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December 6, 2021
On 15 February 2020 new rules on end-of-contract notifications and annual best tariff information came into effect, requiring broadband, phone and TV providers to inform their customers when their minimum contract period is coming to an end, and to show them the best deals available.
Ofcom has now published a report examining the impact of these measures to date. The report found that end-of-contract notifications appear to have had a positive impact on customer engagement. In particular:
- in 2020, 35% of broadband customers were out of contract, compared to 40% in 2019, which is a reduction of over one million out-of-contract customers; average prices paid by broadband customers also fell over the same period;
- engagement improved among broadband customers nearing their contract end date, as well as those already out of contract, while vulnerable customers were also more engaged in 2020;
- engagement among mobile customers has been broadly stable in recent years, but there is some evidence that engagement is now increasing; the proportion of mobile customers who were out-of-contract fell slightly from 27% in 2019 to 25% in 2020; and
- people whose mobile contracts ended in 2020 were more likely to engage compared to people in the same position in 2019; Ofcom did not observe different outcomes for vulnerable customers.
Ofcom also updated its analysis on the prices paid by out-of-contract broadband customers and the extent to which bundled out-of-contract mobile customers overpay compared to customers on comparable SIM-only deals. It found that:
- there has been a significant reduction in the impact of higher out-of-contract prices (price differentials) on vulnerable broadband customers, and the total overpayment by bundled out-of-contract mobile customers, since the pricing commitments took effect;
- out-of-contract broadband customers pay around £5.10 more per month than their provider’s average price for their service; this is a slight increase from £4.70 per month in 2019 which in part reflects lower prices for new customers rather than an increase in the prices paid by out-of-contract customers;
- the price differential paid by vulnerable broadband customers significantly reduced between 2019 and 2020 from £4.40 to £2.30, indicating that the commitments Ofcom secured to protect vulnerable broadband customers from higher prices are having a positive impact;
- the annual aggregate overpayment among bundled out-of-contract mobile customers has more than halved since Ofcom intervened, from £182 million per year in 2018 to £83 million per year in 2020; and
- mobile customers are increasingly opting for SIM-only deals as well as split contracts, where the handset and airtime is purchased separately; more providers are starting to offer split contracts too, sometimes withdrawing traditional bundled deals from the market; Ofcom expects the problem of overpayment by bundled out-of-contract customers to decline further over time.
To access the report, click here.