning about starting the switch before the end of contract date.

Ofcom’s consultation on the matter comes to a close today and the regulator will then examine that before publishing their final statement. After that it’s expected that the regulator will give ISPs 6 months to implement the change, which would put the tentative start date sometime around mid-2019.

An Ofcom Spokesperson told ISPreview.co.uk:

“We’re concerned providers are not giving people the information they need about their contracts, and many are paying more than they need to. That’s why we’ve set out plans to force companies to tell customers when their minimum contract is coming to an end, and give them advice on their options. We will consider all responses to our consultation before we make our final decision.”

Meanwhile some ISPs remain unhappy at the idea of being forced to notify people about something that, they argue, the customers themselves should be responsible for remembering. Nevertheless it’s clear that many people, when asked, do not know the end date of their contract.

We should point out that Ofcom’s proposal would only apply to contracts that have a minimum term period of 6 months or more.

UPDATE 10:33am

Added a comment from Ofcom above. We also note that customers usually have to give their provider up to 30 days’ notice before they can cancel their service, which is one reason why the regulator has been suggesting a longer notice period.

We should add that the proposed end-of-contract (minimum term) notifications would also contain the date on which the customer’s minimum contract period ends, and that early termination charges no longer apply at that point. It would also include details of any applicable notice period.

UPDATE 10th October

The ISPA has published their response to Ofcom’s consultation (here), which “urges Ofcom to focus the scope of the regulation on consumers only” and to avoid including small business customers.

ISPA Statement

“There is, however, a danger that by extending the proposals to small business customers Ofcom is acting disproportionately, given ISPA’s view that it is underestimating the impact on business providers and resellers. The full complexity of the supply chains within the market is not necessarily addressed in the consultation. Therefore, the cost benefit analysis performed by Ofcom may not take full account of the number of providers affected and the difficulty in the application of proposals to small business customers.

Furthermore, whilst supportive of these efforts to engage consumers, ISPA would not necessarily agree with the general assumption driving this policy that loyalty is always a result of inertia. There also needs to be a greater appreciation of the existing levels of competition in the retail market and the range of choice available to consumers, which should inform consumer policy going forward.”