Ofcom – Only 220,000 UK Homes on Cheaper Social Broadband Tariffs

Ofcom has today published their latest UK consumer affordability report, which finds the take-up of cheaper social broadband ISP and mobile tariffs for those on state benefits has increased to 220,000 households (up from 136,000 six months ago). But that still represents just 5.1% of households on Universal Credit (4.3 million).

Consumer broadband, phone and mobile 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. Ofcom found that 29% of UK households reported difficulty affording their communications services (down from 32% in the last report), which has been fuelled by the cost-of-living crisis.

The UK Government and Ofcom have largely responded to this crisis by encouraging more comms providers to proactively introduce and promote low-cost Social Tariffs. The regulator suggests that, on average, these could save an eligible household £202 per year. A fair number of ISPs and mobile operators now offer such plans (i.e. around 85% of customers are now able to switch to one with their existing provider), but awareness remains a key issue.

The latest report states that more than half of eligible households (53%) continue to be unaware that such tariffs even exist. But it should be said that this represents another marked improvement from six months ago, when some 70% of eligible households were deemed to be unaware.

Highlights from Ofcom’s Latest Report

➤ Of eligible customers that are aware of social tariffs, most had heard about them through social media (26%) and television (21%). But just 9% found out about social tariffs through their provider, highlighting how the industry needs to go further to promote their social tariffs effectively and make them easier to find.

➤ Some 6% of households with broadband and 8% with a mobile found it difficult to afford their service. This rose to 11% and 17% respectively for households on government benefits.

➤ Ofcom has once again urged broadband ISP TalkTalk and mobile operator O2 (VMO2) to introduce social tariffs in the broadband and mobile markets respectively, and we expect them to waive fees for any customers who want to switch providers to access one in the meantime.

In the past, Ofcom has 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. But there’s no mention of that today, and instead they’re focused on nudging providers to tackle the awareness problem.

Speaking of which. The regulator said that “broadband providers still aren’t being upfront with millions of customers about how to find and sign up to these packages“. The report further notes that information about social tariffs remains “challenging to locate in some cases” and they discovered examples of “incorrect information about the deals on webpages“.

“We have raised these concerns with providers and asked them to review their social tariff webpages as a matter of urgency, to ensure the information is accurate, clear and understandable for consumers, and highlights all the protections offered by social tariffs,” said Ofcom’s announcement.

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

“Hundreds of thousands of customers are now benefitting from the huge savings that can be made from securing a social tariff. But millions are still missing out on superfast speeds for super low prices – with many not aware they even exist.

We’re urging anyone who thinks they could be eligible for a discount deal to contact their provider today and potentially save hundreds of pounds. Providers should also do much more to help these customers find and access these deals, at a time when these savings could make a massive difference.”

However, there is another side to pushing for higher take-up. At present, the low take-up of such tariffs means that they aren’t a huge drag on an ISP’s bottom line, although that could change as adoption rises. For example, BT – an operator that attracts the lion’s share of social tariff users – has warned that such tariffs may eventually become “unsustainable” without more support (here).

Speaking of more support, more than a few providers have called on the UK Government to do their bit by reducing the rate of VAT on social tariffs to just 5% (here), but there’s been no movement on that front. At this point it’s worth reminding that broadband and mobile providers are commercial businesses, not charities, so they can only be expected to go so far (broadband provision is a business with fairly low per-user margins).

Meanwhile, the aggressive level of competition in the new market for alternative full fibre (FTTP) broadband networks has actually seen many service prices either come down or stay the same, thus there’s a lot of variation out there for consumers to benefit from. But this doesn’t extend to every location yet – FTTP currently only covers 50% of the UK.

Once again, it’s worth remembering that the price we all pay for communication services is largely dwarfed by the colossal hikes in energy (e.g. gas and electricity), petrol, food and other bills. If people are struggling to afford even a fairly basic internet or mobile plan, which doesn’t typically form a large chunk of household bills, then they’ve probably got much more serious concerns in those other areas.

UPDATE:

We’ve had a response from TalkTalk, which is an ISP that doesn’t believe social tariffs are a one-size-fits-all solution and wants to see Openreach support such tiers at wholesale. But to be fair, Openreach’s 40Mbps FTTC tier is already sold at a regulated price and OR’s “Connect the Unconnected” special offer (here) also makes it possible for providers to waive FTTC connection fees for those who receive “Universal Credit” with no other earnings.

A TalkTalk spokesperson said:

“We’re proud to be the UK’s leading value for money connectivity provider, consistently offering customers some of the lowest prices on the market. We also have a unique and innovative partnership with the DWP, recognised by Ofcom in this report, which offers jobseekers six months of free and uncapped connectivity. We believe this is a better, targeted solution and urge the government to extend it to cover other groups.”

The provider also pointed to research from the University of Liverpool/Greater Manchester Authority on Social Housing and Digital Inclusion (here), which noted that 88% of those within a housing project taking part in the research who are offline and could take a social tariff are not interested. The key reasons being a) they’re happy using a smartphone, b) don’t want home broadband, and c) think social tariff packages are too basic.

TalkTalk did also highlight another relevant point with respect to Ofcom’s demand around Early Termination Fees above. When a customer leaves them, they have no way of knowing whether they’re switching to a social tariff. The Government is in the process of developing an API that will allow ISPs to know whether a person is eligible for a social tariff, but it currently only works for Sky Broadband.

At the end of the day, TalkTalk are an ISP in a difficult position. Traditionally, they’ve been aimed more at budget consumers and are currently juggling an awkwardly large pile of debt. We suspect that some of their reluctance toward fully embracing a social tariff may relate to concerns around the impact it could have upon their efforts to improve the provider’s fortunes, especially after Virgin Media (VMO2) opted not to pursue their rumoured £3bn takeover.