Ofcom Ponder Regulated Social Tariff for UK Broadband and Mobile

Ofcom has published the results of new research into the affordability of consumer fixed broadband and mobile internet services, which finds that 19% of UK households (19%) – c.4.7 million homes – struggle to afford their telecoms services. Some 6% have difficulties paying for their broadband, while 5% struggle with mobile bills.

Generally speaking, broadband and mobile services in the UK are often considered to be quite reasonably priced when compared with the rest of the world or even other utility services, but there will always be those – often in the most disadvantaged groups (i.e. low income, unemployed etc.) – who struggle with paying their bills.

On top of that a number of ISPs and mobile operators, such as BT (Basic), Virgin Media (Essential Broadband), KCOM (Flex) and VOXI (For Now), offer special (social) tariffs that can help financially vulnerable customers to stay connected, but take-up of these remains low. BT will also extend theirs to include everyone on Universal Credit in 2021.

Nevertheless, the past year has been particularly hard on this group of people, due primarily to COVID-19 and its impact. As a result many telecoms operators have taken extra measures during the crisis to help support customers, including those who run into financial difficulties, which tends to vary but can include everything from committing not to disconnect users to agreeing various discounts etc. (here and here).

Despite all this, Ofcom’s study has found that a significant number of people are still struggling.

Summary of Survey Findings

• Most UK households (81%) did not report an affordability problem. Nevertheless, on average nearly one in five (19%) reported at least one affordability issue with their communications services in the last month, corresponding to around 4.7 million households.3 Ten per cent of households with Pay TV have experienced an affordability issue, as have 6% with fixed broadband and 5% with mobile.

• The most common issue reported by consumers was the need to make changes to a package or tariff to make it more affordable. This occurred in 11% of all households. Other, potentially more serious issues were reducing spend on other items such as food and clothes (5%), cancelling a service (4%), missing a payment (2%) or changing payment method (2%).

• Some groups are more likely to have experienced an affordability issue, including households with somebody currently unemployed and looking for work (38%), young people aged 18-24 (29%), or a resident with an impacting or limiting condition (29%).

• Data from providers indicates that the proportion of customers in arrears was relatively stable between January and September (2% in fixed and 3% in mobile). The proportion of customers in arrears by two or more payments increased by more than half for both fixed services and mobile services in the period to June, but declined thereafter.

• The proportion of customers disconnected for not paying their bills decreased between March and May (by more than three-quarters to 0.02% of fixed customers and more than a third to 0.14% of mobile customers). It then increased substantially between June and September in both fixed and mobile services (to around 0.3% of customers for each).

• There is a wide range of relatively low-price internet tariffs, including superfast broadband for in-contract customers for under £25 a month and mobile SIM-only contracts with capped data allowances for under £10 a month (see example providers listed earlier).

Ofcom believes that providers can do more to tackle all of this and support their customers. In particular, the regulator wants them to pro-actively promote relevant social tariffs (where available) to customers who might be eligible. “Where providers do not already offer such products, we strongly encourage them to consider introducing them,” added Ofcom.

Lindsey Fussell, Ofcom’s Networks and Communications Group Director, said:

“Lockdown has laid bare our dependence on a reliable internet connection. So it’s important that affordable options are available so everyone can stay connected – particularly those who have fallen on hard times.

And while we welcome the support companies have provided customers this year, some people continue to face challenges and it’s clear providers can do more to support customers who are in financial difficulty.”

Ofcom now intends to carry out further research into affordability and debt during 2021, which will be followed by another report. “Should providers not address our concerns through their current levels of support to customers in financial difficulty, we will consider further action,” warned the regulator.

One solution, warns Ofcom, could include working with the Government to determine whether an “industry-wide regulated social tariff” is necessary. At this point we should remember that broadband and mobile provision tends to be a business with fairly low margins, which makes it difficult for commercial operators to gift super cheap packages to lots of people without putting themselves at risk.

Admittedly, the biggest providers have more scope for doing this (as above, some already do), but it’s probably unrealistic to expect it from smaller players. At the same time operators that are deploying expensive new FTTP broadband networks don’t want to make the economic case for such investment even harder than it already is. Forcing any kind of social tariff on the industry would thus be a difficult balancing act.

UPDATE 1:39pm

We’ve had a comment from BT.

A BT Spokesperson said:

“We’re here for customers who are worried about their finances and have been working hard to support those who tell us they need help with their bills. We offer a low cost landline and broadband package specially for those on low income and we’re currently improving this for 2021. More people will be able to benefit as we’re extending eligibility to include everyone on Universal Credit.

We also offer support to customers in a number of ways including giving unlimited data, texts and calls to vulnerable customers and unlimited mobile data to NHS staff. We have also permanently removed usage limits on all our broadband packages to help customers stay connected.”