Ofcom moves in to protect UK mobile users from loyalty punishments

The UK’s telecom regulator believes out-of-contract mobile users could have saved millions if telcos offered the best deal available, and has released new measures to protect them from being treated unfairly.

After nearly a year’s research the regulator has found that on average the out-of-contract customers, those who have taken out a handset/airtime bundle contract and stay with the operator after the contract runs out, are paying £11 more per month than if they have been offered a better alternative, e.g. a comparable SIM-only deal. This would take the total amount of over-payment made by the 1.4 million out-of-contract customers to £182 million a year.

“Our research reveals a complex mobile market, where not everyone is getting a fair deal. So we’re introducing a range of measures to increase fairness for mobile customers, while ensuring we don’t leave existing customers worse off,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

The new measures introduced today, published in a release titled “Helping consumers to get better deals in communications markets: mobile handsets”, focus on three areas:

1. Transparency of contract details: mobile operators offering bundle contracts should tell customers the cost of the handset and the cost of airtime separately. This is in line with new EU rules, but Ofcom has decided to introduce it to the UK despite  the decision to leave the EU.
2. Time limit on “split contract”: this refers to the kind of contacts that a customer would pay for the handsets and usage separately. The new rule would cap such contracts to 24 months, to avoid customers being locked in one contract for to long and to make switching operators easier.
3. Concretised measure to treat customers fairly, following the more vague “Fairness for Customers” commitment the operators signed up to. Specifically, it requires mobile operators to tell customers that their contract is going to end, and to explain to them the best available deals including SIM-only deals. The easy way of switching operators with a text message that was laid out in June is also coming into effect this month.

Ofcom also declared the first victories in operator endorsements. “All the major mobile companies – except Three – will also be reducing bills for millions of customers who are past their initial contract period,” Fussell said.

O2 and Virgin Mobile will charge their out-of-contract customers the equivalent 30-day SIM-only deal, while both EE and Vodafone are going to reduce the price for their customers out-of-contract for more than three months, though they will only confirm the level of discount by the end of the year. The discount will become effective next February.

“Three is the only major provider that has refused to apply any discount to its out-of-contract customers. As a result, these customers will continue to overpay and will not receive similar protections if they stay on their current deal,” the Ofcom statement said.

The regulator also announced that later this year it will publish its findings on broadband prices, and why some customers find their broadband bills higher than others.