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Ofcom’s End-of-Contract Notifications Deliver Broadband Savings

Tuesday, November 30th, 2021 (8:16 am) - Score 3,480
end_of_contract_text_notice

The UK telecoms regulator, Ofcom, has today given itself a pat on the back after its research found that 1.3 million broadband ISP customers had secured better deals as a result of their new End-of-Contract Notification (ECN) system. Overpayments by mobile customers also dropped by £100m due to new rules on handset bundles.

The new notification system (sent by text, email or letter), which was designed to help tackle the so-called “loyalty penalty” by keeping customers informed about the best deals and encouraging switching or moving to a better package at the end of their contract (otherwise the price would normally rise, often significantly), was officially introduced in February 2020 for all fixed broadband, mobile, home phone and pay TV providers.

NOTE: Ofcom’s research is based on a sample of customers from 5 mobile operators and 3 broadband ISPs who had been sent an ECN, while their average broadband prices are based on customers from 6 broadband ISPs (BT, EE, Plusnet, Sky Broadband, TalkTalk and Virgin Media).

At around the same time, Ofcom also moved to tackle the problems being caused by bundles of both mobile handsets and tariffs (airtime contracts), which in some cases were continuing to charge consumers for the handset cost even after the minimum contract term had ended (here). The only major mobile operator NOT to sign-up was Three UK.

Enough time has now passed that the regulator can finally assess the impact of these changes, and the results appear to be broadly positive.

End of Contract Notifications

In terms of the notification system, Ofcom found that 62% of broadband customers in 2020 – those who were nearing the end of their contract – either signed up to a new deal with their current ISP, or switched to a new provider when their existing deal ended. Crucially, this is up from just 47% in 2019.

The number of broadband customers who were deemed to be “out of contract” also fell from 8.7 million (40%) in 2019 to 7.4 million (35%) in 2020 (i.e. 1.3 million customers were deemed to be better off). On average, the regulator claims that out-of-contract customers pay around £5.10 per month more than they need to.

There is evidence that indicates that these timely prompts from providers are working. In our research, two thirds of customers who were sent an end-of-contract notice recalled receiving one. Of those, 90% found it helpful and a fifth reported that they were prompted into action they would not have otherwise taken,” said Ofcom.

The regulator notes that the average prices paid by broadband customers also fell over the same period, from £39 in 2019 to £38.10 in 2020, while average speeds continued to increase. However, there’s still work to be done as some ISPs have a greater proportion of out-of-contract customers than others.

Ofcom-Out-of-Contract-ISP-Customers-in-2020

The standout above is clearly Virgin Media on 52%, but in a lot of areas they’re still the fastest broadband network, which makes it harder for consumers to switch away. Nevertheless, rising competition from gigabit-capable rivals will steadily change that picture. Oddly, TalkTalk were the only ISP to show an increase in their out-of-contract base, and it’s not entirely clear why (possibly because their out-of-contract prices weren’t as high as some of their rivals).

Mobile Customers

The regulator found that mobile customers on bundled contracts (i.e. paying for a handset and airtime plan together) were likely to take a new deal when their existing one expires, with just 11% of these customers now considered to be out-of-contract. Some 76% of mobile customers on bundled tariffs – those who were nearing the end of their contract – also took action to shop around and secure a new deal (up from 70% in 2019).

Furthermore, the amount that bundled out-of-contract mobile customers overpay, relative to customers on like-for-like SIM-only deals, was found to have more than halved (from £182m in 2018 to £83m in 2020).

Cristina Luna-Esteban, Ofcom’s Director of Telecoms Consumer Protection, said:

“Prompts from providers are turning into pounds in people’s pockets. It’s great to see more people shopping around and saving money since we took action.

But millions are still potentially paying more than they need to. We’ve made it easier to grab a better deal, so it’s worth taking a few minutes to check what’s out there.”

As for “vulnerable” broadband customers (i.e. pensioners, those on benefits etc.), specifically those who pass the end date of their initial deal but now have greater protection from higher prices. Ofcom found that, on average, these customers pay around £2.30 per month more than their provider’s average price for their service – a significant reduction from £4.40 in 2019.

We should point out that a good number of ISPs have now launched better social broadband tariffs for those on benefits (e.g. BT, Virgin Media, KCOM, Hyperoptic etc.), which make them much more attractive. But as we’ve previously reported, there are still problems with consumer awareness of such options and weak advertising by providers.

No doubt there will be further improvements in today’s picture once Ofcom’s new One Touch Switch (OTS) process for customers of fixed line phone and broadband ISPs is introduced (details), which should make it easier for consumers to migrate between providers on physically separate networks. The downside is that, due to the technical complexity and costs involved with introduce this, it won’t be enforced until April 2023.

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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.
Leave a Comment
5 Responses
  1. Richard says:

    I have never ever received one on virgin media. Are they breaking the law then?

  2. AndyC says:

    I got a notification i was out of contract by 2 years but they would not honour any of the “new” prices they were advertising.

    Basically i see it as a tool to make people swop providers and nothing else.

    1. Mark Jackson says:

      They can’t “make” you swap, so the correct word is “encourage” and that’s not a bad thing. All it does is give you information that big ISPs would often rather you didn’t have, which you may or may not act upon.

  3. Doug says:

    The mandatory notification is not always helpful. The minimum term on my current contract ends in two weeks. BT notified me that “my broadband discount is ending”: except it is not because under the terms of my contract the monthly rate will not increase.

    If I followed their advice in the notification I’d continue paying the same, but start a new 24 month minimum term with an annual increase far higher than the one in my current contract (CPI plus 3.9%, versus CPI flat).

    So please check carefully before reacting to an end-of-contract (actually an end of minimum term) notification..

  4. Kenneth George Scroggie says:

    I got an e-mail and got an upgrade from 500Mb/s up and down to 900Mb/s up and down for £18 less a month for 24 months with Vodafone, last month. It sure is saving me money.

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