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More Big UK Home Broadband ISPs Commit to Fairer Pricing

Tuesday, July 28th, 2020 (10:50 am) - Score 1,918
Hands holding british pound coin and small money pouch

Industry regulator Ofcom has today secured new commitments from UK ISPs EE, Plusnet and Sky Broadband to reduce prices automatically for “vulnerable customers” who are out of contract, which mirrors a similar move agreed last year with BT, TalkTalk and Virgin Media. Savings of £270m are forecast.

Sadly, the biggest Internet Service Providers (ISP) rarely reward their existing customers with benefits, such as price discounts or extra features that new customers don’t receive. Instead the UK’s aggressively competitive market is almost entirely focused upon attracting new customers, which often results in ISPs offering big discounts for your initial minimum contract term (usually lasting for 12-24 months of service).

NOTE: Ofcom found that around 40% of broadband customers (8.7 million) are out of contract and these pay c.£4.70 per month more than their provider’s average price for their service.

As a result new customers (i.e. those who hunt around for a better deal and switch ISPs) benefit from discounts that are designed to attract them, while existing customers who reach the end of their initial contract are often hit with a big price rise (aka – the “loyalty penalty“). This is of course entirely normal for such a market, but even today not all providers are clear about how much you’ll pay post-contract (minimum term).

In response Ofcom has been making various changes, such as the new End-of-Contract Notifications (ECN) system, as well as the Fairness for Customers commitment(s) and related Fairness Framework (PDF). As part of their on-going review into broadband pricing the regulator also secured some additional pricing commitments from BT, TalkTalk and Virgin Media in September 2019 (here).

ofcom_out_of_contract_broadband_customers_2020

The good news is that the regulator has now managed to encourage similar commitments from EE, Plusnet and Sky Broadband, which means that all of the providers have agreed to reduce prices automatically for “vulnerable” customers who are out of contract. On top of that EE and Plusnet have also now joined BT, Sky and TalkTalk in deciding to give “all existing customers access to new customer prices” (Virgin Media isn’t named for this one).

NOTE: Customers defined by their ISP as “vulnerable” are those who have disclosed a vulnerability to their provider. In addition, Virgin Media also defines those who are aged 65+ and have been “inactive” for 3 years as vulnerable.

Summary of ISP Commitments

• BT has given a price reduction to its vulnerable customers who are out-of-contract and paying more than £8 per month above the new customer price, to match those paid by new customers for the closest equivalent products. BT will also conduct further annual reviews with vulnerable customers to discuss whether they are on the best deal for their needs.

• EE will give a one-off price reduction to its vulnerable customers who are out-of-contract and paying a price higher than that available to new customers. It will reduce the price for these customers to match the best price available to new customers. EE will also conduct further annual reviews with vulnerable customers to discuss whether they are on the best deal for their needs.

• Plusnet will proactively engage with vulnerable out-of-contract customers with a view to discussing their services and getting them back into contract. For any vulnerable customers that do not respond, Plusnet will immediately reduce their price to the equivalent new customer price.

• Sky will conduct an annual price review for vulnerable customers who are out-of-contract to establish whether they are on the best tariff available to them, given their contract status. If they are not, Sky will automatically move them onto the best out-of-contract price available to them for their product.

• TalkTalk has conducted its first annual price reviews for all out-of-contract vulnerable customers and offered them access to the best new customer prices. It will automatically move customers onto these best prices where they do not respond.

• Virgin Media will conduct annual price reviews for vulnerable customers to help them get onto the best deal for their needs. If customers do not respond, Virgin Media will reduce the price to the best available to that customer as set out in annual pricing notifications. This will usually be the current advertised out-of-contract price for that product.

In addition to these commitments, since we opened our broadband pricing review in December 2018 some providers have made changes to their pricing strategies. We welcome these changes, which will further help customers get better deals:

• BT, EE, Sky and TalkTalk have reduced the average differential between new and out-of-contract prices;

• BT and Virgin Media are undertaking free speed upgrades, while BT and Plusnet have removed data caps from all of their broadband products; and

• BT, EE, Plusnet, Sky and TalkTalk are giving existing customers access to new customer prices.

In total, Ofcom estimates that the pricing changes made by providers as a result of their review could ultimately benefit all out-of-contract customers by over £270m per year. “This would address more than half of the nearly £500m difference in what out-of-contract customers pay compared to average prices,” said Ofcom.

Jane Rumble, Ofcom’s Director of Consumer Policy, said:

“We’ve already made it easier for people to get a discount and save money. But we’re concerned some customers who find it harder to seek better deals are missing out.

So we’re pleased providers have done the right thing by cutting vulnerable customers’ bills. We’re now calling on them to go further and take extra steps to identify and support customers who might be vulnerable.”

Obviously most consumers tend to get around such issues by either switching to a different (cheaper) ISP or haggling for a better price with their current provider (see our Retentions Tips article), although sadly only around 10% of consumers ever do the latter. The above changes are thus more useful to those who never switch or haggle and thus often don’t know whether what they’re receiving is still good value for money.

However, Ofcom still believes there is room for providers to do more to protect their vulnerable customers from high out-of-contract prices more generally, which was reflected last week in their new guidelines for the fair treatment of vulnerable customers (here).

We should add that, despite the aforementioned commitments, not all of the providers have fully implemented the changes.. yet. For example, a lot of existing customers with the big providers have yet to receive a notification about their current package and any better deals that might be available. Likewise, it’s unclear whether some of the ISPs are indeed giving “all existing customers access to new customer prices” (some aren’t making that clear).

Meanwhile it’s worth mentioning that you can often avoid such problems by choosing a smaller and more reputable provider, where you might initially pay a bit more for the service but the discounting culture of the biggest players often doesn’t exist (i.e. out of contract prices are much the same for everybody). As usual it’s wise to look around a bit more before making a decision.

Ofcom intends to publish new research later this year on affordability. “We will consider whether further measures are necessary to protect those who are struggling to pay for their communications services. This is in addition to our recent response to the [COVID-19] pandemic, working with government and providers to secure temporary measures, to protect those who are struggling to pay their bills,” said the regulator.

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Mark Jackson
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.
Leave a Comment
1 Response
  1. Avatar Buggerlugz says:

    Virgin Media has 61% of customers out of contract! You’d think that’d be a worry for the company, but obviously it isn’t. If it was they wouldn’t capitalize on that number by increasing the monthly cost up to 3 times a year (just to cover everyone out of contract!)

    This “PR stunt” (with their cohorts at OFCOM) won’t convince me Virgin Media actually have any concerns about “vulnerable customers” whatsoever.

    In my experience their one concern (since Branson sold them off) has been to fleece they’re existing customers for every penny they can get away with by any means necessary.

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