Ofcom UK Opt Not to Propose Regulated Social Broadband Tariff… Yet

Ofcom has today revealed the conclusion of their latest bout of research into the impact of affordability and debt on broadband ISP customers, which found that around 2 million UK households “struggle to afford internet access.” But they aren’t going to force a regulated social tariff onto the industry.. yet.

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. The impact of COVID-19 on society has only added to such pressures.

At the end of last year Ofcom said mobile and broadband providers could still do more to help tackle this and support their customers (here). In particular, the regulator called on them to pro-actively promote relevant low-cost social tariffs (where available) to customers who might be eligible (i.e. until now, take-up of such tariffs has been low) and demanded that more providers launch similar plans.

On top of that, the regulator announced that they would carry out further studies and warned of further action if providers failed to put more effort into tackling the issue. One option, warned Ofcom at the time, could include working with the Government to determine whether an industry-wide regulated social tariff is necessary. Various consumer groups (here) and MPs have backed that idea (here).

BT has since moved to replace their existing ‘Basic’ social tariff with a much improved Home Essentials package (here), while Hyperoptic has also joined the fun with their Fair Fibre Plan (here). Not to mention the similar Essential Broadband plan from Virgin Media and KCOM’s related Flex tariff.

However, forcing the introduction of a social tariff on all providers is a much bigger ask. Broadband and mobile provision tends to be a commercial business with fairly low margins, which makes it difficult for such providers – particularly smaller players – to permanently gift super cheap (loss making) packages to lots of people without putting themselves at risk, or forcing price rises elsewhere.

Ofcom’s Conclusion

After mulling all of this over, while also taking account of recent improvements (particularly the new tariffs from BT, Virgin Media and Hyperoptic), the regulator has not yet chosen to recommend that a regulated social tariff should be introduced industry-wide. But they do note that only around 40,000 households have actually signed up to one of the tariffs (i.e. 0.15% of all UK homes or only 1% of those in receipt of out-of-work benefits). We also get some other useful statistics.

Ofcom’s Statistics

➤ Average ‘new customer’ prices for superfast broadband and landline bundles last year were nearly 20% cheaper in real terms than in 2015, while the average amount of broadband data households used increased by 342% over that time, and average download speeds rose by 178%.

➤ The average cost of mobile services in 2020, based on average use across all mobile users, was over 20% cheaper in real terms than in 2015, while people used 369% more data.

➤ Some 2% of broadband customers and 3% of mobile customers are in arrears, while 0.1% of broadband customers and 0.2% of mobile customers are disconnected by their provider every month. Between January 2020 and January 2021, total debt among broadband and mobile customers increased from £475m to £550m.

In short, despite all the changes, Ofcom states that many ISPs still do not offer social tariffs and “providers of the ones that are available need to improve how they promote them as take-up is low.” However, the regulator has warned that if the industry “does not take sufficient action to address our concerns,” then they believe there would be a “strong case for exploring … mandatory social tariffs.”

On top of that, they found “considerable variation” in how different companies treat customers who may be in debt or struggling to pay their bills, which cause some people to receive less support than others, depending on who their provider is. In response, Ofcom have launched a new Call for Inputs to examine whether the protections in place for customers in debt or struggling to pay should be strengthened (open for feedback until 30th September 2021).

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

“Many of us take being able to get online and use a mobile phone for granted, but if you’re on a low income or have fallen on hard times, being able to pay for these vital services can be really tough.

We’re concerned that many households on the lowest incomes are struggling to stay on top of their bills and providers need to take action to make sure these customers get the help they need.”

Matt Upton, Director of Policy at Citizens Advice, said:

“Broadband is essential for the way we live today. People struggling to afford it shouldn’t be penalised simply because their provider isn’t one of the few firms offering a cheaper tariff.

The pandemic exacerbated this problem, but in reality it had already been dragging on for far too long.

The fact that so many providers still aren’t taking responsibility for protecting lower income customers shows just how precarious it can be to rely on voluntary arrangements and goodwill. Ofcom are right to say things aren’t happening quick enough. If we don’t see action soon, the government needs to get involved.”

Naturally, it would be for the UK Government to determine whether a formal review of social tariffs should be carried out. On this point the Government were recently asked, very directly (here), whether they intended to do so and the response seemed to suggest that they prefer the route of encouragement rather than enforcement. But that may change if the regulator adopts a different stance further down the line.

Much may thus depend upon the response from other large providers that have yet launched such packages, such as Sky Broadband, TalkTalk, EE and Three UK, and how those with existing social tariffs go about the awkward business of promoting them (it goes without saying that commercial providers don’t particularly like promoting the sale of loss-leaders).

Equally, it’s probably unrealistic to expect a sudden surge in the take-up of such tariffs, as in many cases this would require a change of ISP (consumers remain very cautious about such things) and lots of customers won’t be able to move until their existing contracts expire. Building awareness is also something that will take time, so politicians and Ofcom may need to be patient.

UPDATE 11:10am

The first comment from an ISP has arrived via BT.

A BT Spokesperson said:

“Since launching our Home Essentials packages at the end of June we’ve been pleased with how strong take up has been. However, we want to encourage more customers who need our help to get in touch.

We know from recent research that 54% of people are uncomfortable sharing their problems due to embarrassment and fear particularly when it comes to their finances, and we want to help break down those barriers of asking for help with Here For You – a campaign to raise awareness of the all the support we provide customers who need more help – and we encourage similar approaches across the industry.

Fast, reliable connectivity has never been as important as it is today, with millions of people relying upon our networks to get back on their feet after the pandemic – so we launched BT Home Essentials our low-cost fibre package that will now include all customers on Universal Credit, to provide a potential 4.6 million families across the UK with half-price fibre broadband and calls.”

The new campaign includes information and videos about the latest accessibility options and priority services for customers with long-term illnesses or disabilities, advice for dealing with scams and the newly launched Home Essentials social tariff.