Ofcom Finds Just 55000 UK Homes on a Social Broadband Tariff UPDATE2

Ofcom has published their latest report on the availability and take-up of cheaper broadband social tariffs from UK ISPs, which finds that – out of an estimated 4.2 million households in receipt of Universal Credit – just 55,000 homes have taken such a package (1.2% of those eligible). The regulator calls on all providers to do more.

Consumer broadband services are often considered to be quite reasonably priced in the UK, but there are always those – often in the most disadvantaged groups (i.e. low income, unemployed etc.) – who may struggle with paying their bills. The latter has become a much bigger problem during the COVID-19 pandemic, which is also being exasperated by a surge in inflation and the rising cost of key services, such as energy (gas and electric).

The UK Government and Ofcom have so far been responding to this by encouraging more UK ISPs to proactively introduce and promote low-cost social tariffs, which tend to be available to those on certain benefits. The regulator has also previously warned of further action if providers fail to put more effort into tackling this issue, which they said could include the potential introduction of an industry-wide regulated social tariff.

In response we’ve seen a fair few changes. For example, BT has significantly improved their existing social broadband tariffs (Home Essentials) and they’ve also been joined by new or enhanced tariffs from several other providers, including Virgin Media (Essential Broadband), Hyperoptic (Fair Fibre Plans), KCOM (Flex) and G.Network (Essential Fibre).

However, it’s already well known that one of the biggest problems on this front has been the sheer lack of consumer awareness around the existence of such tariffs. Broadband ISPs, perhaps understandably, tend not to openly promote them alongside their main packages and instead hide their social tariffs away on separate pages, which require more effort to uncover. As a result, Ofcom claims that recipients are missing out on an average annual broadband saving of £144 each.

According to Ofcom’s new Affordability Report, some 1.1 million households (5% of the UK) are “struggling to afford their home broadband service” and so could stand to benefit from such tariffs, but customers are often left in the dark. The research shows that the vast majority of benefits recipients (84%) are unaware that social tariffs even exist, and so it’s hardly a surprise that take-up is extremely low.

In response, the regulator is today asking, but NOT forcing (yet), current providers of social tariffs to “do a lot more” to raise awareness and ensure it is easy for those eligible to sign-up. On top of that, they’ve reiterated earlier calls for all providers to consider introducing such a tariff.

Ofcom Urges ISPs To:

➤ Offer a social tariff. While many are doing so, companies which still do not include EE, Plusnet, Shell Energy, Sky Broadband, TalkTalk and Vodafone.

➤ Promote discounted deals. Any communications with customers about price rises should also include details of available social tariffs. Providers should also consider partnering with local authorities and consumer advice agencies to spread the word.

➤ Make the information clear. Details on social tariffs should appear prominently on websites and include clear information about who is eligible.

➤ Make it easy to sign up. Broadband companies should review their application processes to make sure they are easy to follow. Customers must not be put off applying for a social tariff by making it hard to prove they’re eligible.

Ofcom’s report also noted that the existing providers of fixed broadband social tariffs have no plans to raise prices for these tariffs in 2022. This suggests that the need for social tariffs, and the value of them to financially vulnerable people, could further increase.

The regulator added that they would continue to track the extent to which households have difficulty paying for communication services through their ongoing research programme, as well as monitoring take-up and awareness. In addition, they will shortly publish proposals to “help ensure that customers in debt or at risk of disconnection are treated fairly by their provider.”

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

“People rely on their broadband for staying in touch, working and learning from home. But for those who are really struggling with rising bills, every penny counts.

Special discounts can make all the difference, and too many broadband firms are failing either to promote their social tariff or to offer one at all. We expect companies to step up support for those on low incomes, and we’ll be watching their response.”

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

“We know that 1 in 10 people aren’t confident they’ll be able to pay their broadband bill in the next three months. This comes as the majority of us face huge increases on our broadband bill, piling on yet more pressure in the middle of a cost-of-living crisis.

It’s been more than six months since Ofcom and the government started pushing social tariffs as an answer, but the shameful 1% take-up says it all. It’s people on the lowest incomes who are missing out.

If firms aren’t able to show serious increases in the number of people they’re helping move to these tariffs in the next six months, the government and Ofcom must take action.”

The good news today, for ISPs at least, is that Ofcom has not yet moved to force the introduction of a mandatory social tariff, and they haven’t enforced any new requirements on providers in terms of how such tariffs should be promoted (this would be a logical first step). But much as we’ve seen in the past, if change doesn’t come via some soft nudging, then we could well see more movement on this front in the future.

Clearly the big problem to address is awareness and promotion, while forcing a mandatory social tariff on all ISPs is a much bigger challenge and may not have the desired impact, particularly among smaller players that already have to struggle against the big boys – the latter have economics of scale on their side.

Broadband provision also tends to be a business with fairly low per-user margins, which makes it difficult for providers to permanently gift super cheap (loss making) packages to lots of people without putting themselves at risk, or forcing bigger price rises on to other customers. The latter issue won’t be noticeable yet because take-up is low, but that may change if Ofcom is successful.

Ofcom’s laser focus on fixed broadband above also seems to overlook the fact that it’s today possible to buy some incredibly cheap 4G and 5G based unlimited home broadband tariffs, such as from £14 per month via Three UK. Some low-income households are even known to have completely dumped their fixed line in favour of a mobile solution, but so far as we’re aware the impact of this is still relatively small.

Finally, one other option that has been suggested by the odd ISP, such as BT, is for the Government to assist the launch of such tariffs by providing a new subsidy scheme, but they’ve so far shown little interest in that idea.

UPDATE 9:59am

Vodafone has been quick to point out that their entry-level “superfast” plans are already priced within the same area as Ofcom’s list of social tariffs (£10-£20 per month).

A Vodafone UK spokesperson told ISPreview.co.uk:

“Vodafone’s broadband is already priced below Ofcom’s threshold of a ‘social tariff’ – at £18 for Superfast 1 and £19 for Superfast. We also don’t require customers to meet any specific criteria to get these great prices; our plans are available to all families.”

The caveat above, which Vodafone fails to mention, is that those prices are a discounted rate. The small print on Vodafone’s website states: “Please note, your monthly bill will increase by £10 a month for Superfast plans … after your initial 24 month contract.” By comparison, social tariffs only rarely increase in price and thus there should only ever be a minimal, if any, impact from being loyal.

However, Vodafone does make a valid point. We should add that a fair few alternative networks also have 30Mbps+ packages or faster that come in at a similar level.

UPDATE 11:54am

We should point out that Ofcom also requires social tariffs to offer pricing stability (i.e. mid-contract price and out-of-contract price increases are not consistent with this), avoid early termination charges and have minimal initial upfront costs. As such, an ISP cannot merely convert an existing package and call it comparable to a ‘social tariff’ without factoring this in first. Social tariffs must also be cheaper than their commercial counterparts.